Table of Contents
Quick Answer
The 57th GST Council recommended faster, system-based GST refunds. The notified CGST Rules cut the refund acknowledgement period from 15 to 10 days with deemed acknowledgement, remove the 1.5-times cap on zero-rated goods from 1 November 2026, and bring eligible input services (availed from 1 November 2026) and capital goods (availed from 1 April 2027, spread over 60 months) into the inverted-duty refund formula. The Council’s 90% automatic provisional refund depends on amendments to Section 54.
What did the Council recommend on GST refunds?
The Council’s aim, as stated in the press release, is to speed up refunds, reduce officer interface and improve cash flow. It proposed system-based processing and sanction of refunds for excess balance in the electronic cash ledger, zero-rated supplies and inverted duty structure, in two phases.
| Phase | Recommendation |
|---|---|
| Phase 1 | Full refund of excess cash-ledger balance sanctioned automatically; acknowledgement or deficiency memo within 10 days (down from 15) with deemed acknowledgement; 90% of zero-rated and inverted-duty claims sanctioned provisionally by the system on risk evaluation |
| Phase 2 | System-based automated acknowledgement; automated sanction of the full refund on zero-rated supplies after adjusting pending dues, based on risk evaluation |
Other recommendations: FORM GST RFD-01 to capture details in a system-readable format (no scanned uploads) for zero-rated and inverted-duty claims; the ₹1,000 minimum refund threshold under Section 54(14) to apply to CGST, SGST/UTGST and IGST taken together; and a standalone Section 115 on interest on refund of pre-deposits.
What is already in the notified Rules?
Notification No. 05/2026-Central Tax (26 October 2026) amends Rules 89 to 92 and related forms:
- Rule 90: acknowledgement or deficiency memo within 10 days; deemed acknowledgement under new sub-rule (3A).
- Rule 91: the portal can generate a provisional refund order (FORM GST RFD-04) on system risk assessment within three working days of acknowledgement.
- Rule 92: portal-generated sanction (RFD-06) and payment (RFD-05) orders, with adjustment against outstanding demands.
- Rule 89(4)(C): the 1.5-times cap is removed from 1 November 2026.
- Rule 89 (inverted duty): Net ITC now includes eligible input services availed from 1 November 2026 and attributable capital-goods ITC from 1 April 2027, with capital goods apportioned over 60 months.
- FORM GST RFD-01: revised version from 1 December 2026.
The percentage of provisional refund and several other features also depend on amendments to Section 54 of the CGST Act. Read the final Act provisions when notified.
Worked examples (simplified and illustrative)
Example 1: inverted duty refund with input services
A manufacturer’s output is taxed at 5% while inputs are taxed at higher rates.
- Turnover of inverted-rated supply: ₹1,00,00,000 (assume this is also the adjusted total turnover)
- ITC on inputs: ₹8,00,000
- ITC on eligible input services availed after 1 November 2026: ₹2,00,000
- Tax payable on the inverted-rated supply (5%): ₹5,00,000
The formula is: (turnover of inverted-rated supply × Net ITC ÷ adjusted total turnover) − tax payable on such supply.
- Before: Net ITC ₹8,00,000, so refund = ₹8,00,000 − ₹5,00,000 = ₹3,00,000
- Now: Net ITC ₹10,00,000, so refund = ₹10,00,000 − ₹5,00,000 = ₹5,00,000
Example 2: capital goods ITC over 60 months
A unit buys machinery on 15 May 2027 with ITC of ₹6,00,000 availed in the same month. Because the credit is availed after 1 April 2027, it qualifies. On a simple straight-line view the amount taken into the formula is about ₹10,000 a month for 60 months; the notified formula governs the exact apportionment. Credit availed before 1 April 2027 does not qualify.
Example 3: removal of the 1.5-times cap
An exporter ships goods worth ₹6 crore under LUT while like goods are sold domestically at ₹2 crore. Earlier, turnover of zero-rated supply for the refund formula was limited to 1.5 × ₹2 crore = ₹3 crore. From 1 November 2026 the cap does not apply, so the full ₹6 crore is used, subject to the other conditions of Rule 89.
Example 4: deemed acknowledgement
A refund application is filed on 3 December 2026. If neither RFD-02 nor RFD-03 is issued by 13 December 2026, the application is treated as acknowledged.
Example 5: the ₹1,000 threshold across tax heads
A claim comprises CGST ₹400, SGST ₹400 and IGST ₹300, a total of ₹1,100. Under the recommended explanation to Section 54(14), the ₹1,000 threshold is tested on the total, so the claim is not barred by the threshold. This requires an Act amendment.
What about refund of pre-deposits?
CBIC Circular No. 259/05/2026-GST (26 October 2026) provides guidance on appeal pre-deposits. It states, among other things, that interest under Section 115 runs from the date of each deposit and that a refund should not be denied only because the department intends to appeal, unless the order is stayed. The rate of interest remains to be settled by the recommended Section 115 amendment.
What should exporters and manufacturers do now?
- Tag input-service invoices dated on or after 1 November 2026 for refund working papers.
- Maintain asset-wise records for capital goods purchased on or after 1 April 2027.
- Update refund checklists for the revised RFD-01 from 1 December 2026.
- Track Section 54 amendments before filing high-value provisional claims.
Related reading: 57th GST Council meeting: key decisions and our GST refunds and duty drawback practice page.
57th GST Council Meeting: In-Depth Special Series
This statutory analysis is part of our comprehensive 6-part technical coverage of the 57th GST Council recommendations, CGST Rules amendments, and CBIC notifications:
- Part 1:
Pillar: Key Decisions & What Is Already in Force
- Part 2:
Registration: Rule 14B, Biometrics & Cancellation Reforms
- Part 3:
Decriminalisation: Arrest Powers Omission & Penalty Relief
- Part 4:
Returns & ITC: Correction Mechanism, Schema 1.2 & ISD
- Part 5:
Rates & Exemptions: 5% EV Transport, App Delivery & Scrap TDS
Frequently Asked Questions
How long does GST refund acknowledgement take now?▼
The period for issuing the acknowledgement (FORM GST RFD-02) or deficiency memo (RFD-03) is reduced from 15 days to 10 days. If neither is issued within 10 days, the application is deemed acknowledged under new Rule 90(3A).
What is the 90% provisional GST refund?▼
The Council recommended that, for refund claims on zero-rated supplies and inverted duty structure, 90% of the claimed amount be sanctioned provisionally by the system without officer intervention, based on system risk evaluation. The amending provisions of Section 54 are required for this to operate fully.
Is ITC on input services now refundable for inverted duty cases?▼
Yes, from 1 November 2026, for ITC on eligible input services availed on or after that date. The amended Rule 89 includes such credit in Net ITC for the inverted-duty refund formula.
From when can capital goods ITC be refunded?▼
For ITC on capital goods availed on or after 1 April 2027. The refund is spread over 60 months under the notified formula.
Is the 1.5-times cap on zero-rated goods still there?▼
No. The cap in Rule 89(4)(C), which limited the turnover of zero-rated supply of goods to 1.5 times the value of like goods supplied domestically, is removed from 1 November 2026.
Primary Official Sources
CA Amol Gupta, FCA
Chartered Accountants AdvisoryPublished by H A V N & COMPANY (Amol Gupta & Associates). Providing technical analysis on corporate tax planning, entity incorporation, statutory attestation, and regulatory compliance under the ICAI framework.
General Information Only
This article is general information on the law as at its date of publication and is not professional advice. The Income-tax Act, 2025 applies from 1 April 2026; references to the Income-tax Act, 1961 apply to earlier years. Please take advice on your own facts before acting on it.