Despite the government's GST 2.0 guidelines issued in October 2025 mandating provisional refunds for 90% of eligible amounts within seven days for low-risk cases, businesses continue to face significant delays in obtaining goods and services tax refunds under the inverted duty structure. According to Business Standard, many large taxpayers with clean compliance histories are still experiencing delays as their applications continue to be flagged as risky by the system. Prashanth Agarwal, partner at PwC India, noted that while the government's intent is in the right direction, taxpayers' experiences vary significantly from state to state, with some authorities conducting what amounts to audits before issuing refunds. Finance ministry officials have acknowledged that many taxpayers may not be fully familiar with the detailed documentation and information requirements under the IDS refund mechanism, which could be contributing to the issue. As reported by Business Standard, affected taxpayers have not yet formally represented the matter before the authorities, and the issue would be examined once such representations are received.
The refund process becomes particularly problematic at the state GST jurisdiction level, where officers often seek information beyond prescribed requirements and hold refunds for what the industry describes as frivolous reasons. As reported by Business Standard, Abhishek Jain, indirect tax head and partner at KPMG, emphasized that the provisional refund process remains jurisdiction-dependent, with faster processing and timely issuance of refunds remaining critical industry demands. Prashanth Agarwal from PwC India highlighted that in some states, there is extra scrutiny wherein authorities are conducting what is effectively an audit before issuing the refund. At times, authorities are not issuing either the provisional refund or a deficiency memo within the 15-day timeline, as reported by Business Standard. Bipin Sapra, partner at EY, pointed to the absence of accountability in refund processing and called for a more technology-driven mechanism to reduce subjectivity at the field level.
Recent changes to the GST Network (GSTN) portal have introduced additional compliance challenges, with a new requirement for Annexure-B purchase details through a utility posing significant difficulties while filing refund applications. According to Business Standard, Prashanth Agarwal noted that recently, a new requirement on the GST Network portal — providing Annexure-B purchase details through a utility — has also posed challenges while filing refund applications. He added that field formations should restrict requirements to only those documents prescribed under the Central Board of Indirect Taxes and Customs' master circular governing refund claims. Experts also flagged opacity in the risk-classification mechanism, with taxpayers often unaware of their risk status and the parameters used to determine it, particularly concerning as provisional refunds are generally withheld in high-risk cases.
Industry experts are pushing for comprehensive reforms to address the persistent refund delays, including greater transparency in the refund process and improved accountability mechanisms. As reported by Business Standard, Bipin Sapra advocates for system-generated provisional refunds and shifting refund verifications to post-audits for low-risk assessees to avoid delays for genuine taxpayers. Bimal Jain from A2Z Taxcorp emphasized that genuine taxpayers should not suffer because of excessive caution in the system, noting that the objective of GST refunds is ensuring uninterrupted business liquidity rather than merely procedural compliance. Prashanth Agarwal advocates for greater transparency, stating it is advisable that steps be taken to help taxpayers know their risk status transparently, and there should be a mechanism to improve the same in consultation with the authorities. Experts also recommend taking industry feedback to make necessary corrective changes to improve taxpayers' experience and provide transparent mechanisms for taxpayers to know their risk status.
