GST Council Clears Major Refund Reforms for Businesses

Current position — reviewed 22 August 2026

These refund reforms are now operational. They were implemented broadly as recommended, so treat this article as describing the current refund process rather than a proposal.

• Risk-based, system-driven provisional sanction of 90% of the refund claim was operationalised by CBIC Instruction No. 06/2025-GST dated 3 October 2025.

• The provisional route applies to zero-rated supplies and to accumulated credit arising from an inverted duty structure, subject to the system's risk assessment.

• Claims flagged as risky continue to be sanctioned only after detailed scrutiny, so provisional release is not automatic for every applicant.

• The minimum-threshold relaxation for low-value export refunds also applies, which mainly helps exporters shipping through courier and post.

September 6, 2025

The 56th GST Council meeting, held on September 3–4, 2025, has approved a set of landmark amendments to refund rules that will significantly change the way businesses claim and receive refunds under the Goods and Services Tax (GST).

These reforms are not just minor tweaks but part of the “Next Generation GST Reforms”, promised by Prime Minister Narendra Modi in his 79th Independence Day speech (August 15, 2025). The focus is clear — simplify compliance, improve liquidity for businesses, and make India’s tax system more efficient.

The new refund rules will officially come into effect from November 1, 2025.

Why Refund Reforms Were Needed

For years, businesses — particularly exporters and MSMEs — have faced significant challenges in claiming GST refunds. Refund delays locked up working capital, caused compliance burden, and reduced global competitiveness.

• Exporters struggled with blocked refunds for zero-rated supplies.
• Industries facing Inverted Duty Structure (IDS) suffered from higher input taxes than output taxes, with refunds taking months.
• Small exporters, especially those sending low-value consignments via couriers or e-commerce, were denied refunds due to thresholds in law.

This reform package directly addresses these long-standing issues.

Key GST Refund Reforms Approved

1. Risk-Based Provisional Refunds for Zero-Rated Supplies

The Council has amended Rule 91(2) of the CGST Rules, 2017 to allow exporters and suppliers of zero-rated supplies to receive 90% of refunds provisionally and automatically.

• Refunds will be processed by the system based on risk parameters.
• Officers can withhold refunds only in exceptional cases, with written reasons.
• Certain categories of taxpayers may be excluded through a future notification.

📌 Impact: Exporters will get much faster access to their funds, improving cash flow and trade competitiveness.

2. Extension of Provisional Refunds to Inverted Duty Structure (IDS)

The Council has also extended provisional refunds to businesses facing IDS — a situation where input taxes are higher than output taxes.

• 90% of refunds will now be granted provisionally in IDS cases.
• This will be done under a proposed amendment to Section 54(6) of the CGST Act, 2017.
• The CBIC has been directed to issue guidelines immediately so officers can begin implementing this relief even before the law is formally amended.

Impact: IDS has been a chronic pain point for sectors like textiles, fertilizers, footwear, and pharma. With provisional refunds, these industries will have quicker access to their funds, reducing financial stress.

3. Refunds for Low-Value Export Consignments

Currently, under Section 54(14) of the CGST Act, exporters of low-value consignments face restrictions on refund claims.

The Council has now approved the removal of this threshold limit.

• Exporters shipping goods via courier, post, and e-commerce platforms can claim refunds without restrictions.
• This move will particularly benefit small exporters, artisans, and online sellers who ship smaller consignments abroad.

Impact: A boost for MSMEs and small traders, enabling them to compete in international markets without being penalized for lower shipment values.

Broader Economic Impact

These refund reforms are expected to have far-reaching benefits:

1. Improved Liquidity – Faster refunds will ensure that working capital is not stuck with tax authorities.
2. Boost to Exports – Small and large exporters alike will benefit, improving India’s trade competitiveness.
3. Support for MSMEs – By addressing low-value consignments and IDS, the reforms give direct relief to small businesses.
4. Reduced Litigation – Automated, system-driven refunds reduce disputes between taxpayers and officers.
5. Ease of Doing Business – Simplified compliance aligns with India’s vision to strengthen its business environment globally.

Government’s Reform Roadmap

These changes are part of a larger GST reform agenda. Along with refund reforms, the Council is also working on:

• GST rate rationalisation to reduce complexities.
• Digital payment integration (UPI, cards, etc.) for GST dues.
• Simplified compliance processes for small taxpayers.

Together, these steps are expected to strengthen trust in the tax system, reduce compliance burden, and enhance taxpayer experience.

Reactions from Industry and Experts

• Exporters’ Associations have welcomed the reforms as “game-changing,” especially for small exporters.
• Tax practitioners have highlighted the need for clear risk-based criteria to ensure fairness in provisional refunds.
• Industry bodies have urged the government to extend benefits to pending refund claims, not just new ones filed after November 1.

What Businesses Should Do Now

• Stay Updated: Watch for CBIC notifications clarifying excluded categories and risk-based guidelines.
• Review Pending Refunds: Businesses should prepare documentation and ensure compliance to benefit from faster refunds post-November.
• Plan Cash Flow: Exporters and IDS-affected industries should factor in improved liquidity in their financial planning.

Conclusion

The GST Council’s approval of major refund reforms is a turning point in India’s indirect tax regime. By addressing exporters’ concerns, supporting MSMEs, and simplifying refund processes, the government has taken a decisive step towards improving ease of doing business.

From November 1, 2025, businesses can look forward to:

• Faster 90% provisional refunds for zero-rated supplies.
• Relief from IDS-related refund delays.
• Refund access for small-value consignments.

At MyFinTax, we believe these reforms will unlock working capital, reduce compliance stress, and strengthen India’s business ecosystem.

Follow @myfintaxofficial for more such updates, explained simply for business owners and professionals.