Union Budget 2026-27: Provisional Refunds Extended to Inverted Duty Structure [Read Finance Bill 2026]

The Union Budget for the Financial Year 2026-27 was presented by Finance Minister Nirmala Sitharaman in the Lok Sabha today (Sunday, 1 February 2026).

Among many announcements made during the Union Budget 2026 presentation, the President’s Recommendation under Articles 117 and 274 of the Constitution of India was also taken into consideration.

Under these recommendations, he made several comments on Central Goods and Services. Section 54 of the Central Goods and Services Tax Act, 2017 provides for refunds of taxes. The same has been edited through Clause 139 of the Finance Bill, 2026.

Section 54(6) previously provided for provisional refunds of 90% were limited to zero-rated supplies. Now, taxpayers claiming refunds due to an inverted duty structure will also be eligible for provisional refunds. It shall be implemented from the date as the Central Government may notify in the Official Gazette.

Clause 139 of the Bill seeks to amend sub-section (6) of section 54 of the Central Goods and Services Tax Act to extend the provisions of provisional refund to refunds arising out of inverted duty structure. The amendment includes unutilised input tax credit as has been given in sub-section (3).

An inverted duty structure arises when the GST rate on input goods is higher than the GST rate on the output goods. For example, if a trader purchases raw materials at 18% and sells them at 12%, input tax credit accumulates and excess credit impacts a business’s working capital and cash flow. These refunds act as a relief measure.

The clause further seeks to amend sub-section (14) of section 54 of the Central Goods and Services Tax Act to provide for removing the threshold limit for refund claim in case of goods exported out of India with payment of tax. It excludes cases where refund of tax is claimed on account of goods exported out of India with payment of tax.

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