Unjust enrichment in GST refunds: when it applies, and when it does not
The doctrine that decides who keeps the money when a tax was wrongly collected.
A refund of tax is granted to the applicant only where the incidence of the tax has not been passed on to another person. Section 54(8) lists the categories where the refund is paid directly without the incidence test, including refunds of unutilised credit on zero rated supplies, refunds of tax paid on zero rated supplies, refunds of tax on inputs in an inverted duty structure, refunds where the tax was collected but the supply was not made, and refunds to specified persons. Outside those categories the amount is credited to the Consumer Welfare Fund unless the applicant establishes that the incidence was borne by him.
The structure of Section 54(8)
Section 54(5) provides for the refundable amount to be paid to the applicant, and Section 54(9) directs that otherwise the amount be credited to the Consumer Welfare Fund.
Section 54(8) carves out the categories where the refund is paid without the incidence enquiry. Those categories cover the overwhelming majority of commercial refund claims, which is why unjust enrichment is often assumed to be irrelevant in GST.
It becomes relevant where the claim falls outside the list — a refund of tax paid on a transaction later held not to be a supply, a refund following a judgment on the validity of a levy, or a refund of an amount collected in excess of the tax payable.
How the incidence is proved
A certificate from a chartered accountant, where the amount exceeds the prescribed threshold, and a declaration below it, are prescribed by the rules. The certificate alone is not the evidence; it is the summary of it.
The primary evidence is the accounting treatment. Where the tax was charged to the profit and loss account and not recovered from the customer, the incidence was borne by the applicant.
Where the tax was collected from the customer, the applicant must show that it has been or will be returned to the customer. Credit notes with the tax component, and evidence of the actual credit, are what persuade.
Where the price was contractually inclusive of tax and no separate recovery occurred, the pricing evidence and the contract carry the argument.
The practical positions
For an exporter or an inverted duty claimant, the enquiry does not arise; the claim is within Section 54(8).
For a developer refunding excess tax collected on a land inclusive price, the enquiry does arise, and the credit note trail to the buyers is the case.
For an importer claiming a refund following a judgment on the validity of a levy, the enquiry arises and the accounting treatment decides it.
Where the incidence was passed on and cannot be returned, the amount goes to the Consumer Welfare Fund and the applicant recovers nothing, which is why the pass through analysis should precede the claim.
Authorities relied on
A claim for refund of tax collected under an invalid levy is subject to the doctrine of unjust enrichment; the claimant must establish that the incidence was borne by him.
What to do on Monday
Run the pass through analysis before filing any claim outside the Section 54(8) categories.
Produce the accounting treatment alongside the certificate, not instead of it.
Where tax was collected, issue credit notes with the tax component and evidence the actual credit before claiming.
Document the pricing basis in contracts so an inclusive price can be established later.
This page states the general position. A reader with a specific question on their own facts may write to the GST practice at AMLEGALS.
Write to the GST practiceQuestions we are asked on this
Does unjust enrichment apply to export refunds?
No. Refunds of unutilised credit and of tax paid on zero rated supplies are within Section 54(8) and are paid without the incidence test.
Is a chartered accountant's certificate enough?
It is prescribed, but the underlying accounting treatment is the evidence. Produce both.
Can a refund be claimed for a customer's benefit?
The claim is by the supplier, and the pass back must be established with credit notes and evidence of actual credit.
What happens if the incidence was passed on?
The amount is credited to the Consumer Welfare Fund. That is why the analysis must precede the claim.
Does the doctrine apply to a refund of pre-deposit?
No. A pre-deposit is not a tax whose incidence is passed on.
In this cluster
- GST refunds: every category, every form, every deadline
- Export refunds: the LUT route versus the IGST route
- VKC Footsteps: why input service tax stays stuck in an inverted duty structure
- Provisional refund of ninety percent: the mechanism and how to keep it
- Replying to RFD-08: the refund rejection notice
- Deficiency memos in RFD-03 and the limitation reset problem
- Interest on delayed refunds under Section 56
- Section 77: refund where tax was paid under the wrong head
- SEZ supplies and refund: endorsement, authorised operations and the disputes
- Deemed exports and the refund to the recipient
GST Insights is published by AMLEGALS for general information. Law stated as on 3 September 2026. Not advice on any particular set of facts; not an advertisement or a solicitation under Rule 36 of the Bar Council of India Rules. Readers with a question on their own facts may write to the GST practice of their own accord.