GST Council Approves Risk-Based Provisional Refunds for Inverted Duty Structure from November 2025

Last updated: 04 September 2025

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Quick Summary

The GST Council has approved a significant change to improve business cash flow by allowing provisional refunds for inverted duty structures. From November 2025, businesses will be able to receive 90% of their refund claims based on risk assessment, similar to how export refunds are currently processed. This move aims to unblock working capital for companies where input tax rates are higher than output tax rates, offering particular support to SMEs and enhancing the ease of doing business.

The 56th meeting of the GST Council was held in New Delhi under the chairpersonship of the Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman. The GST Council inter-alia made the recommendations relating to changes in GST tax rates, provide relief to individuals, common man, aspirational middle class and measures for facilitation of trade in GST.

GST Council: Provisional Refunds for Inverted Duty Structure from Nov 2025

In a move to improve cash flow for businesses, the GST Council has recommended an amendment to Section 54(6) of the CGST Act, 2017, to allow provisional sanction of refunds arising out of the inverted duty structure (IDS). The decision aims to provide relief to businesses facing working capital blockages due to accumulation of input tax credit.

What's Changing?

Currently, provisional refunds of 90% of the claim are available only in cases of zero-rated supplies (such as exports). With this amendment, the benefit will be extended to refund claims arising from the inverted duty structure, where the tax rate on inputs is higher than the tax rate on output supplies.

To ensure early implementation, the Central Government has decided that pending formal amendments to the law, the Central Board of Indirect Taxes and Customs (CBIC) will issue instructions to its field formations. These will direct officers to sanction 90% of refund claims provisionally, based on risk identification and system evaluation, on similar lines as zero-rated refunds.

The mechanism will be operationalized from 1st November 2025.

Benefits for Businesses

Improved Liquidity: Faster access to funds will help businesses manage working capital more effectively.
Reduced Delays: Risk-based processing ensures genuine claims are settled quickly, while maintaining checks against fraudulent claims.
Support to MSMEs: Small and medium enterprises, which are often most affected by IDS, will particularly benefit.
Ease of Doing Business: Aligning IDS refunds with export refunds enhances consistency in GST refund procedures.

Click here to view the complete Press Release of the 56th GST Council Meeting

FAQ :

The GST Council has recommended allowing provisional sanction of 90% of refund claims arising from the inverted duty structure, a benefit previously limited to zero-rated supplies.

The mechanism for provisional refunds for inverted duty structures will be operationalised from 1st November 2025.

The refunds will be sanctioned provisionally, based on risk identification and system evaluation, similar to the process for zero-rated refunds.

An inverted duty structure occurs when the tax rate on inputs is higher than the tax rate on output supplies.

Businesses will experience improved liquidity and reduced delays in accessing funds, which will help manage working capital more effectively and support ease of doing business, especially for MSMEs.

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Finance news reporter covering taxation, GST, income tax, business compliance, and economy updates. I simplify complex financial topics into easy-to-understand articles for professionals, taxpayers, and business owners on leading finance and tax platforms.

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