Circular 06/2025-GST - Central Tax

Date: October 3, 2025

Subject

Provisional sanction of refund claims on the basis of identification and evaluation of risk by the system

Content

The   56th   meeting   of   the   Goods   and   Services   Tax   Council   held   on   3 rd September  2025,  recommended  amendment  in  rule  91(2)  of  CGST  Rules,  2017  to provide  for  sanction  of  90%  of  refund  claimed  on  provisional  basis  by  the  proper officer   on   the   basis   of   identification   and   evaluation   of   risk   by   the   system.   In addition,  a  proviso  has  been  inserted  in  rule  91(2)  to  provide  that,  on  case-by-case basis,  where  the  proper  officer  is  of  the  opinion  that  in  a  particular  case,  provisional refund  should  not  be  granted,  he  can,  for  reasons  to  be  recorded  in  writing,  instead of  grant  of  refund  on  provisional  basis,  proceed  with  detailed  examination  of  the application.   Further,   vide   notification   No.   14/2025-Central   Tax   dated   17.09.2025, category of registered persons has been notified under section 54(6) of the CGST Act, 2017, who shall not be allowed refund on provisional basis for zero rated supplies.

2. In  order  to  ensure  uniformity  in  the  implementation  of  the  provisions  of  the Act  across  field  formations  and  to  streamline  the  process  of  GST  refunds,  the  Board, hereby  issues  the  following  instructions  with  respect  to  processing  of  refund  claims, filed  with  the  proper  officer,  on  account  of  zero  rated  supply  of  goods  or  services  or both.

3.         Manner of processing refund applications:

3.1       While processing refund applications, the following may be ensured:

a.   The  refund  application,  consequent  to  its  filing,  shall  continue  to  be  processed as per extant guidelines till the issuance of FORM GST RFD-02 or FORM GST RFD-03, as the case may be. The extant timeline prescribed for the issuance of FORM  GST  RFD-02  or  FORM  GST  RFD-03,  as  the  case  may  be,  should  be strictly adhered to.

b.    Categorization  of  refund  applications  as  "low-risk"  on  the  basis  of  risk  score provided  by  the  system  shall  be  taken  into  account  and  90%  of  the  refund amount claimed shall be sanctioned on provisional basis in such cases.

c.    It may be noted that once an acknowledgment has been issued in FORM GST RFD-02,  scrutiny  is  not  required  to  be  done  for  low  risk  refund  applications for    sanctioning    of    refund    on    provisional    basis    unless    the    said    refund application  is  covered  under  the  first  proviso  to  rule  91(2)  of  the  CGST  Rules, 2017,  whereby  the  officer,  for  reasons  to  be  recorded  in  writing,  may  proceed with  the  examination  of  the  application  in  accordance  with  the  provisions  of rule 92, instead of grant of refund on provisional basis.

d.     For   refund   applications,   which   are   not   categorised   as   "low-risk"   by   the system,   refund   shall   not   be   sanctioned   on   provisional   basis   and   in   such cases,   the   proper   officer   shall   proceed   with   detailed   scrutiny   of   refund application and further action as per the extant guidelines.

3.2 The  statutory  conditions  prescribed  for  grant  of  provisional  refund,  including non-eligibility  of  the  notified  category  of  registered  persons  under  section  54(6)  vide notification  No.  14/2025-Central  Tax  dated  17.09.2025,  the  requirement  under  rule 91(1)  regarding  non-prosecution,  shall  continue  to  be  applicable  in  these  cases. Further,  as  no  adjustment  or  withholding  of  refund,  as  provided  under  sub-sections (10)  and  (11)  of  section  54  of  the  CGST  Act,  can  be  done  in  respect  of  the provisionally  sanctioned  amount,  therefore,  in  such  cases,  the  proper  officer,  instead of  granting  refund  on  provisional  basis,  may  process  and  sanction  refund  on  final basis  at  the  earliest  and  recover  the  amount  from  the  amount  so  sanctioned.  Also, provisional  refund  may  not  be  sanctioned  where,  in  respect  of  any  previous  refund application  filed  by  the  claimant,  the  issue  involved  is  pending  in  an  appellate forum, or where a show cause notice is issued or where an order has been passed but matter has not attained finality.

