Delhi Govt. Notifies Persons Ineligible for Provisional GST Refund: See Full List [Read Notification]
The Provisional GST Refund mechanism helps offset some of the businesses’ cash flow related issues while full verification of their refund is carried out
The Finance (Expenditure-I) Department of the Government of Delhi government has issued a notification identifying categories of registered taxpayers who will not be eligible for provisional refunds of Goods and Services Tax (GST), with the restriction being applied retrospectively.
What is a provisional refund under GST?
A provisional refund is an advance payment of part of a refund claim on zero-rated supplies or inverted-duty transactions that is provided to GST registrants to ease working-capital constraints while full verification of the refund is carried out.
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Under Section 54(6) of the GST framework, a proper officer can provisionally sanction up to 90% of a refund claim subject to conditions and safeguards. Provisional orders are normally issued by Form GST RFD-04 after acknowledgement in Form RFD-02. Final orders sanctioning or rejecting the refund is done on completion of scrutiny by Form RFD-06 or Form RFD-08, with recovery mechanisms available if provisional amounts exceed admissible refunds.
Who all are barred from availing refund by the Delhi Notification?
The notification lists two categories of registered persons who shall not be allowed provisional refunds under the Delhi Act:
Non-Aadhaar-authenticated taxpayers - Persons who have not undergone Aadhaar authentication under Rule 10B of the Delhi GST Rules, 2017.
Taxpayers engaged in the supply of the goods, along with their relevant HSNs are listed below:
- Areca nuts (0802 80)
- Pan masala (2106 90 20)
- Tobacco and manufactured tobacco substitutes (24)
- Essential oils (3301)
The Central Board of Indirect Taxes & Customs (CBIC) had earlier issued instructions implementing a risk-based provisional refund mechanism. Under the revised framework, applications classified as “low risk” by the system may receive provisional sanction of up to 90% of the claimed amount based on automated identification and evaluation; applications flagged as “not low risk” will attract detailed officer scrutiny.
What should GST registered entities do?
Registered persons in Delhi who seek to avail provisional GST refund should ensure that Aadhaar authentication under Rule 10B is completed before filing refund claims. Exporters and zero-rated suppliers should also check whether their goods fall within the notified exclusions before seeking to avail provisional GST refund.
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