GST Refunds (2026): Automated 90% Provisional Sanction, the 10 Day Clock and Wider Net ITC
CA Meet Dhrangadhariya 
October 10, 2026
CA Meet Dhrangadhariya October 10, 2026
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10 min readTable of Contents
Last updated: 10 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
For an exporter or a business sitting in an inverted duty structure, the GST refund has never really been about eligibility. It has been about waiting. Money that is admittedly yours sits with the government while an application moves through acknowledgement, scrutiny and sanction at whatever pace the queue allows.
The refund machinery is being rebuilt to take the officer out of the first and largest part of that journey. On 09/10/2026 the Press Information Bureau published detailed FAQs on refunds and on refund of credit accumulated on input services and capital goods, following the 57th GST Council meeting of 08/10/2026.
The usual caution applies, and it matters more here than anywhere. These are recommendations and design, to be given effect by amendment and notification, and they roll out in two phases “as per readiness of the system”. Two of the most valuable changes carry dates in the future by their own terms: 01/11/2026 for input services and 01/04/2027 for capital goods. Do not restructure a refund position on the strength of this.
Phase 1
Phase 2
| Stage | Form | Timing |
|---|---|---|
| Refund application | FORM GST RFD-01 | Filed on the portal |
| Acknowledgement | FORM GST RFD-02 | Within 10 days, or deemed, issued by the system |
| Deficiency memo | FORM GST RFD-03 | Within 10 days, and never after an acknowledgement |
| Provisional refund order | FORM GST RFD-04 | Within three working days of acknowledgement |
| Payment order | FORM GST RFD-05 | On provisional sanction in phase 2 |
| Final refund order | FORM GST RFD-06 | After the officer’s scrutiny |
Three working days from acknowledgement to the provisional order is the number to hold on to. Combined with the 10 day acknowledgement window, a clean low risk claim should see 90% of the money inside a fortnight or so of filing.
For a low risk claim on zero rated supplies or the inverted duty structure, 90% is sanctioned by the system after acknowledgement with no officer interface at that stage at all. The officer cannot refuse provisional sanction on a low risk claim, because the officer is not in that loop. Scrutiny and the final order in FORM GST RFD-06 come afterwards.
If a claim is not classified as low risk, the officer scrutinises it after acknowledgement, both for provisional sanction and for the final refund.
Excluded from provisional refund altogether:
That Aadhaar authentication point deserves attention. It is a one-off piece of housekeeping that silently decides whether your refunds run on the fast track or the slow one.
If the officer finds a deficiency, FORM GST RFD-03 issues, and then:
The protection worth knowing is the other way round: once an acknowledgement has been issued, no deficiency memo can follow, on any ground. Getting past acknowledgement closes that door.
This is the structural change, and it is the one with money in it.
At present, under rule 89, “Net ITC” excludes credit on capital goods for a zero rated refund, and excludes credit on both input services and capital goods for an inverted duty refund. That is being changed:
| Credit on | Enters the computation for | For credit availed on or after | How much |
|---|---|---|---|
| Input services | Inverted duty structure, rule 89(5) | 01/11/2026 | In full, subject to eligibility |
| Capital goods | Zero rated, rule 89(4), and inverted duty, rule 89(5) | 01/04/2027 | One sixtieth per month over 60 months, from the month the credit is availed |
Two qualifications on capital goods. The credit counted is only that attributable to the relevant period, meaning capital goods on which credit was availed on or after 01/04/2027 in any month not earlier than 59 months before the last month of the relevant period, computed by the formula in rule 89. And only eligible credit counts: anything blocked under section 17(5) or otherwise inadmissible is out, and any reversal required under the Act or Rules, including rule 43, attributable to the months in the relevant period is deducted.
The change does not affect zero rated supplies made on payment of integrated tax, because there is no restriction on using capital goods credit to pay tax on those supplies in the first place.
Widening Net ITC does not widen who is eligible. Inversion is still established by comparing the rate of tax on inputs against the rate on output supplies, and nothing else. The FAQ gives two cases, and they are worth reproducing because the distinction decides entitlement.
| Position | Case A | Case B |
|---|---|---|
| Rate on inputs | 18% | 5% |
| Rate on output supplies | 5% | 5% |
| Rate on input services | 18% | 18% |
| Inversion exists? | Yes, inputs are taxed higher than outputs | No, inputs and outputs are at the same rate |
| Credit on input services in Net ITC? | Yes, for credit availed on or after 01/11/2026 | No, not eligible for an inverted duty refund at all |
In short, a high rate on services you buy does not by itself get you a refund. The proposal does not expand the class of persons eligible under clause (ii) of the first proviso to section 54(3).
The FAQ is unusually direct about this, and it amounts to one idea: the system is matching your numbers against other filings, so inconsistency is what throws you off the fast track.
We can test whether an inverted duty structure genuinely exists on the inputs against outputs comparison before a claim is built on it, compute Net ITC under the widened rule 89 including the one sixtieth monthly capital goods allocation and the rule 43 reversals that have to be deducted, reconcile a refund application against the returns and shipping bills so it stays on the automated track, deal with a deficiency memo and the fresh filing it forces, and pursue interest where a refund has run past the statutory timeline or was withheld under section 54(11). Please reach out to our team and we will be happy to assist.
For a low risk claim on zero rated supplies or the inverted duty structure, the system sanctions 90% of the amount claimed on a provisional basis with no officer interface. The balance follows after the officer completes scrutiny and issues the final order in FORM GST RFD-06.
The application is deemed acknowledged. An acknowledgement in FORM GST RFD-02 is made available on the common portal once the 10 days expire. Deemed acknowledgement only starts the processing clock; it does not mean the refund is approved.
No. Once an acknowledgement has been issued for a refund application, no deficiency memo can be issued for that application on any ground.
Notified persons supplying commodities such as areca nuts, pan masala, tobacco and manufactured tobacco substitutes and essential oils, anyone who has not completed Aadhaar authentication under rule 10B, and cases where a DRC-01 has been issued against an RFD-06, an APL-03 filed without a corresponding APL-04, or an APL-07 filed where the APL-04 is still awaited.
No. Inversion is determined by comparing the rate on inputs with the rate on output supplies only. If inputs and outputs are both at 5%, a service taxed at 18% does not make you eligible, even after the Net ITC change.
Where the refund is not sanctioned within the statutory time limit, interest runs on the delay beyond 60 days under section 56. Separately, where a refund withheld under section 54(11) later becomes payable, interest at 6% runs from the date it was withheld to the date it is paid.
Yes, ₹1,000, and it is applied to the total across all tax heads together rather than head by head. It does not apply to a refund on goods exported out of India with payment of tax.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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