Are the COGS also deducted when a refund is issued?

It would reduce both the revenue and the COGS on the day the refund was issued in Shopify.

The COGS would be decreased as it is assumed that the item is returned to the merchant.

For the COGS decrease, to have this setting disabled - this can be done on this page here to have it not affect the COGS. This setting is called "COGS is not decreased on refund".