Deficiency Memo

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Deficiency Memo

If the applicant’s refund application contains some deficiency, the proper officer is required to communicate such deficiency by electronically issuing Form GST RFD-03. Form GST RFD-03 is also known as a deficiency memo. The said form is systematically explained in the current article.

Different forms for the application of refund under GST

In all, there are three major forms relevant for the application of the refund under Goods and Service Tax. The said forms and its brief understanding are tabulated below-

Relevant Forms Brief explanation
Form GST RFD-01 The person claiming refund of tax; interest; penalty and fees paid is required to file an applicant in Form GST RFD-01.
Form GST RFD-02 In case the application filed in Form GST RFD-01 is complete. Then, the proper officer is required to issue an acknowledgment in Form GST RFD-02. Such acknowledgment is to be issued within a period of 15 days from the date of filing of a refund application.
Form GST RFD-03 In case there is any deficiency in the application, the proper officer will issue a deficiency memo in Form GST RFD-03. Such a deficiency memo is to be issued within 15 days from the date of filing a refund application.

Legal provisions attached with Form GST RFD-03

As seen above, the applicant is required to file a refund application in Form GST RFD-01. The refund processing officer will review and scrutinize the refund application so filed. If the officer finds the refund application proper and complete, then within 15 days, the officer will issue an acknowledgment in Form GST RFD-02. Once the acknowledgment in Form GST RFD-02 is issued, subsequently, no deficiency memo can be issued for the same application.

However, if the refund processing officer will reviewing/ scrutinizing the application finds/ concludes that there is a deficiency in the refund application. Then, the officer will issue a deficiency memo.

Provisions of rule 90(3) of the Central Goods and Services Tax Rules, 2017 direct the refund processing officer to figure out and communicate the deficiency, if any, in the refund application filed by the person.

As per the rule, the proper officer is required to communicate the deficiency, electronically via the GST portal, in Form GST RFD-03.  The deficiency memo so issued in Form GST RFD-03 instructs the applicant to rectify the deficiency and file a new refund application.

Important points relating to the deficiency memo-

The applicant receiving the deficiency memo should note the following points-

  • After issuing the deficiency memo, the amount of input tax credit or cash, that is debited from the electronic credit ledger or the electronic cash ledger will be automatically re-credited to the respective accounts. Such re-credit will be auto-credited and doesn’t require an order in Form GST PMT-03.
  • The applicant is required to rectify the deficiency (pointed via Form GST RFD-03). After rectification, the applicant is required to file a new refund application in Form GST RFD-01. The new refund application will be allotted a new and distinct ARN.
  • Importantly, the new refund application so filed by the applicant in Form GST RFD-01 will be treated as a new application. Hence, such an application (post rectification of deficiency) is to be filed within a period of two years of the relevant date as per explanation (2) after section 54(14) of the Central Goods and Service Tax Act, 2017 (clarified vide Circular No. 125/44/2019- GST dated 18th November 2019).
  • It is important to note that the proper officer cannot issue/ serve another deficiency memo, covering the same period, until the deficiency pointed out in the earlier/ original deficiency memo is not rectified.

Post by poonamgandhi

CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.