CBIC Issues Instruction on Provisional Sanction of Refund Claims on Basis of identification and Evaluation of Risk by System [Read Instruction]
With effect from 1st October 2025, the risk-based provisional refund mechanism under amended Rule 91(2) will apply to all refund applications
The Central Board of Indirect Taxes and Customs ( CBIC ) has issued Instruction No. 06/2025-GST dated 3rd October 2025, providing detailed guidelines for the provisional sanction of refund claims under GST.
This was issued after the recommendations of the 56th GST Council meeting, which approved amendments to Rule 91(2) of the CGST Rules, 2017. Under the revised framework, 90% of refund claims will be sanctioned provisionally by the proper officer based on the system’s risk identification and evaluation, ensuring faster processing of claims and improved trade facilitation.
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According to the instructions, refund applications categorized as “low risk” by the system will be eligible for provisional sanction of 90% of the claimed refund amount. Once an acknowledgment is issued in FORM GST RFD-02, no further scrutiny will be required for such applications unless the officer, for recorded reasons, opts to withhold provisional sanction and conduct a detailed examination. However, in cases flagged as “not low risk”, officers will undertake detailed scrutiny before sanctioning any refund.
CBIC has also clarified that provisional refunds will not be granted where statutory conditions under Section 54(6) and Rule 91(1) are not met. For instance, notified categories of taxpayers under Notification No. 14/2025-Central Tax will remain excluded from provisional refunds for zero-rated supplies. Additionally, where refund claims are pending before appellate forums, or issues from previous claims have not attained finality, provisional sanction will be withheld to safeguard revenue.
In addition, the instruction states that the discretionary power under the newly inserted proviso to Rule 91(2)should be used sparingly and case-by-case, to prevent denial of refunds on presumptive grounds. If upon final scrutiny the sanctioned provisional amount is found to exceed admissible refund, officers will issue a show cause notice in FORM GST RFD-08 for recovery, in line with Sections 73, 74, or 74A of the CGST Act.
The system-based risk evaluation framework applies to refund applications filed on or after 1st October 2025, following notification of the amendment through Notification No. 13/2025-Central Tax. Further, the GST Council has also recommended extending the 90% provisional refund facility to cases of Inverted Duty Structure (IDS).
Although a legislative amendment to Section 54(6) is awaited, CBIC has introduced this measure on an interim basis, effective from 1st October 2025. Refunds under IDS will be processed in the same manner as zero-rated supplies, with system-enabled functionality already made available by GSTN.
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