Form GST RFD 04: Provisional Order for Refund

Form GST RFD-04 plays a crucial role in India’s Goods and Services Tax (GST) refund mechanism by enabling provisional refunds to taxpayers. Form GST RFD-04 is the provisional refund application form in GST. When a business files a refund claim, this form allows them to receive up to 90% of the eligible amount even before the final verification is complete.

This provisional refund process, as outlined in Section 54(6) of the CGST Act, 2017, is particularly beneficial for exporters and suppliers to SEZs, helping them maintain liquidity and operational efficiency. The issuance of RFD-04 ensures timely disbursement of funds, aiding businesses in preserving working capital during the ongoing refund assessment.

So, learn about the applicability and process of using this form for a refund in GST on a provisional basis.

What Is a Provisional Refund Order?

Even if the GST review process is pending, you can use the Provisional Refund Order to accelerate refund in GST payments. Until complete claim verification is complete, businesses can use this method to receive a partial refund. As a result, this process improves the cash flow for businesses.

Section 54(6) of the CGST Act, 2017 (Central Goods and Services Act), states that businesses can acquire up to 90% of their refund as initial reimbursement. The remaining portion is released on completion of successful verification.

A business can qualify for an advance refund if they submit Form GST RFD-04 with their refund application. The concerned GST officers reserve the right to assign up to 90% refund in advance. This helps businesses preserve their working capital during the concerned assessment period.

The ultimate refund is processed on GST RFD-06 or rejected in GST RFD-08. In case there is a discrepancy in provisional and final refund, it needs to be followed by adjustments. Further, if there is a rejection, businesses need to restore the previously granted refund.

Usually, the tax authorities provide provisional refunds if businesses are involved in exports of goods and services or supplies to SEZ (Special Economic Zone) units and developers, which are zero-rated supplies.

Moreover, a proper officer provides a refund claim in GST without input tax credit adjustments. It takes 7 days or less to transfer funds to the taxpayer's account with Form RFD-05 payment advice in accordance with Form RFD-02. Notably, if a taxpayer has faced tax evasion charges of more than ₹2.5 Crore over the last 5 years, he/she will not be able to avail provisional refund.

Eligibility Criteria for Provisional Refunds

Here is the eligibility criteria for provisional refund in GST:

• If a taxpayer does not have a tax evasion history exceeding ₹2.5 Crore over the previous 5 years.
• In case the internal auditors rate the performance of a business at 5 or higher on the given scale.
• If the business does not have any pending legal case about a refund petition.

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Application Procedure for Provisional Refunds

Here is the application process for provisional refunds:

1. Filling in the Refund Application: You need to provide all necessary information and documents in Form GST RFD-01 to claim refunds online on the GST portal.

2. Acknowledgment of Your Application: You will receive an acknowledgement number within 15 days from the date of application. Ensure you track the application using the number.

3. Review of Your Application: The GST officer will review your application and issue GST RFD-03 within 15 days if details are missing, incorrect or inappropriate.

4. Provisional Refund Approval: If all the information and documents are correct, the tax officer will issue a 90% provisional refund which will reach the taxpayer’s account within 7 days.

5. Final Refund Decision: Within the next 60 days, the GST officer will accept or reject your refund request based on evaluation and assessment. If accepted, you will receive the remaining amount in your bank account. In case the request is rejected, it will reflect on your credit ledger or offset your tax liabilities.

Form RFD-04 Issuance Cases

Here are the instances when RFD-04 is issued:

• Export of service with tax payment.
• Refund of ITC on export of goods or services under LUT/Bond without integrated tax payment.
• Supplies to SEZ units or developers with or without tax payment.

Details of Form RFD-04 

Here are the details of the form:

● Sanction order number

● ARN (Application Reference Number) with date

● Acknowledgement number followed by the date

● A table containing the sanctioned amount and bank account details.

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Table of Form RFD-04 

Here are the details of the table of Form RFD-04:

● The refund amount claimed

●  10% of the refund amount which is sanctioned upon verification

●  The balance amount, or 90% of the refund amount

●  Amount of refund that has been sanctioned

●  The bank account provided in the application

●  Bank name

●  Bank address

●  IFSC code of the bank branch

●  MICR of the branch

Conclusion

Form GST RFD-04 allows taxpayers to ensure smooth cash flow while a GST refund is in process. This helps them preserve their working capital while final refunds are sanctioned.

However, if there is a discrepancy in provisional and final refund, you need to adjust the same as a taxpayer to comply with Indian GST laws. Ensure you submit Form RFD-04 if you wish to claim a provisional refund.

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