Refund Withholding After an Adverse Order: Section 54(11) and the Case for Periodic Review
This article explains how a GST refund may be withheld under Section 54(10) and Section 54(11) of the Central Goods and Services Tax Act, 2017, and discusses a proposal for a CBIC circular to govern the continuation and review of withholding once a refund order has been challenged.
It matters now because the Act provides for withholding but says nothing on how long it may last, who reviews it or whether part of the amount can be released. In the absence of that structure, disputes tend to reach the High Courts, and assessees, particularly small businesses, carry the working-capital cost in the meantime.
1. The Refund Process in Brief
- A claim must be made within two years from the relevant date, which is defined by category in the Explanation to
Section 54. - The claim is filed electronically on the GST Portal, or at a notified facilitation centre, in Form GST RFD-01 under
Rule 89of the CGST Rules, 2017, and is processed by the jurisdictional officer. - If the claim is found valid, the refund order is to be passed within 60 days, and delay attracts interest.
2. Two Distinct Withholding Powers
Section 54(10): routine withholding
The proper officer may withhold payment of a refund, or deduct from it, tax, penalty and other sums the person is liable to pay under the CGST Act or an existing law. This is the ordinary power and is exercised in the course of processing.