GST Refund Circular 135: What It Changed and What Still Applies

GST Refund Circular 135 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Circular No. 135/05/2020-GST dated 31 March 2020 is the second most-cited refund circular after the master Circular 125. It changed four things: clubbing of refund periods across financial years, ITC refunds on invoices missing from GSTR-2A, inverted-duty refunds where input and output are the same goods, and how tax-paid refunds are split between cash and credit. Some of those points still stand. Others have been modified by later circulars or questioned by High Courts.

Circular 135/05/2020-GST (31.03.2020) removed the bar on clubbing refund periods across financial years that Circular 125 had imposed. It restricted ITC refunds to invoices reflected in GSTR-2A; for periods from 01.01.2022 the test is GSTR-2B under Circular 197/09/2023-GST. It said no inverted-duty refund where input and output are the same goods; Circular 173/05/2022-GST later relaxed that, and several High Courts have gone further. It also explained that refunds of tax paid on non-zero-rated supplies come back in the same cash/credit mix in which the tax was paid (RFD-06 + PMT-03).

The four points at a glance

If an officer is citing Circular 135 against your claim, check first whether the point relied on has since been modified. Our GST refund process service can review the order or deficiency memo against the current position.

1. Clubbing refund periods across financial years

Circular 125/44/2019-GST allowed a refund claim for one tax period or for successive periods clubbed together, but said the claim could not spread across financial years. That caused real losses. Exporters who bought inputs in March and shipped in April could not match the credit to the export in one claim, so they claimed less than they were entitled to.

The Handbook on Refunds records that the Delhi High Court, in Pitambra Books Pvt Ltd (order dated 21.01.2020), stayed that paragraph of Circular 125 and observed that circulars cannot impose stricter conditions than the law. Circular 135 then noted that neither section 16(3) of the IGST Act nor section 54(3) of the CGST Act bars clubbing across financial years, and removed the restriction. Circular 125 "stands modified to that extent".

The practical result: a single RFD-01 may cover, say, January to June, even though that crosses 31 March. How far to club, and whether you should, is covered in refund claim bunching and the financial year restriction.

2. ITC refunds and invoices missing from GSTR-2A

Circular 135 tied refunds of accumulated ITC to invoices reflected in the applicant's FORM GSTR-2A. The earlier facility of claiming refund on missing invoices by uploading self-certified copies was withdrawn. The Handbook sets out the current position:

• Tax periods up to 31.12.2021: verification against GSTR-2A, as per Circular 135.
• Tax periods from 01.01.2022: verification against GSTR-2B, as per Circular 197/09/2023-GST dated 17.07.2023. ITC on invoices not in GSTR-2B is not admissible for refund.
• Exceptions (Circular 139/09/2020-GST read with Circular 197/09/2023-GST): ITC on imports (verified from Bill of Entry details), ISD credit and reverse charge supplies need not appear in GSTR-2B.

Circular 135 also added an HSN/SAC column to the statement of invoices filed with ITC-based refunds (the Handbook's annexure footnotes this change). That statement is today's Annexure-B.

If your claim was cut because some invoices were not in 2B, read refund rejected: ITC not in GSTR-2B before replying.

3. Inverted duty where input and output are the same goods

Circular 135 dealt with traders who bought goods at one rate and sold the same goods after a rate cut. It clarified that refund under section 54(3)(ii) is not available where the input and the output are the same goods, even if they attracted different rates at different times.

Two later developments matter:

• Circular 173/05/2022-GST (06.07.2022) substituted that paragraph. Refund is allowed where input and output are the same goods but the output rate is lower at the same point of time because of a concessional notification.
• High Courts have taken a wider view. The Handbook cites the Calcutta High Court in Shivaco Associates (the Act does not exclude cases where input and output are the same), the Rajasthan High Court in Baker Hughes Asia Pacific, and the Delhi High Court in Indian Oil Corporation (refund cannot be denied merely because the principal input and output carry the same rate when other inputs are at higher rates).

Illustration. A trader of goods taxed at 3% also buys packing material at 18%. The principal goods are the same on both sides, but the packing input is at a higher rate than the output. On the reasoning in these rulings, the accumulation from the packing input can support an inverted-duty claim. Whether a department accepts this depends on the facts and the jurisdiction, so the claim needs a clear working. With the GST 2.0 rate changes from 22.09.2025, this point has come up again; see ITC accumulation after GST 2.0 rate cuts.

4. Refunds of tax paid on other supplies: cash and credit in proportion

For refunds that are not ITC refunds (excess payment of tax, intra-State held inter-State and vice versa, refund arising from an order, and "any other" ground), no ledger debit is made at filing. Before 2020 the admissible amount was paid wholly in cash, even when the tax had been paid partly from the credit ledger. The Handbook explains that Circular 135 read with Notification 16/2020-CT (23.03.2020) changed this:

• Rule 86(4A): an amount paid from the electronic credit ledger and found refundable is re-credited to that ledger by PMT-03.
• Rule 92(1A): the officer sanctions in RFD-06 only the cash share, in proportion to the cash used to discharge the total liability for the period, and re-credits the rest by PMT-03.

Illustration. For a month, total tax paid was ₹10,00,000: ₹4,00,000 from the cash ledger and ₹6,00,000 from the credit ledger. An excess payment of ₹1,00,000 is found admissible. Cash share = 1,00,000 × 4/10 = ₹40,000 in cash through RFD-06. Credit share = ₹60,000 re-credited through PMT-03. This does not apply to refunds of tax paid on zero-rated supplies or deemed exports.

For the wider picture on this category, see excess GST paid in GSTR-3B: refund or adjust.

Need help with a Circular 135 issue on your claim?

Deficiency memos and rejection orders still quote Circular 135, sometimes on points that have since been changed. We check which version of each point applies to your period, then reply or refile on that basis. See our GST refund process service, or begin at the GST refund hub.

Key takeaways

• Circular 135/05/2020-GST is dated 31.03.2020 and modifies the master Circular 125.
• Clubbing of refund periods across financial years is allowed.
• ITC refunds follow GSTR-2A for periods up to 31.12.2021 and GSTR-2B from 01.01.2022; imports, ISD and RCM credit are exceptions.
• The same-goods inverted-duty bar was relaxed by Circular 173/05/2022 and has been read down by several High Courts.
• Refunds of tax paid on other supplies come back in the same cash and credit mix, through RFD-06 and PMT-03.

Read next

• Circular 125 GST refund explained
• GST refund circulars list
• Inverted duty refund: Circular 181 cannot override section 54(3)
• Re-credit of rejected refund by PMT-03

Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.