The Central Board of Indirect Taxes & Customs (CBIC) recently directed a significant change in the process for GST refunds medical devices. This move particularly benefits manufacturers in India. The change aims to fast-track refunds. It targets manufacturers affected by the inverted duty structure. CBIC introduces a system. Under this system, the government will provisionally sanction 90 percent of refund claims. This happens on a case-to-case basis. It is subject to a system-based risk evaluation. This change promises to alleviate working capital challenges. Many Indian manufacturers, especially Micro, Small, and Medium Enterprises (MSMEs), have faced these challenges.
Addressing the inverted duty structure remained a pressing concern for manufacturers. Previously, the government’s rationalization changes taxed raw materials at 18 percent. Finished goods, conversely, enjoyed a reduced rate of 5 percent. Consequently, this created an inverted duty of 13 percent. This tied up significant working capital for manufacturers. Unlike other players in the value chain, manufacturers handle products from raw materials to finished goods. This makes them particularly vulnerable to such duty imbalances. Therefore, this new directive from the CBIC comes as a welcome relief to the sector. It ensures smoother cash flows for businesses.
Streamlining Provisional GST Refunds for Medical Devices
The CBIC issued a letter dated October 3, 2025. It instructed principal and chief commissioners of central tax to implement this provisional refund system. Where authorities do not permit provisional refunds, they must document the reasons in writing. Furthermore, the GST Council previously recommended an amendment in rule 91(2) of CGST Rules, 2017. This amendment proposed to sanction 90 percent of the claimed amount provisionally. Sanctioning would occur within seven days. While this proposal awaits incorporation into the Finance Act, the CBIC’s directive acts as an interim trade facilitation measure. It applies to refund claims filed on or after October 1, 2025. This mirrors the provisional sanctioning process for zero-rated supplies.
Industry Welcomes Faster GST Refunds
Rajiv Nath, Forum Coordinator of the Association of Indian Medical Device Industry (AiMeD), praised this development. He highlighted that delayed GST refunds significantly impacted Indian manufacturers. Especially, MSMEs faced working-capital constraints. The medical device industry, in particular, suffered from an accumulation of 13 percent input tax. This accumulation was due to the rate revision. Nath expressed optimism. He believes releasing 90 percent of refunds upfront for low-risk taxpayers will effectively alleviate cash-flow challenges.
Moreover, Nath advocated for “GST 2.0”. This should include input services and capital goods in the refund process. He emphasized that modern supply chains increasingly rely on spending on technology, machinery, logistics, rentals, and specialized services. Expanding the refund process to cover these aspects would further support the manufacturing sector’s growth and efficiency.
Frequently Asked Questions
Q1: What is the primary change in GST refunds announced by CBIC?
The CBIC has directed that 90 percent of GST refund claims will be provisionally sanctioned on a case-to-case basis, based on a system-based risk evaluation. This aims to fast-track refunds for manufacturers.
Q2: Why was this change necessary for the medical device industry?
The medical device industry, along with other manufacturers, faced working capital constraints due to an ‘inverted duty structure,’ where raw materials were taxed higher than finished goods. This led to an accumulation of input tax, impacting cash flow.
Q3: When did this new directive for provisional refunds become effective?
The directive applies to refund claims filed on or after October 1, 2025, as an interim trade facilitation measure, although the formal amendment in the Finance Act is still pending.
References
- GST refunds to get fast-tracked as Govt mandates risk-based approvals – ETHealthworld
- Understanding Inverted Duty Structure Under GST: A Complete Guide – CashFlo
- CBIC Introduces Risk-Based System for 90% Provisional GST Refunds – Taxmann
- MedTech industry seeks additional GST reforms, raise in cess on imported devices
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