Doctrine of Unjust Enrichment in Case of Refund of GST :
Refund will be normally paid in Consumer Welfare Fund, and not paid to the taxable person who has applied for refund – section 54(5) of CGST Act.
This is on the basis of doctrine of unjust enrichment, as explained below.
If the supplier of goods and services has recovered GST from recipient, it is clear that he has passed the burden to the recipient and has already recovered GST from him. In such cases, refund of excess GST will amount to excess and undeserved profit to supplier of goods and services. It will not be equitable to refund the duty to him, as he will get double benefit – from the recipient of goods and services and again from the Government.
This will be ‘unjust enrichment’ of supplier.
Every person who has paid the tax on goods or services or both under this Act shall, unless the contrary is proved by him, be deemed to have passed on the full incidence of such tax to the recipient of such goods or services or both – section 49(9) of CGST Act.
If tax recovered, it means duty incidence has been passed on – If the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer [indeed obvious] – Explanation (ii) to rule 89(2) of CGST and SGST Rules, 2017.