The proper officer under Rule 90 of the CGST Rules, 2017, should issue an acknowledgement using FORM GST RFD-02 or a deficiency memo with FORM GST RFD-03 within 15 days of filing a refund application. The 60-day period for sanctioning refunds as specified in Section 54(7) begins from the date of acknowledgement.
Rule 91 allows for a provisional refund of 90% of claims related to zero-rated supplies, which must be ordered in FORM GST RFD-04 and issued by the proper officer within seven days of acknowledgement. Additionally, Notification No. 14/2025-Central Tax extended provisional refunds based on risk evaluation by the system to inverted duty structure claims, effective from October 1, 2025.
However, acknowledgements were frequently delayed beyond the stipulated period, and deficiency memos were often issued on peripheral grounds, effectively restarting the limitation period. Refunds of excess balances in the electronic cash ledger, which do not require verification of eligibility, were processed manually. Consequently, exporters and taxpayers under the inverted duty structure consistently reported that their working capital remained blocked in pending refunds.
During the 57th GST Council meeting on October 8, 2026, recommendations were made for the system-based processing and approval of refund claims in two phases. Phase 1 includes:
Read Also: Easy to Claim & Check Status of Income Tax Refund Online
(i) automatic sanctioning of the full refund of excess balances in the electronic cash ledger without officer intervention.
(ii) a reduction in the time limit for issuing acknowledgements or deficiency memos from 15 days to 10 days, with deemed acknowledgement by the system thereafter.
(iii) automatic provisional sanction of 90% of refund claims for zero-rated supplies and inverted duty structures based on system risk evaluation. Phase 2 will focus on system-based acknowledgements and the automated sanctioning of full refunds in zero-rated supply cases. The Council also suggested revising FORM GST RFD-01 to capture details in a system-readable format, eliminating the need to upload scanned documents.
The Notification No. 05/2026
The CBIC, vide Notification No. 05/2026-Central Tax dated 26.10.2026, has made the following amendments to implement Phase 1:
Rule 90(2): Acknowledgement: The time duration for the proper officer to investigate the application for completeness and issue the acknowledgement in FORM GST RFD-02 has been decreased from 15 days to 10 days.
Rule 90(3): Deficiency memo: Similarly, a deficiency memo in Form GST RFD-03 should be issued within 10 days of the filing of an application.
New Rule 90(3A): Deemed acknowledgement: Where no acknowledgement in RFD-02 or a deficiency memo in RFD-03 is issued within 10 days, the application is deemed acknowledged, and the acknowledgement is made available by the common portal in FORM GST RFD-02 signifying the filing date; from that filing date, the 60 days u/s 54(7) are counted.
Rule 91(2): Automatic provisional refund: Based on the risk identification and assessment by the common portal, a provisional refund order in Form GST RFD-04 shall be issued within three working days from the date of the acknowledgement (including a ‘deemed acknowledgement’) on the common portal. This order shall not require revalidation by the proper officer. Rule 91(3) has been revised to enable the payment order in Form GST RFD-05 to be made available through the common portal.
New Rule 92(1B): Excess cash ledger balance: Where a refund of the balance in the electronic cash ledger is due under Section 49(6), an order shall be issued by the common portal in Form GST RFD-06. This order will sanction the refund after adjusting any outstanding demands under this Act or any other law. Furthermore, Rule 92(4) has been amended to allow for the issuance of a payment order in Form RFD-05 by the common portal for the amount determined.
Rule 89(1) and (1A): The provision allowing refund applications to be submitted “directly or via a facilitation centre notified by the Commissioner” has been removed, as applications are now filed electronically via the common portal.
Rule 86(3) read with new Rule 89(3): Order of debit of credit ledger: Where the refund is pertinent with the ITC, the electronic credit ledger is to be debited by the applicant within a mentioned order- first IGST to the extent of balance; then CGST and SGST/UTGST equally to the extent of balance; and where there is a shortfall in one of the CGST/SGST ledgers, the differential amount is debited from the other (with illustrations incorporated in the rule).
Rule 89(2): Statements and declarations (w.e.f. 01.12.2026): The statements required with the application must now include “details” of invoices instead of just the “number and date.” This information should be provided in a system-readable format using the revised FORM GST RFD-01. New clause (ha) mandates that a statement of invoices must accompany the shipping bills or bills of export submitted by the merchant exporter for refund claims made by suppliers under Notification No. 40/2017-CT(R)/41/2017-IT(R).
New clause (n) requires a statement of invoices received along with details of Input Tax Credit (ITC) for the refund of unused ITC. Also, new clause (o) necessitates a declaration confirming that the applicant has not been prosecuted for any offence where the tax evaded is more than Rs 2.5 crore in the five years preceding the tax period.
This applies to cases involving refunds of unused ITC u/s 54(3) or zero-rated supplies with the tax payment. Furthermore, the previous requirement to indicate that the claim arises from inputs taxed higher than outputs in the statement under clause (h) has been removed. Lastly, clause (p), which pertains to a declaration regarding capital goods, will take effect from April 1, 2027.
FORM GST RFD-01 has been replaced w.e.f. 01.12.2026 to capture the aforesaid information in structured form, and FORM GST RFD-07 has been updated for its rule reference.
Effective Date:
The revisions made to Rules 86(3), 89(1)/(1A)/(3), 90, 91, and 92 will come into effect from November 1, 2026. The amendment to Rule 89(2) and the revised Form GST RFD-01 will come into effect on December 1, 2026. From 01.11.2026, applicants for refunds will receive an acknowledgement (or a deemed acknowledgement) within 10 days.
Subsequently, for low-risk claims, specifically those involving ‘zero-rated’ supplies and ‘inverted duty structures’, a 90% provisional refund will be issued by the system within three working days. Furthermore, any excess balance available in the cash ledger will also be refunded through a fully automated process.
Applicants should ensure that the data provided in the refund application matches their returns, shipping bills, and ledgers, as the system will rely on validation rather than manual verification.
