At the 56th meeting held on 3 September 2025, the GST Council recommended changing Rule 91(2) of the CGST Rules, 2017 so that the proper officer can sanction 90% of a refund claim on a provisional basis when the system flags the claim as low risk after identifying and assessing risk. The amendment also adds a proviso that allows the officer, on a case-by-case basis and for reasons recorded in writing, to decide not to grant a provisional refund and instead carry out a full detailed examination of the refund application.
Further, Central Tax Notification 14/2025 17 September 2025 identifies a category of registered persons under Section 54(6) of the CGST Act who will not be eligible for provisional refunds for zero rated supplies. To ensure consistent application of the law across all field offices and to streamline GST refund processing, the CBIC has issued instructions about how proper officers should handle refund claims linked to zero rated supplies of goods or services or both.
1. Manner of processing refund applications: CBIC has explained the procedure to be followed while handling refund claims, as under:
a) after a refund application is filed, it must continue to be processed under existing guidelines up to the point where FORM GST RFD-02 or FORM GST RFD-03 is issued, and the current timelines for issuing those forms must be strictly followed;
ii) where the system’s risk score categorizes an application as low risk, the officer should sanction 90% of the claimed refund on a provisional basis;
iii) once an acknowledgement in FORM GST RFD-02 has been issued, additional scrutiny is not required for low-risk applications before granting the provisional amount, unless the application falls under the new proviso to Rule 91(2) where the officer has recorded reasons for conducting a detailed examination under Rule 92; and
iv) for applications that the system does not flag as low risk, no provisional refund should be given, and the officer must carry out a detailed scrutiny and the follow up actions required by current guidelines.
2. Conditions for granting provisional refunds: The usual statutory conditions for granting provisional refunds remain in force. This includes the ineligibility of the persons notified under Section 54(6) vide Central Tax Notification 14/2025 and the requirement under Rule 91(1) related to non-prosecution. Because the law does not allow adjustments or withholding of the provisionally paid amount under Section 54(10) & (11), the proper officer has the option, where appropriate, to process and sanction the refund on a final basis at the earliest and recover any excess later. Provisional refunds should also be avoided when a related issue from a prior refund claim is pending before an appellate forum, or if a show cause notice has been issued, or if an order exists that has not attained finality.
3. Non-denial of Provisional Refunds: CBIC has emphasized that the new proviso to Rule 91(2) should be used sparingly as the amendment in the Rules has been made as a trade facilitation measure and the Officers should not deny provisional refunds on mere presumptions or simply because routine steps such as scrutiny have been initiated. If, after a detailed examination, it is found that an amount paid provisionally exceeds the amount finally admissible, the officer will issue a show cause notice in FORM GST RFD-08 under Section 54 read with Section 73 or 74 or 74A, following the present practice.
4. Applicable from 01/10/2025: CBIC has advised that the amendment to Rule 91(2) has been notified by Central Tax Notification 13/2025 dated 17 September 2025 and will take effect from 1 October 2025. Therefore, the risk based provisional sanction provision applies to refund applications filed on or after 1 October 2025.
5. Inverted Duty Structure Claims: On provisional refunds for claims arising from inverted duty structure, CBIC has advised that the GST Council has recommended amending Section 54(6) of the CGST Act so that inverted duty structure claims would also be eligible for 90% provisional sanction, similar to zero rated supplies. That change to the Act will be made through the upcoming Finance Act and will require corresponding amendments by States, so it will take some time. As an interim trade facilitation step, the Central Government has decided that for IDS refund applications filed on or after 1 October 2025, 90% of the claimed amount may be sanctioned provisionally in the same way as for zero rated supplies. The processing steps for these IDS claims will follow the procedure described earlier and the same statutory conditions for provisional refunds will apply. GSTN has enabled the technical functionality needed to issue these provisional refunds in the same manner as for zero rated supply refunds.
The newly introduced regulations provide a more efficient, risk-based method for provisional GST refunds. For requests made after 1 October 2025, 90% of the amount claimed will be provisionally approved for those cases that are considered “low-risk” by the system. This enables quicker releases of funds for zero-rated supplies and, temporarily, for the inverted duty structure as the proper officer can still issue the letter of refusal for provisional refund with the reasons stated in writing. The core idea of this change, which is the result of the GST Council’s initiative, is to provide easier trade while still having control through the checks conducted after the sanction and the recovery of amounts if excess refund is detected.
GST Instruction 6/2025 dated 03/10/2025: Provisional sanction of refund claims on the basis of identification and evaluation of risk by the system