22 Mar 2018Posted By: Mudit Handa

What are the key issues vis-à-vis Refund of unutilized GST Input Credit?

Though the rules laid down under the CGST Act 2017 are undoubtedly user-friendly and seek to rule out the ambiguities and snags that impeded the steadiness of trade & commerce in the erstwhile tax regime. Albeit with GST registration, an average taxpayer can alleviate much of the complexities of the taxation system, he still has numerous unsolved queries regarding refund of GST.

Recently, the Central Board of Excise & Customs (CBEC) has discoursed and clarified several scenarios for GST refund in its Circular 37 dated 15th March 2018. One of these cases relates to the claim of GST refund on unutilized input tax credit at the end of a taxation period. In the circular, the department has clearly specified the significance and applicability of the unutilized input credit.

At their abode in heaven, Krishna and Arjun were pondering over the current state of affairs on earth. Arjun was earnestly seeking solutions to the tangles involved in GST registration in India that affect the common people. Amid deep contemplation over this issue, he suddenly inquired Krishna-


#1. What is the concept of unused input credit?

Krishna: Often it happens that the tax incurred on inputs for production exceeds the output tax liability, i.e. GST on sales. Parth, it's here that the accumulation of Input Tax Credit occurs. Whenever such buildup of ITC takes place, it is carried forward to the next fiscal year. It remains unutilized by the GST registrant.


Thereafter, Arjun passes on a series of questions for Krishna.

#2. How can this unutilized ITC be used by the taxpayer?

Krishna: Luckily, our GST Laws permit the claim of refund of such unutilized ITC by applying online for the refund on the GST portal in certain scenarios.

#3. Which are the cases where GST refund can be claimed?

Krishna: As per the CGST Act 2017, the refund of the GST can be availed under 2 broad cases-

Zero-rated supplies without payment of GST:   

If a trader supplies on a Zero-rated basis, such as in an SEZ, he will be eligible for GST ITC refund. However, this can be claimed under specific conditions, as follows-

  • If he has supplied goods under a bond subject to such conditions and without payment of IGST and has claimed the refund of unutilised input tax credit.

  • If he has supplied the goods on payment of the IGST on purchases and has claimed the refund of it.

Inverted Tax structure:

The second case relates to the situation of Inverted Tax structure, where the input credit gets accumulated on account of the excess of GST tax on inputs over the rate of GST on output supplies, for a considerable period.   

Here, Arjun wonders about the cases of the taxpayers who had applied but were not entitled to refund. He asks-

#4. Which scenarios are those wherein taxpayers are not eligible for a refund?

Krishna: The applicant will receive no refund of unutilised ITC in cases where the exported goods are subject to any export duty. Furthermore, no refund will be allowed, if the exporter has goods has availed a duty drawback with respect to the goods he has supplied.


#5. What is the procedure to apply for GST refund?

Krishna: The procedure for applying for a refund of GST is quite simple. All you need to do is- 

Log on to GST portal and click on the Application for refund option from the Services menu.

Specify the type of refund by selecting one of the options, and select the period for which refund is to be availed.   

Enter the details of the refund as shown below-

The amount eligible for refund will be shown as below-

Select the bank account in which refund amount is to be credited. Click on the declaration and finally click Proceed.

The application for refund will be generated as shown below-


If you have any doubt regarding Online GST registration procedure or GST return filing, feel free to contact us at 8881-069-069.


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