GST Refund Filing Just Got Simpler: Here's What You Need to Know
In an effort to reduce compliance hassles and make the refund process smoother, the Goods and Services Tax Network (GSTN) rolled out key changes via advisory on 8th May 2025. These updates are especially important for exporters, SEZ suppliers, and those involved in deemed exports - whether as suppliers or recipients.
Quick Context:
On 8th May 2025 GSTN issued two advisories were issued - Updates in Refund Filing Process for Recipients of Deemed Export and Updates in Refund Filing Process for various refund categories; outlining a major shift in refund processing logic. The changes mark a transition from a tax-period-centric approach to an invoice-based one. This aims to improve traceability, prevent duplicate claims, and better reflect the way refunds arise in real business scenarios.
A quick legal note:
These refund processes are governed by Section 54 of the Central Goods and Services Tax (CGST) Act, 2017, which covers refunds on account of excess tax paid, zero-rated supplies, deemed exports, and unutilized input tax credit (ITC). The new advisory doesn’t amend the law itself but modernizes how refund applications are handled on the GST portal.
Let’s walk you through what’s changed and how it affects your refund filing strategy.
I. From Tax Periods to Invoices: A Big Change in Refund Filing
A Major Shift in Refund Filing Logic
Earlier, refund applications had to be tied to a tax period - you had to choose a “From” and “To” date. That’s no longer required for the following refund types:
Export of services with payment of tax
Supplies to SEZ units/developers with payment of tax
Refund by supplier of deemed export
Refund by recipient of deemed export
Now, instead of selecting a tax period, taxpayers can directly pick the relevant refund category and initiate the refund application by clicking “Create Refund Application.”
What’s the impact?
This change enables a more flexible, invoice-centric approach, helping taxpayers manage their refund claims more efficiently, especially when invoices span across different tax periods.
Addition:
It also eliminates the earlier restriction of filing refund claims in
chronological order. Taxpayers now have the freedom to file refund applications
for any tax period, regardless of sequence, as long as the relevant invoices are
eligible and not previously claimed.
II. Mandatory Compliance Check: All Returns Must Be Filed
GSTN has reiterated that no refund application will be allowed unless all due returns, including GSTR-1 and GSTR-3B, have been filed up to the date of the refund application. This applies uniformly to all the categories listed above.
This serves as a timely reminder for taxpayers to stay on top of their return filing compliance if they wish to avoid refund delays.
III. Breakdown by Refund Category
Let’s now examine the changes specific to each refund category.
1. Export of Services with Payment of Tax
Filing is now invoice-based, not tax-period based.
Taxpayers must upload eligible invoices in Statement 2.
Once an invoice is uploaded with a refund claim, it is locked and cannot be used again in subsequent refund claims unless:
The refund is withdrawn, or
A deficiency memo is issued.
2. Supplies to SEZ Units/Developers with Payment of Tax
Similar to export of services, this category has also moved to invoice-based filing.
Invoices must be uploaded in Statement 4.
The same invoice locking/unlocking rule applies.
3. Refund by Supplier of Deemed Export
This category has also shifted to invoice-based filing and is now independent of tax periods.
Invoices must be uploaded in Statement 5B.
Locking/unlocking rule apply as above.
4. Refund by Recipient of Deemed Export
This category has now shifted to an invoice-based filing system, removing the earlier requirement to select “From” and “To” tax periods.
Taxpayers are also no longer required to file refund applications in chronological order, allowing greater flexibility in managing refunds across different months.
The “Amount Eligible for Refund” table in the application has been modified to show the following:
|
Column |
Description |
|
Col. 1 |
Balance in ECL – Auto-populated values reflecting available balance under each head (IGST, CGST, SGST/UTGST) in the Electronic Credit Ledger at the time of filing. |
|
Col. 2 |
Net ITC of Deemed Exports – Auto-populated from the invoices uploaded in Statement 5B. Reflects ITC claimed under respective major heads. |
|
Col. 3 |
Refund Amount as per Invoices – This column auto-populates the total refund amount being claimed based on invoices uploaded in Statement 5B across all major heads. Importantly, taxpayers can edit this amount downward, if needed, but cannot increase it. |
|
Col. 4 |
Eligible Refund Amount – This is the system-calculated maximum amount that can be granted as refund based on the available balance in the Electronic Credit Ledger, in accordance with the order of debit prescribed under Circular No. 125/44/2019-GST. |
|
Col. 5 |
Ineligible Refund (Due to Insufficient Balance) – This column shows the portion of the claimed amount that cannot be refunded at present due to insufficient balance in the respective ledger heads. It is the difference between Columns 3 and 4. |
What's New and Noteworthy?
The system now auto-calculates the maximum refundable amount based on the uploaded invoices.
It checks the total credit balance across all tax heads together (IGST, CGST, SGST)- not separately for each.
This means even if you don’t have enough balance in one head, you may still get the refund if the overall balance is sufficient.
IV. Important Operational Tips
If you attempt to amend or reuse an invoice already linked to a refund claim, the system won’t allow it - unless the refund is withdrawn or marked deficient.
For any issues during filing, taxpayers are advised to raise a grievance at the GST Self-Service Portal. (https://selfservice.gstsystem.in/ReportIssue.aspx).
Final Thoughts
These changes mark a significant step toward making GST refunds faster, simpler, and more aligned with real business practices. The move to invoice-based filing, the elimination of rigid timelines, and auto-validation of refund amounts all make the system more user-friendly.
Exporters, SEZ suppliers, and those handling deemed exports should now:
Review their internal refund processes
Educate teams about these changes
Take full advantage of the simplified and more logical system
Disclaimer: The information given in this article is solely for purpose of understanding the law. It is completely based on the interpretation of the author and cannot be constituted as a legal advise, the author of this article and Lawcrux team is not responsible for any legal issues if arises on the basis of the interpretation given above.