February 20, 2023

Manner of processing and sanction of withheld IGST refunds

Small and Medium Enterprises (SMEs) form an integral part of the Indian economy, providing employment opportunities and driving economic growth. In a bid to support and encourage the growth of SMEs, the Government of India introduced the Goods and Services Tax (GST) regime in 2017, which aimed to streamline the taxation system and eliminate the complexities associated with it. Under this regime, businesses are required to file monthly or quarterly returns and pay taxes based on their taxable turnover. However, in cases where businesses have paid excess taxes, they are eligible to claim a refund of the same.

What is IGST?

Integrated Goods and Services Tax (IGST) is a tax imposed on the movement of goods and services between two states or between an Indian state and a country outside India. The IGST is collected by the Central Government on behalf of the state government, thus ensuring uniformity and consistency across the country.

Refund of IGST

Under the GST regime, businesses are eligible to claim a refund of the IGST paid on the export of goods and services or on the supplies made to a Special Economic Zone (SEZ). However, in certain cases, the refund of IGST is withheld by the authorities due to various reasons such as incomplete documentation, mismatch in details, or verification required.

Process of Refund of Withheld IGST

When the refund of IGST is withheld, businesses must follow a specific process to claim the same. The process involves the following steps:

  • Submitting the refund application: The first step is to submit a refund application in the Form RFD-01 on the GST portal.
  • Verification of refund application: Once the refund application is submitted, the authorities verify the same for completeness and accuracy.
  • Issuance of deficiency memo: In cases where the refund application is found to be incomplete or inaccurate, the authorities issue a deficiency memo highlighting the areas that need to be rectified.
  • Rectification of deficiency: The businesses must rectify the deficiencies highlighted in the deficiency memo and resubmit the refund application within 15 days from the date of receipt of the memo.
  • Sanction of refund: Once the refund application is found to be complete and accurate, the authorities sanction the refund amount and credit the same to the bank account of the business.

Time Limit for Sanction of Refund

The GST law mandates that the refund of IGST must be sanctioned within 60 days from the date of receipt of the refund application. In cases where the refund is not sanctioned within the stipulated time, the authorities are liable to pay interest at the rate of 6% per annum on the refund amount for the period of delay.


The refund of IGST is a crucial aspect of the GST regime. While businesses are eligible to claim a refund of the excess tax paid, it is essential to ensure that the refund application is complete and accurate to avoid any delays or rejection. The Government of India has taken several steps to simplify the process of refund of IGST and provide timely refunds to businesses. The strict time limit for the sanction of refund and the provision for interest payment in case of delay acts as a deterrent for authorities to withhold refunds without valid reasons.


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