Guide to Provisional Refund under GST

Provisional Refund under GST can be said as the GST Refunds that are sanctioned or issued by the officer in charge on the applications made for claiming a refund of GST. These are issued provisionally on the basis of the scrutiny of the documents done during the GST Refund Process by the concerned official.

Provisional Refund under GST

Some Facts related to Provisional Refund under GST:

The following facts are to be considered while a provisional refund under GST is sanctioned by an official or received by the taxpayer-

  • There have been severe doubts from the taxpayer in the past, regarding the provisional refund under GST, and whether it is provided by the prima-facie proper officer in cases where he/ she has sufficient and appropriate reasons that there are irregularities in the refund application. It is believed that these disparities can result in partly or wholly rejection of the claimed refund amount. The GST Council and the finance ministry have already clarified that in such scenarios only 90% of the refundable amount is to be issued as provisional refund under GST by the proper officer. This is done in accordance with the Rule 91 of the CGST Rules, 2017 and other related provisions. But the final refund amount is sanctioned as per the Rule 92 of the CGST Rules, 2017.
  • The department has also clearly stated that under the law preventing the proper officer from sanctioning the whole refund amount, there is no prohibition to provide such a refund instead of the claimed provisional refund under GST in Form GST RFD-04, within 7 days from the date of issuing an acknowledgement in Form GST RFD-06. On account of zero-rated supplies, if the proper officer is completely satisfied with the eligibility of the claimed amount and has an opinion that no further scrutiny of documents is required, then he may issue a final order within 7 days of date of issuing the acknowledgement, through Form GST RFD-06. In such cases issuing an order for Provisional Refund under GST is not required in Form GST RFD-04.
  • The taxpayers have also raised doubts related to the procedures that are followed in the final refund amount sanctioning through Form GST RFD-06 but it is less than the amount issued in the Form GST RFD-04, where provisional refund under GST was issued. In such cases, the proper officer has to issue a show-cause notice to the claimant through Form GST RFD-08 as per the provision and Section 54 read with Section 73 and Section 74 of the CGST Act, 2017. The applicant is required to reply to the show-cause notice as to why-
  • The claimed amount by the applicant should not be rejected in accordance with the relevant provisions of the Goods and Services Tax
  • And why the amount provided as erroneously refund issued in the provisional refund under GST along with penalties and interests, should not be recovered as per the section 73 or section 74 of the CGST Act.
  • The proper officer who sanctioned the refund as per Section 54 of the CGST Act, 2017 and the one adjudicating the cases as provided above have to be same under all the condition. Following the principles of natural justice, a notice and an order is to be issued in the Form GST RFD-06 under proper adjudication. The refund granted as per the above-said provisions is to be entered in the electronic liability register of the applicant and the officer has to issue the same in Form GST RFD-07.
  • If the application is pertaining to the unutilized ITC, the amount that was rejected partly while granting the refund after the provisional refund under GST is re-credited to the applicant’s electronic credit ledger through Form GST PMT-03. But, such re-credits are made on the basis of the condition that the applicant will not file an appeal in future and if in any case he files an appeal then, no refund will be given to them. In cases like these the Form GST RFD-06 and Form GST RFD-08 are considered as an adjudicating order and show-cause notice under Section 54 and Section 73 and 74 of the CGST Act, 2017.
  • A further clarification on the adjustment and the withholding refund amount has been provided in the subsections (10) and (11) of the Section 54 of the CGST Act, 2017. It allows such refunds with respect to the amount sanctioned in the provisional refund under GST.
  • Where there are recoverable amount outstanding and due on the applicant, the concerned officer while providing GST Refund Service, is liable to process and sanction refund on an early basis that is final, instead of granting provisional refund under GST. He is likely to recover the pending amount from the amount sanctioned.
Author: Anil Agrawal
EZYBIZ India Consulting LLP, New Delhi. The firm is business and tax consultancy firm providing consultancy in Taxation, Regulatory, Transfer pricing, Valuation, Corporate funding and Business set up matters. He may be reached at 9899217778 or