Quick Summary
In a move aimed at addressing liquidity concerns stemming from the Inverted Duty Structure (IDS) under the Goods and Services Tax (GST) regime, the Central Board of Indirect Taxes and Customs (CBIC) has directed field officers to release 90% of refund claims on a provisional basis. The directive, issued via a letter dated October 3, 2025, comes after the GST Council's recent rate rationalisation exercise, which created fresh instances of inverted duty across key manufacturing sectors. The Board
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FAQ :
The CBIC has directed field officers to release 90% of refund claims on a provisional basis to address liquidity concerns arising from the Inverted Duty Structure.
Provisional refunds are being issued to ease cash flow for manufacturers who are facing liquidity issues due to the Inverted Duty Structure, which occurred after recent GST rate rationalisation.
The Inverted Duty Structure occurs when the tax rate on inputs is higher than the tax rate on finished goods, leading to an accumulation of input tax credit and cash flow problems for manufacturers.
Sectors such as medical devices, electronics, and engineering goods have been particularly affected, especially micro, small, and medium enterprises (MSMEs) within these industries.
Refund claims filed on or after October 1, 2025, will be sanctioned provisionally as an interim trade facilitation measure, pending formal incorporation into the Finance Act.
Experts suggest that future GST reforms (GST 2.0) should focus on extending refund eligibility to include input services and capital goods to provide a more comprehensive solution to credit accumulation.
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