Refund in Case of Export of Electricity: Key Legal Provisions, Procedure and Documentation under GST Law
This article attempts to unpack the well-defined and structured mechanism under GST law for refund in case of export of electricity.
Exports are a significant component of India’s growth strategy. The GST framework seeks to ensure that exported goods and services remain free from domestic tax burden. Under Section 16 of the Integrated Goods and Services Tax Act, 2017, refund of tax paid or refund of unutilised input tax credit in respect of zero-rated supplies is permitted.
Electricity exported outside India falls within this category, and is laid down under Section 54 of the Central Goods and Services Tax Act, 2017 read with Rule 89 of the Central Goods and Services Tax Rules, 2017.
Statutory Framework
The refund mechanism for export of electricity is primarily governed by:
• Section 54 of the CGST Act, 2017
• Rule 89 of the CGST Rules, 2017
Section 54(3) permits a registered person to claim refund of unutilised input tax credit in cases of zero-rated supplies made without payment of tax.
Section 54(8)(a) and (b) provide that:
• Refund of tax paid on export, and • Refund of unutilised input tax credit
shall be paid to the applicant instead of being credited to the Consumer Welfare Fund. Accordingly, the principle of unjust enrichment does not apply to such refunds.
Zero-Rated Nature of Electricity Exports
Section 16(1) of the IGST Act categorises export of goods or services as zero-rated supply.
Under Section 16(3), a registered person may:
• Export without payment of integrated tax under bond or Letter of Undertaking, and • Claim refund of accumulated input tax credit
In the case of electricity exports, the refund pertains to accumulated credit attributable to such zero-rated supply.
Filing of Refund Application
As per Rule 89(1):
• The refund application shall be filed electronically in FORM GST RFD-01 • Filing must be done through the common portal • The claim must be within the limitation period prescribed under Section 54(1)
Further:
• Rule 89(3) requires debit of the electronic credit ledger equal to the refund claimed • Section 54(14) provides that no refund shall be granted if the amount claimed is less than one thousand rupees
Documentary Requirements for Export
Rule 89(2) prescribes documentary evidence to establish that refund is due. In case of export of electricity, the applicant must furnish:
• A statement containing number and date of export invoices • Details of energy exported • Tariff per unit for export of electricity as per the agreement
Additionally, the following documents are required:
• Copy of the statement of scheduled energy for exported electricity issued by the Regional Power Committee Secretariat as part of the Regional Energy Account under the Central Electricity Regulatory Commission (Indian Electricity Grid Code) Regulations, 2010
• Copy of the agreement detailing the tariff per unit for export of electricity
These documents collectively establish:
• The fact of export
• The quantity of energy transmitted
• The consideration receivable
Computation of Refund
Refund of unutilised input tax credit in case of zero-rated supply without payment of tax is computed as per the formula under Rule 89(4):
Refund Amount = (Turnover of zero-rated supply of goods and services × Net ITC) ÷ Adjusted Total Turnover
Where:
• Net ITC means input tax credit availed on inputs and input services during the relevant period • Adjusted Total Turnover has the meaning assigned under Rule 89(4)
The value of zero-rated supply of electricity is determined based on export invoices and the agreement, subject to statutory conditions.
Processing and Sanction
Upon receipt of the application:
• Acknowledgement in FORM GST RFD-02 is issued if complete • Deficiencies are communicated through FORM GST RFD-03
Section 54(6) permits:
• Provisional refund of 90% of the total amount claimed in case of zero-rated supplies, subject to safeguards
Section 54(7) mandates:
• Final order in FORM GST RFD-06 within 60 days from the date of receipt of complete application
Refund may be withheld under Section 54(10) where:
• Returns have not been furnished, or • Tax, interest or penalty remains unpaid
Practical Compliance Considerations
For smooth processing of refund claims, exporters of electricity must ensure:
• Export invoices are issued in accordance with Section 31 of the CGST Act • Invoices reflect accurate quantity and value of electricity exported • Export agreement and tariff structure are properly documented • Statement of scheduled energy forming part of the Regional Energy Account is obtained and checked with invoices • Electronic credit ledger is correctly debited at the time of filing refund application • All returns are filed within prescribed timeline
To conclude, Section 54 of the CGST Act read with Rule 89 of the CGST Rules ensures that electricity exports retain their zero-rated character while maintaining procedural discipline and statutory safeguards.
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