What is a Provisional Order for Refund?

Small and medium-sized businesses and startups in India that are registered under the Goods and Services Tax (GST) regime are required to file returns and pay taxes on a regular basis. However, there may be situations when businesses have paid taxes more than what is due or have paid taxes on exempted goods or services. In such cases, businesses can claim a refund of the excess tax paid by filing an application for the same.

When a refund application is filed, the GST authorities may take some time to verify the claim and process the refund. In order to provide relief to businesses and avoid disruptions in their cash flow, the GST law provides for a provisional order for refund.

A provisional order for refund is an order issued by the GST authorities directing the refund of a certain amount of tax to the applicant. This order is issued based on the information provided in the refund application and is subject to verification and adjustment at a later stage.

The provisional order for refund can be issued after the application for refund is filed, but before the verification process is completed. This means that the applicant can receive a part of the refund amount before the final decision is taken by the authorities. The provisional order for refund is valid for a period of 90 days from the date of issue, and can be extended by another 90 days if required.

When is a Provisional Order for Refund issued?

A provisional order for refund can be issued in the following cases:

When the refund claim is based on documents and information available with the GST authorities, and the claim is less than or equal to the amount of refund available based on such documents and information.
When the refund claim is based on documents and information available with the GST authorities, and the claim is more than the amount of refund available based on such documents and information, but the claimant has a good track record of tax compliance.
When the refund claim is based on documents and information not available with the GST authorities, and the claimant has a good track record of tax compliance.

The GST authorities may also issue a provisional order for refund in other cases, based on the merits of each case.

What are the implications of a Provisional Order for Refund?

A provisional order for refund provides relief to businesses and startups that are facing financial difficulties due to delayed refunds. It helps in maintaining their cash flow and avoiding disruptions in their operations. However, businesses must remember that the provisional order for refund is subject to verification and adjustment at a later stage, and they may have to refund the amount received if the claim is disallowed or reduced.

Therefore, businesses are advised to ensure that their refund applications are complete and accurate, and that they have sufficient documentary evidence to support their claims. They should also maintain proper records and comply with all the GST provisions to avoid any penalties or interest charges that may be levied in case of non-compliance.

Conclusion

A provisional order for refund is a useful provision under the GST law that provides relief to businesses and startups facing financial difficulties due to delayed refunds. However, businesses must ensure that their refund applications are complete and accurate, and that they comply with all the GST provisions to avoid any penalties or interest charges.