CBIC Clarifies Risk-Based Provisional GST Refunds for Zero-Rated and IDS Claims:

CBIC Clarifies Risk-Based Provisional GST Refunds for Zero-Rated and IDS Claims The Central Board of Indirect Taxes and Customs (CBIC) has recently issued an instruction No. 06/2025-GST (File No.: CBIC-20006/4/2025-GST) dated October 03, 2025, addressing all the Principal Chief Commissioners/Chief Commissioners of Central Tax regarding the provisional sanction of GST refund claims. The instruction is titled "Provisional sanction of refund claims based on identification and evaluation of risk by the system." The 56th GST Council meeting, held on September 3 and 4, 2025, requested amendments to rule 91(2) of the CGST Rules, 2017. Now, for low-risk refund applications, the proper officer can approve 90% of the refund on a provisional basis based on the system’s risk evaluation. Along with this, a provision has been added in rule 91(2) to provide that, on a case-by-case basis, where the proper officer thinks that in a particular case, a provisional refund should not be granted, he can, for reasons to be recorded in writing, instead of granting a refund on a provisional basis, proceed with a detailed examination of the application.

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Additionally, via notification No. 14/2025-Central Tax dated 17.09.2025, certain registered taxpayers have been identified under section 54(6) of the CGST Act, 2017, who are not allowed to get a provisional refund for zero-rated supplies. Refunds will continue to be processed using existing guidelines until the issuance of FORM GST RFD-02 or FORM GST RFD-03, as the case may be. Low-risk applications, once acknowledged, do not need further scrutiny unless covered under the special proviso. Refunds for applications not marked as low-risk will require detailed scrutiny before final approval. Certain registered persons notified under section 54(6) are not eligible for provisional refunds for zero-rated supplies. Also, provisional refunds cannot be adjusted or withheld, so in some cases, the officer may directly sanction the refund on a final basis. Provisional refunds may also be withheld if there are pending appeals, show-cause notices, or unsettled orders.

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The proviso to rule 91(2) is meant for trade facilitation and should be applied sparingly, only when justified. If, after detailed examination, the provisional refund exceeds the final admissible amount, a show-cause notice (FORM GST RFD-08) will be issued to recover the excess. As mentioned, the amendments introduced to rule 91(2) of the CGST Rules, 2017, via notification No. 13/2025-Central Tax dated 17.09.2025, were scheduled to take effect from October 1, 2025; hence, all provisions relating to risk-based sanction of provisional refund will apply to all the refund applications filed on or thereafter. Refer to the official instruction for complete information.