Unjust enrichment under GST means that a taxpayer is taking the benefit of a non-eligible refund or credit or retaining the money. This can be done through error, misrepresentation, or non-compliance with law.

Put simply, it involves retaining the benefits of something that rightfully belongs to someone else.

Why theory of unjust enrichment is important in GST?

The rationale behind this was that the individual who bears the responsibility of GST liability should receive the credit or any money refunded by the government. Typically, business owners transfer the burden of GST liability to their customers. Therefore, in such situations, if there are any instances where a refund is due. It should not be given to the business owner, as the liability burden has been passed on.

How does this impact the refund process?

If the department thinks that the unjust enrichment test is not passed. Then the department will reject the refund. The rejection will be subject to exceptions.

At the time of claiming the refund, the taxpayer needs to submit a document to justify that burden of tax, interest or penalty has not been passed.

Documentary evidence required to prove that burden is not passed:

• Only a declaration needs to be submitted that there is no unjust enrichment, where the amount of refund does not exceed Rs. 2 lakhs.
• In case of refund amount is more than Rs. 2 lakhs, a certificate from CA or CMA needs to be submitted in Annexure 2 form GST RFD-2.
• In the below cases, neither a declaration by the taxpayer nor a certificate is required:
• Refund of tax on export of goods or services or both or on inputs or input services used in making such exports.
• Refund of unutilized ITC in case of zero rates of supplies done without paying taxes;
• Refund due to inverted duty structure.
• Refund of tax paid on a supply that is not provided, either wholly or partially, and for which invoice has not been received.
• Refund of tax paid on a transaction treating it as inter-state supply. But later held to be an intra-state supply or vice-versa.

What happens if test fails?

In such cases, the refund application will be rejected and benefits will not be given to business operators. Instead of this, the amount of the refund will be transferred consumer welfare fund.

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