The Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 06/2025-GST dated 3 October 2025, introducing a significant improvement in the way GST refund claims are processed.
Starting 1 October 2025, refund applications identified as low-risk by the GST system will receive 90% of the refund amount provisionally, usually within a few days of acknowledgment. This aims to reduce working capital blockage for exporters, manufacturers, and service providers while ensuring faster and transparent refund processing.
The change also extends this benefit to Inverted Duty Structure (IDS) refunds as an interim measure until the formal amendment to the CGST Act is enacted.
For many businesses, delayed GST refunds create severe liquidity pressure. Exporters and units operating under the inverted duty structure (where input tax is higher than output tax) often wait weeks or months to receive their refunds.
The new instruction bridges this gap by combining risk-based automation with simplified processing. Compliant taxpayers with consistent filing history and accurate records will now enjoy faster refund release with minimal manual scrutiny.
How the New Refund Process Works
When a taxpayer files a refund claim in FORM GST RFD-01, the GST system automatically assigns a risk score based on parameters such as filing consistency, compliance record, data match between returns, and prior refund history.
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Low-Risk Cases:
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System categorizes the claim as “low-risk.”
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The proper officer issues an acknowledgment (FORM GST RFD-02) within 15 days.
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90% of the claimed refund is released on a provisional basis through FORM GST RFD-04 within 7 days of acknowledgment.
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The payment order (FORM GST RFD-05) follows immediately, and the refund is credited directly to the taxpayer’s bank account.
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The balance 10% is sanctioned later through FORM GST RFD-06 after final verification.
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Other Cases:
Refund claims not classified as low-risk will undergo detailed scrutiny under the existing refund guidelines before any payment is made.
When Provisional Refund Will Not Be Granted
Businesses should note that provisional refund will not be granted in certain situations, including:
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If a previous refund claim is under appeal or pending before an appellate authority.
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If a show cause notice (SCN) has been issued for any refund matter.
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If an order has been passed but not attained finality (still open to appeal).
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If the officer expects adjustment or withholding of refund against dues under Section 54(10) or (11) of the CGST Act.
In such cases, the officer will process and sanction the refund on a final basis after verification rather than provisionally.
Refund Categories
The risk-based provisional refund system applies to all refund applications filed on or after 1 October 2025.
Initially, it covers:
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Zero-rated supplies (exports or supplies to SEZs).
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Refunds due to inverted duty structure (IDS) – temporarily extended until the formal legislative amendment.
This brings parity between exporters and domestic manufacturers facing accumulated input tax credits due to rate inversion.
Step-Wise Timeline Summary
| Step | Process | Form | Timeline (Maximum) |
|---|---|---|---|
| Filing of refund application | Refund claim submission | RFD-01 | — |
| System risk evaluation | Categorization as low-risk / others | Auto | Instant |
| Acknowledgment / deficiency memo | RFD-02 / RFD-03 | 15 days | |
| Provisional refund sanction (for low-risk) | RFD-04 | 7 days from acknowledgment | |
| Payment order and credit | RFD-05 | Immediate | |
| Final refund / balance sanction | RFD-06 | Within 60 days of filing |
This streamlined process aims to ensure that low-risk refunds are provisionally credited within 10–12 working days from the date of filing.
Practical Guidance
(a) To Qualify as a Low-Risk Taxpayer
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File all GST returns (GSTR-1, GSTR-3B) on time with full consistency.
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Ensure reconciliation between returns and books of accounts.
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Avoid mismatches between outward supply, inward credit, and e-invoice data.
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Maintain clear documentation—export invoices, shipping bills, bank realization certificates, and input credit records.
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Rectify any pending deficiency memos or unresolved refund disputes before filing new claims.
(b) During Refund Filing
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Use the latest version of FORM GST RFD-01 available on the GST portal.
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Validate bank details through PFMS before filing.
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Choose the correct refund type—zero-rated supply, inverted duty structure, etc.
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Retain digital acknowledgment copies and ARN tracking for each application.
(c) After Provisional Refund
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Retain the refund sanction order (RFD-04) and payment order (RFD-05) for record.
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Track the final order (RFD-06) and ensure proper accounting treatment in books once the refund is finalized.
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Respond promptly to any further clarification sought by the department.
Points to remember
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Refunds may still be withheld in cases of pending dues, fraud detection, or non-compliance.
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Incorrect or duplicate claims may attract penalties under Section 73 or 74 of the CGST Act.
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Businesses should regularly monitor the refund ARN status and maintain correspondence records.
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Interest is payable by the department for delay beyond 60 days under Section 56, but only for admissible claims.
