CBIC introduces simplified refund system to improve ease of doing business

The CBIC has introduced, through Instruction No.06/2025 dated 03-October-2025, a risk-based provisional refund system under GST to make refunds faster and ease cash flow for exporters and businesses.

From now on, 90% of refund claims marked as 'low risk' by the GST system will be released upfront without detailed scrutiny of refund applications.

This change helps reducing delays, improving liquidity, and ensuring genuine taxpayers get timely refunds. At the same time, the system retains safeguards through data-based risk evaluation to prevent misuse and protect revenue.

Also Read: CBIC Issues Instruction on Risk-Based Provisional Refund Sanction Under GST

Manner of processing refund applications under the new system

Refund applications will now be automatically categorized by the system as low risk or high risk, using data analytics and risk parameters built into the GSTN.

• For low-risk refund claims, 90% of the claimed amount will be released provisionally upfront, without detailed scrutiny.
• For cases that do not fall under the low-risk category, the refund will be processed only after detailed examination by the proper officer.

However, the proper officer empowered to withhold provisional refunds in exceptional cases. For instance, where previous refund issues are under appeal or litigation but only after recording reasons in writing. CBIC has clarified that such discretion should be exercised sparingly and, on a case-to-case basis.

Scope extended to Inverted Duty Structure refunds

The CBIC has also decided to extend this facilitation to refund claims filed under the inverted duty structure, where tax paid on inputs is higher than that on outputs. While the relevant amendment to Section 54(6) of the CGST Act, 2017 is yet to be enacted through the upcoming Finance Act, the government has, as an interim measure, allowed 90% provisional refunds for inverted duty structure claims filed on or after October 1, 2025, following the same risk-based framework.

The new refund mechanism applies to all refund applications filed on or after 01-October-2025. The necessary system functionality has already been made available on the GSTN portal to enable officers to process refunds under the revised procedure.