The 57th GST Council Meeting recommended further automation of the GST refund process to help taxpayers receive eligible refunds more efficiently and reduce delays in the availability of working capital.
One of the key recommendations is the automated sanction of 90% of the claimed refund amount on a provisional basis for eligible, acknowledged, low-risk refund claims relating to zero-rated supplies and inverted duty structure.
The proposal forms part of a phased reform of the GST refund mechanism. It is important to note that the 90% provisional refund concept is not entirely new: risk-based provisional refunds for zero-rated supplies and inverted duty structure claims have already been addressed through earlier legal and administrative measures. The latest recommendation focuses on further system-based processing.
1. What Is a Provisional GST Refund?
A provisional refund is an interim refund sanctioned before the final scrutiny and determination of the refund claim.
Under the proposed automated mechanism, the system would sanction 90% of the claimed amount provisionally in eligible low-risk cases, subject to applicable conditions and restrictions.
The remaining amount would be considered during the subsequent processing and final determination of the claim.
A provisional refund should not be treated as unconditional approval of the entire refund claim. The final amount remains subject to the applicable legal provisions and scrutiny.
2. Which Categories of Refund Are Covered?
The GST Council's recommendation covers eligible refund claims relating to:
A. Zero-Rated Supplies
Zero-rated supplies include exports and qualifying supplies to a Special Economic Zone developer or unit, subject to the applicable provisions of the IGST Act.
Eligible refunds of unutilised input tax credit relating to zero-rated supplies may fall within the proposed automated provisional refund mechanism.
B. Inverted Duty Structure
An inverted duty structure generally arises where the rate of tax on input goods is higher than the rate of tax on output supplies, subject to the statutory conditions governing refund eligibility.
Eligible refunds of unutilised ITC arising from an inverted duty structure are also covered by the recommendation.
However, not every refund claim under these categories will automatically qualify. The system's risk assessment, statutory eligibility conditions and applicable exclusions remain relevant.
3. How Will the Proposed Automated Refund Process Work?
The proposed mechanism is intended to reduce manual intervention at the provisional refund stage.
The process can be understood in the following steps:
Step 1: Filing the refund application
The taxpayer files the prescribed refund application electronically, along with the required information and supporting details.
Step 2: Acknowledgement and eligibility checks
The application is acknowledged and assessed under the applicable process. The system evaluates the claim for risk and eligibility.
Step 3: Provisional refund for eligible low-risk claims
Where the claim qualifies under the proposed framework, 90% of the claimed amount would be sanctioned provisionally through the system without officer intervention at this stage.
Step 4: Further scrutiny and final refund
The application proceeds for further processing under the applicable framework. In inverted duty structure cases, the GST Council FAQ provides for subsequent scrutiny by the proper officer and issuance of the final refund order.
The automated provisional sanction does not remove the requirement to comply with the law or establish the correctness of the refund claim.
4. Is Every Taxpayer Eligible for a 90% Provisional Refund?
No. The proposed mechanism is intended for eligible, acknowledged, low-risk refund claims. Certain statutory restrictions and exclusions continue to apply.
The GST Council FAQ identifies restrictions that include:
-
Certain notified categories of persons engaged in specified commodities, including areca nuts, pan masala, tobacco and manufactured tobacco substitutes, and essential oils.
-
Persons who have not undergone Aadhaar authentication as required under Rule 10B of the CGST Rules, 2017.
-
Certain cases involving proceedings or appellate developments linked to refund orders, including specified DRC-01, APL-03, APL-04 and APL-07 situations that require appropriate scrutiny.
Refund eligibility under the inverted duty structure category is also subject to the restrictions under the relevant notifications, including Notification No. 5/2017-Central Tax (Rate), as amended.
Taxpayers should examine the applicable provisions and their individual circumstances before assuming that a refund qualifies for automated provisional sanction.
5. Will a Tax Officer Still Have a Role?
Yes, the role of the proper officer continues in the refund process.
Under the proposed framework, eligible low-risk claims may receive provisional sanction through the system without officer intervention at that stage.
However, further scrutiny and final processing remain relevant. Claims that are not classified as low-risk, or are not eligible for provisional refund, continue to require processing under the applicable procedure.
For inverted duty structure refunds, the GST Council FAQ specifically describes further scrutiny by the proper officer after provisional sanction.
6. What Is the Proposed Timeline for Provisional Refund?
The GST Council FAQ states that the provisional refund order in Form GST RFD-04 is proposed to be issued by the system within three working days from the date of acknowledgement.
This is part of the proposed system-driven refund framework. It should not be treated as an enforceable timeline without confirming the relevant amendment, notification and implementation date.
7. How Can This Reform Benefit Businesses?
If implemented as proposed, automated provisional refund processing could provide the following benefits:
-
Improved cash flow: Eligible businesses may receive a substantial portion of the claimed refund earlier.
-
Reduced manual intervention: Low-risk claims may not require officer intervention at the provisional sanction stage.
-
Better working capital management: Earlier access to funds can help businesses manage operational expenses.
-
Greater predictability: A more automated process may reduce uncertainty in the initial stages of refund processing.
These benefits depend on eligibility, implementation and the proper functioning of the prescribed system. They do not guarantee that every refund claim will be sanctioned within a particular period.
8. Is the 90% Automated Refund Mechanism Already Applicable?
The GST Council's 57th meeting recommended further system-based processing of refunds in phases.
However, the recommendation should not be interpreted as proof that every aspect of the proposed mechanism has become operational. Earlier measures already provided for risk-based provisional refunds in specified circumstances, including inverted duty structure claims from 1 October 2025.
Taxpayers should distinguish between the existing legal framework and the additional automation proposed at the 57th GST Council Meeting. The relevant notifications, instructions, system advisories and implementation status should be checked before relying on a particular procedure or timeline.
9. Practical Guidance for GST Practitioners
Before filing a refund application, taxpayers and practitioners should:
-
Verify eligibility under Section 54 of the CGST Act and the relevant rules.
-
Confirm that the ITC included in the claim is eligible and correctly calculated.
-
Check applicable restrictions and exclusions.
-
Ensure that the refund application and supporting information are accurate and consistent with returns and other relevant records.
-
Monitor the GST portal for acknowledgement, provisional sanction and final refund orders.
-
Avoid treating provisional sanction as final approval of the entire claim.
Official References
Disclaimer: This article is for general informational and educational purposes only. It explains a GST Council recommendation and the related refund framework. Applicability must be assessed with reference to the relevant statutory provisions, notifications, instructions and implementation status.