India’s GST refund process is undergoing a notable shift in 2026. Recent amendments to Section 54 of the CGST Act, alongside a new GSTN advisory, have reshaped GST refund rules for exporters, manufacturers and businesses with an inverted duty structure. GST refund claims can now move faster through wider provisional sanction, but GST refund reconciliation has become far more rigorous, with Annexure-B now required to match GSTR-2B and IMS data rather than internal purchase registers. For businesses, this is a clear signal to strengthen GST refund compliance well before filing. Here’s what’s changed, and how to position your business for faster GST refunds.
GST refund rules have been tightened and eased at the same time. Three changes, all effective through 2026, now shape how quickly a refund claim moves and what it takes to get one approved: provisional refunds have been extended to Inverted Duty Structure (IDS) claims, ITC refund applications are now reconciled against GSTR-2B/IMS rather than the purchase register alone & the minimum claim threshold for export refunds has been removed. Taken together, businesses that keep clean, reconciled records stand to get paid faster, those that don’t risk new grounds for delay or rejection.
Change | Basis | Applies To |
90% provisional refund extended to inverted duty structure claims | Amendment to Section 54(6), CGST Act (Finance Act 2026) | Inverted duty structure ITC refund applications |
Refund ITC statement (Annexure-B) reconciled to GSTR-2B/IMS | GSTN Advisory No. 660 (May 2026) | All accumulated-ITC refund applications |
Minimum claim threshold removed for export refunds | Amendment to Section 54(14), CGST Act (Finance Act 2026) | Export refund claims (with payment of tax) |
Risk-based 90% provisional sanction for zero-rated claims | Instruction No. 06/2025-GST; Rule 91(2) proviso | Zero-rated supply (export) refund claims |
Until this change, the 90% provisional refund mechanism, long available to exporters — did not extend to unutilised ITC refunds arising from an inverted duty structure (where GST paid on inputs exceeds GST charged on output supplies, common in textiles, footwear and fertilisers). Businesses in these sectors had to wait for full verification before receiving any part of their claim.
What Changed: Section 54(6) has been amended to bring inverted duty structure refunds within the same 90% provisional sanction framework as zero-rated supplies. The proper officer still verifies and finalises the balance 10%, but the bulk of the claim is released upfront.
Practical Effect: Businesses with a recurring IDS refund position should build the faster 90% release into cash flow forecasts, and flag pending/future IDS claims for provisional processing rather than assuming a full-verification timeline.
Refund applications involving accumulated ITC require a supporting statement (Annexure-B) listing the underlying invoices. Previously, this was largely prepared from the purchase register. Following GSTN Advisory No. 660, Annexure-B must now reconcile to GSTR-2B as shaped by the Invoice Management System i.e., to what suppliers have actually reported and what has been accepted in IMS, not merely to internal books.
Practical effect: A refund claim can now be delayed or rejected purely on reconciliation grounds — for instance, where a supplier has not filed correctly or an invoice remains unaccepted in IMS. Purchase-register-to-GSTR-2B reconciliation should be completed, and vendor-side gaps resolved, before a refund application is filed, not after.
Section 54(14) previously set a minimum claim amount below which export refund applications (with payment of tax) would not be processed. This threshold has now been removed, so even small-value export refund claims are eligible for processing, relevant for smaller exporters who previously found such claims not worth filing.
These changes reward businesses that keep a clean, well-reconciled refund pipeline and penalize those that don’t. A structured, claim-wise review process is the prudent response.
Area | Recommended Business Response |
Refund Pipeline | Map all pending and upcoming ITC, IDS and export refund claims; flag those eligible for 90% provisional sanction. |
Reconciliation | Reconcile the purchase register against GSTR-2B/IMS before filing; resolve supplier-side mismatches proactively rather than post-filing. |
Annexure-B Preparation | Update refund-filing SOPs so Annexure-B is prepared directly from GSTR-2B, not the purchase register alone. |
Export Claims | Revisit previously unfiled small-value export refund claims that are now eligible following removal of the minimum threshold. |
Cash Flow Planning | Factor faster 90% provisional refunds into working capital forecasts, particularly for IDS-heavy businesses. |
The GST refund process for IDS claims now mirrors the treatment for zero-rated exports. Once a claim is filed, 90% of the eligible amount can be sanctioned on a provisional basis, with the proper officer verifying and releasing the remaining 10% afterward. This significantly shortens the working-capital wait for businesses with a recurring IDS position.
Earlier, Annexure-B (the invoice-wise statement supporting an ITC refund claim) was typically prepared from the internal purchase register. Now, following GSTN Advisory No. 660, it must reconcile to GSTR-2B as shaped by the Invoice Management System — meaning it has to match what suppliers have actually reported and what has been accepted in IMS, not just what your books show.
Yes. Section 54(14) previously blocked refund payouts below a minimum claim amount for export refunds (with payment of tax). That threshold has now been removed, so even small-value export refund claims — the kind commonly filed by exporters using courier or postal mode — are eligible for processing.
Take a textile manufacturer as an example: GST paid on inputs like synthetic yarn is typically higher than the GST charged on the finished garments, creating a classic inverted duty structure. Before filing a refund claim, such a manufacturer should reconcile its purchase register against GSTR-2B, confirm that suppliers have correctly filed their returns, and clear any invoices still sitting unaccepted in IMS. Doing this upfront, rather than after filing — is now central to GST refund compliance, since reconciliation gaps are a direct ground for delay or rejection.
Not automatically. The reforms make faster GST refunds possible, but only for businesses with clean, well-reconciled data. A claim built on purchase-register figures that don’t match GSTR-2B/IMS can still face deficiency memos or rejection, even under the new, more liberal provisional-refund framework.
GST refund policy has moved decisively toward faster cash release, but faster release is now conditional on cleaner data. Businesses that reconcile ITC claims against GSTR-2B/IMS before filing, and that actively track eligibility for provisional and threshold-free processing, stand to see refunds move materially faster. Those that continue to file on purchase-register data alone risk delays under the very reforms designed to speed things up.
For the underlying statutory position on refund of unutilised ITC, refer to the official GST Council resource on refund provisions, issued by the Government of India.
KEY ACTION: Reconcile ITC refund claims against GSTR-2B/IMS before filing and fast-track inverted duty structure and export claims now eligible for provisional or threshold-free processing. |
GST refund reconciliation is now less forgiving of loose data, and businesses that adapt early stand to gain the most from faster GST refunds. UJA Global Advisory’s Indirect Tax team can help you review your refund pipeline, align Annexure-B filings with GSTR-2B/IMS, and build a GST refund process that stays ahead of compliance requirements. Get in touch with us today.