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

04Oct 2025 by admin

Instruction No. 06/2025-GST (Dated 03.10.2025)

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

Background

  • The 56th GST Council meeting (03.09.2025) recommended amendment to Rule 91(2) of CGST Rules, 2017.
  • The change allows sanction of 90% of refund on provisional basis by the proper officer based on risk identification by the system.
  • A proviso permits the officer, on a case-by-case basis (with recorded reasons), to bypass provisional refund and instead conduct detailed examination.
  • Notification No. 14/2025-CT dated 17.09.2025 notified categories of taxpayers ineligible for provisional refund for zero-rated supplies.

Processing of Refund Applications

  1. Initial processing
    • Refund applications continue under existing guidelines till issuance of FORM GST RFD-02 / RFD-03.
    • Timelines must be strictly followed.
  2. Low-risk applications
    • If categorized as low risk by the system → 90% refund to be sanctioned provisionally.
    • No scrutiny required after acknowledgment (RFD-02), unless covered by proviso to Rule 91(2).
  3. Non-low-risk applications
    • No provisional refund.
    • Detailed scrutiny and action as per guidelines.
  4. Conditions for provisional refund
    • Ineligible categories (as per Notification 14/2025).
    • Non-prosecution requirement under Rule 91(1).
    • No adjustment/withholding allowed for provisional sanction; if needed, officer should finalize refund quickly instead.
    • No provisional refund where earlier claims are pending in appeal, under SCN, or not attained finality.
  5. Use of Proviso
    • The officer’s discretion to deny provisional refund should be exercised sparingly and only case-by-case, not routinely.
  6. Excess refund cases
    • If provisional refund > final admissible refund, officer must issue SCN in RFD-08 under section 54 with section 73/74/74A.

Applicability

  • Effective for refund applications filed on or after 01.10.2025 (Notification 13/2025-CT).

Extension to Inverted Duty Structure (IDS)

  • GST Council recommended similar provisional refund facility for IDS refunds (90% sanction).
  • Requires amendment to Section 54(6), to be done through Finance Act & State amendments.
  • Interim measure: From 01.10.2025, IDS refund applications will also get 90% provisional sanction, processed in the same manner as zero-rated supply refunds.
  • Functionality enabled on GSTN portal.

Monitoring & Reporting

  • Implementation to be supervised by jurisdictional Principal Commissioner/Commissioner.
  • Reports to be sent to Principal Chief Commissioner/Chief Commissioner.
  • Ensuring uniformity and strict monitoring of trade facilitation measures.

Conclusion

Instruction 06/2025-GST streamlines refund processing by leveraging system-based risk assessment, ensuring faster provisional sanction of 90% refunds for both zero-rated supplies and IDS cases, with safeguards against misuse. Field officers are directed to exercise discretion judiciously, avoid delays, and uphold the spirit of trade facilitation.