The government's landmark decision to allow 90% upfront refunds for exporters under GST may take longer to roll out, as it requires a change in the law. Officials said the Centre is considering promulgating an ordinance to fast-track the implementation, while the law committee under the GST Council has been tasked with examining the proposal.
Earlier this month, the GST Council announced upfront release of 90% refunds on a provisional basis as part of the new two-slab GST structure. The move was widely welcomed by exporters and small businesses as a critical relief measure.
However, under the current framework, Section 54 of the Central GST Act, which governs refunds, does not allow risk-based provisional refunds. This legal gap, particularly complex in industries with an inverted duty structure, needs an amendment before the reform can be operationalised.
"There is an issue. The law committee is working on it," a senior official told reporters, confirming that the definition of "risky taxpayers" is also under review.
Relief for exporters amid global headwinds
The upfront refund system is expected to ease working capital constraints for exporters, especially in sectors such as textiles, chemicals, fertilisers and pharmaceuticals, which are heavily impacted by blocked refund claims. These sectors operate under an inverted duty structure where input taxes are higher than taxes on finished goods, creating liquidity pressures.
The reform is also seen as timely, coming at a time when Indian exporters face challenges from 50% tariffs imposed by the US and slowing global trade.
Ordinance route likely
Given the urgency, the Centre may opt for an ordinance to amend the law, instead of waiting for the next Parliament session. Once implemented, exporters would get 90% of their GST refunds upfront, with the balance cleared after verification.
Industry experts believe the move could significantly boost competitiveness, encourage compliance, and strengthen India's trade environment.
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