3.3 It  is  clarified  that  as  the  said  amendment  has  been  made  for  trade  facilitation, therefore  the  said  proviso  to  rule  91(2)  of  the  CGST  Rules,  2017  may  be  used sparingly  and  on  case-to-case  basis,  so  that  the  provisional  refund  is  not  denied merely  on  the  basis  of  presumptive  reason(s),  initiation  of  routine  proceedings  such as scrutiny etc.

3.4 It  also  needs  to  be  noted  that  if,  on  detailed  examination,  it  appears  to  the proper  officer  that  the  refund  amount  sanctioned  provisionally  is  more  than  the refund  amount  finally  found  admissible,  in  such  case,  the  proper  officer  shall  issue  a show  cause  notice  to  the  applicant,  in  FORM  GST  RFD-08,  under  section  54  of  the CGST Act, read with section 73 or 74 or 74A of the CGST Act, as is presently being done.

4.          As  the  amendment  in rule  91(2)  of  CGST  Rules, 2017 has been notified  vide notification   No.   13/2025-Central   Tax   dated   17.09.2025   to   come   into   effect   from 01.10.2025,   therefore   the   provisions   related   to   risk-based   sanction   of   provisional refund shall be applicable for all refund applications filed on or after 01.10.2025.

5.           It  is  worthwhile  to  note  that  the  GST  Council,  in  its  56th  meeting,  has  also recommended amending  Section 54(6) of the CGST Act, 2017, to provide for sanction of  90%  of  the  refund  amount  claimed  on  provisional  basis,  in  case  of  refund  claims filed  on  account  of  inverted  duty  structure  (IDS),  similar  to  the  provisions  in  place for    zero-rated    supplies.    However,    the    said    amendment    to    the    Act    will    be incorporated  through  the  forthcoming  Finance  Act  and  States  will  also  be  required to   pass   the   corresponding   amendments   in   their   respective   legislations,   which   will take time.

5.1.       Therefore,  as  an  interim  measure  of  trade  facilitation,  it  has  been  decided  by the  Central  Government  that  till  this  amendment  in  the  Act  is  effected,  in  case  of refund applications filed on account of IDS, on or after 01.10.2025, 90% of the refund amount  so  claimed  may  be  sanctioned  on  provisional  basis  in  similar  manner  as  is being   sanctioned   provisionally   for   refund   claims   filed   on   account   of   zero-rated supplies.

5.2.       The  maimer  for  processing  such  refund  applications  shall  be  the  same  as specified  in  para  3.1  to  para  3.4  above.  Further,  the  statutory  conditions  prescribed for  grant  of  provisional  refund  in  case  of  zero  rated  supplies  shall  equally  apply  in these cases.

5.3  It  is  further  stated  that  the  functionality  for  issuance  of  provisional  refund  in such  cases  has  been  made  available  by  GSTN,  on  lines  similar  to  the  provisional refund  processing  for  refund  applications  filed  on  account  of  zero  rated  supply  of goods or services or both.

6. The    implementation    of    this    instruction    may    be    supervised    by    the jurisdictional  Principal  Commissioner/  Commissioner  and  a  report  in  this  regard may  be  sent  to  the  jurisdictional  Principal  Chief  Commissioner/  Chief Commissioner.  Principal  Chief  Commissioner/  Chief  Commissioner  should  ensure that  the  trade  facilitation  measures  decided  upon  by  the  Government  are implemented in letter and spirit and there is proper monitoring regarding the same.

7. Difficulty,  if  any,  in  implementation  of  this  instruction  may  please  be  brought to the notice of the Board.

Related Case Laws

No related case laws found for this circular.