File GST Refund 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.
If your inputs are taxed at a higher rate than your output, the extra credit piling up in your electronic credit ledger can be claimed back in cash. This guide walks through exactly how to file that inverted duty refund in FORM GST RFD-01, from the working you prepare offline to the ARN and the officer's order.
The claim is made under section 54(3)(ii) of the CGST Act in FORM GST RFD-01, category "inverted tax structure", for one or more tax periods. The maximum refund is worked out with the Rule 89(5) formula (as substituted by Notification 14/2022-CT), and the portal pays the least of that formula figure and your credit-ledger balances. You attach Statement 1 (the formula working) and Statement 1A (invoice list), give the section 54(3) declarations, and file with DSC or EVC. Only credit on input goods that appears in GSTR-2B qualifies. The time limit is two years from the due date of the GSTR-3B for the period.
Before you open the portal: three checks
Most inverted duty claims fail on preparation, not on the portal. Clear these first.
- Returns are filed. GSTR-1 and GSTR-3B for every month in the claim period must be filed. The output turnover you report in the claim must match GSTR-1 and Table 3.1(a) of GSTR-3B.
- The credit is refundable credit. Only ITC on inputs (goods) enters "Net ITC". Credit on input services and capital goods is excluded. The Supreme Court upheld this in VKC Footsteps (13.09.2021). For periods from 01.01.2022, only invoices reflected in GSTR-2B count (Circular 197/09/2023-GST). Imports, ISD credit and reverse charge credit are the exceptions.
- Your goods are not on the restricted list. Notification 5/2017-CT(R), as amended, blocks inverted duty refunds for certain goods. See goods where inverted duty refund is not allowed.
If any of these is unclear, it is worth having the working reviewed before you debit the ledger. Our inverted duty structure refund service starts with exactly this check.
Step 1: Work out the maximum refund under Rule 89(5)
The formula, after Notification 14/2022-CT, is:
Maximum refund = (Turnover of inverted rated supply × Net ITC ÷ Adjusted Total Turnover) − (Tax payable on inverted rated supply × Net ITC ÷ ITC availed on inputs and input services)
Illustration (round figures, one month):
| Item | Amount (₹) |
|---|---|
| Turnover of inverted rated supply (output taxed at, say, 5%) | 80,00,000 |
| Adjusted Total Turnover | 80,00,000 |
| Tax payable on that output | 4,00,000 |
| Net ITC (inputs only) | 9,00,000 |
| ITC on input services | 1,00,000 |
| ITC on inputs + input services | 10,00,000 |
Refund = (80,00,000 × 9,00,000 ÷ 80,00,000) − (4,00,000 × 9,00,000 ÷ 10,00,000) = 9,00,000 − 3,60,000 = ₹5,40,000
The portal then compares this with (a) the credit-ledger balance at the end of the period after GSTR-3B is filed, and (b) the balance on the day you file. If those are ₹6,00,000 and ₹5,80,000, the refund is ₹5,40,000, the least of the three. You can test your own figures on the GST refund calculator. For how each term is defined, read Net ITC in the refund formula.
Step 2: File RFD-01 on the portal
| Step | What you do on the portal |
|---|---|
| 1 | Log in at gst.gov.in and go to Services → Refunds → Application for Refund |
| 2 | Choose the inverted tax structure category and the "from" and "to" tax period |
| 3 | Fill Statement 1A: invoice number and date of inward and outward invoices for the period (Rule 89(2)(h)) |
| 4 | Fill Statement 1: turnover, Adjusted Total Turnover, Net ITC, tax payable. The system computes the maximum refund |
| 5 | Enter the amount claimed under IGST, CGST and SGST |
| 6 | Upload the invoice statement (Annexure-B) and supporting documents |
| 7 | Tick the declarations under section 54(3), and the undertaking on section 16(2)(c) |
| 8 | Preview, then submit with DSC or EVC. The ledger is debited and an ARN is generated |
Two practical notes. First, when you split the claimed amount across tax heads, the handbook says to debit IGST first, then CGST and SGST equally. The portal does not force this order yet, and no adverse view is to be taken if you do not follow it. Second, GSTN brought in a JSON-based Annexure-B utility in May 2026 with invoice-level matching against GSTR-2B. Any invoice that does not match will show up at this stage, so reconcile first. Our Statement 1A guide covers the invoice statement line by line.
You do not need a CA certificate or unjust-enrichment declaration for this refund. Rule 89(2)(l) and (m) exclude refunds of unutilised ITC, which fall under section 54(8)(b).
Step 3: After the ARN
- Within 15 days the officer issues an acknowledgement in RFD-02 or a deficiency memo in RFD-03 (Rule 90). A deficiency memo re-credits the debited amount, and you must file a fresh application. See how to respond to RFD-03.
- The refund must be sanctioned within 60 days of a complete application (section 54(7)). If it is late, you are owed 6% interest under section 56.
- The sanction order is issued in RFD-06 and the payment order in RFD-05. The money reaches your bank account through PFMS.
- If the officer proposes to reject any part, you get an RFD-08 notice first, and you reply in RFD-09.
Provisional refund: The Finance Act 2026 extends section 54(6) provisional refund (90%) to inverted duty claims. It is enacted but not yet in force, because it awaits notification. Until then, inverted duty claims get no provisional refund.
Timing and bunching
The relevant date is the due date of the GSTR-3B for the period in which the claim arises. The two-year limit runs from that date (Explanation 2(e) to section 54). One RFD-01 can cover several months, including months across financial years, but you cannot file two applications for overlapping periods. Details are in refund claim bunching.
Need help filing your inverted duty claim?
If your credit ledger keeps growing and you are unsure whether the formula, the GSTR-2B match or the restricted-goods list will hold up, we can prepare the working and the statements and track the claim to sanction. See our GST refund for inverted duty structure page, or start at the GST refund hub.
Key takeaways
- The claim is made under section 54(3)(ii) in RFD-01, in the inverted tax structure category.
- The refund is the least of the Rule 89(5) figure and the two credit-ledger balances.
- Net ITC means input goods only, and only credit reflected in GSTR-2B for periods from 01.01.2022.
- Statement 1 and Statement 1A are mandatory. A CA certificate is not needed for ITC refunds.
- The two-year limit runs from the GSTR-3B due date. There is no provisional refund until the Finance Act 2026 change is notified.
Read next
- Inverted duty refund formula with calculation examples
- Statement 1A for inverted duty refund
- Inverted duty refund rejected: common grounds
- GST RFD-01 refund application filing guide
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.