Major GST Refund and Appeal Rules Announced by CBIC in 2025: Key Takeaways for Businesses

The Central Board of Indirect Taxes and Customs (CBIC) has recently made important changes to the Goods and Services Tax (GST) system in India, especially in the areas of refunds and appeals. These changes came into effect on March 27, 2025, through a formal notification, and were further explained and expanded upon in May 2025 with the release of a circular and an advisory. Together, these updates bring major changes in the way businesses will handle tax compliance, manage legal matters related to GST, and plan their finances. Standardize Accounting Policies – Specimen Drafts at Your Fingertips! Perfect for internal reference and client consistency- Click here The recent changes made by CBIC to the GST refund and appeal process are aimed at making the system more efficient, clear, and practical for taxpayers. These updates affect how businesses claim refunds, file appeals, and handle older tax periods. Here’s a detailed breakdown of what has changed: 1. No Refund Allowed for Certain Older Payments As per the new Rule 164(4), which came into effect on March 27, 2025, businesses will not be allowed to claim refunds for tax, interest, or penalty that was already paid before this date, if the payment relates to the period between July 1, 2017, and March 31, 2020 (either fully or partially). This rule is based on Section 128A(1) of the CGST Act, 2017. Businesses that paid GST, interest, or penalties in the past for those years can no longer get that money back through a refund. This could impact their cash flow and financial planning, especially if they were expecting to recover some amounts. However, this move is meant to help close old cases and bring uniformity to refund claims. 2. Businesses Can Partially Withdraw Appeals A new provision in Rule 164(7) (effective March 27, 2025) allows businesses to withdraw appeals for certain periods only, instead of having to drop the entire case. If a business has received a GST notice covering multiple periods, it can choose to withdraw the appeal for just the period between July 1, 2017, and March 31, 2020, and continue the appeal for the rest. This is a useful strategic tool for businesses. If they no longer wish to contest tax matters from earlier years, they can drop only that part of the case. This will help save time, reduce legal costs, and make the appeal process faster. 3. Appeals Are Treated as Withdrawn for Older Periods (If Chosen by Taxpayer) In connection with the above, the rules now state that if a taxpayer informs the authorities that they are not pursuing an appeal for the 2017–2020 period, then the appeal will be considered withdrawn for that period automatically. Important Note: This is not something the system will do by itself. The taxpayer must clearly state that they are withdrawing the appeal for that time period. Only then will it be treated as withdrawn. This helps businesses simplify their appeals cases. By removing old periods from the dispute, they can focus on more important or ongoing tax matters. It also helps in resolving issues more quickly. 4. New Invoice-Based GST Refund Filing System Introduced On May 8, 2025, the GST Network (GSTN) issued an advisory introducing a new system for filing GST refunds. Instead of filing for refunds based on monthly or quarterly tax periods, businesses must now file refunds based on each invoice. This new system applies to: Export of services (with tax payment) Supplies made to SEZ units or developers (with tax payment) Deemed exports (where the supplier claims the refund) Key Features of the New System: Tax Periods Removed: You no longer need to mention a 'from' or 'to' date. Refunds are tied to individual invoices. Mandatory Statements: Statement 2 for export of services Statement 4 for SEZ supplies Statement 5B for deemed exports Preconditions: All GSTR-1 and GSTR-3B returns must be filed before applying for a refund. Invoice Locking: Once you upload invoices for a refund, they are locked. They can only be unlocked if you withdraw the refund application or receive a deficiency notice. No Offline Tools: Businesses can no longer upload invoices offline. All data must be entered directly into Form RFD-01 on the GST portal. This system improves accuracy and ensures that there are no double claims. It creates a clear audit trail and is expected to make refund processing faster and more reliable. However, it also means that businesses must update their internal systems and may need training to adjust to the new process. Summary ChangeEffective DateDetailsBusiness ImpactNo Refund for Prior PaymentsMarch 27, 2025Refunds disallowed for pre-27 March 2025 payments relating to 2017–2020 periodCash flow impact; requires financial reassessmentPartial Appeal WithdrawalMarch 27, 2025Allows taxpayers to drop appeal for older periods selectivelyLegal cost savings, strategic appeal managementDeemed Appeal WithdrawalMarch 27, 2025Appeal considered withdrawn upon taxpayer’s intimationSimplifies dispute resolution; taxpayer-controlledInvoice-Based Refund FilingMay 8, 2025Filing now based on invoice, not tax period; mandatory online processSystem overhaul needed; better data accuracy and audit trail Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates

Major GST Refund and Appeal Rules Announced by CBIC in 2025: Key Takeaways for Businesses

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