The GST Council said on Thursday that businesses can now get 90 per cent of eligible refunds within 13 days. This change aims to speed up the process and ease working-capital pressures. Pratik Jain said, "Automated payment of 90 per cent of refunds will allow businesses to put the money back."
Businesses will now be able to get 90 per cent of eligible GST refunds within 13 days. This was one of the several changes recommended by the GST Council on Thursday to speed up the refund process. The changes also allow refunds on input services and some capital goods under the inverted duty structure.
The Finance Ministry said the time for acknowledging a refund claim will be cut to 10 days from 15. If no acknowledgement or deficiency memo is issued within that timeframe, the claim will be treated as acknowledged. The system, based on a risk assessment, will then sanction 90 per cent of the claim within three working days, instead of the current cycle of seven days.
The government said 65 per cent of refund claims relate to exports or the inverted duty structure, of which 55 per cent are already classified as low-risk. Another 19 per cent relate to excess cash balances already lying with the government. Under the inverted duty structure, businesses currently cannot claim refunds on GST paid on input services when their inputs are taxed at a higher rate than their final products. This will change for credits availed from November 1.
Cash freed up
Refunds will also be allowed on GST paid on plant and machinery. For credits availed from April 1, 2027, the refund will be spread over 60 months, reflecting the asset's useful life.
Industry stakeholders said the changes could ease working-capital pressures by getting money back to businesses faster. "The intent is clearly positive, though the real test will be how smoothly and consistently these measures translate into faster refunds on the ground," said Sohrab Bararia, Partner, Grant Thornton Bharat.
Pratik Jain, Partner, Price Waterhouse & Co LLP, said that the inclusion of input services and capital goods in the refund mechanism will help businesses affected by the inverted duty structure. Automated payment of 90 per cent of refunds will allow businesses to put the money back into operations, he said.