Accelerating GST refunds: Unlocking liquidity for India’s next growth phase

By M PandiyanFor exporters and industries such as pharmaceuticals, textiles and electric vehicles (EVs), GST refunds are not merely a tax matter. They are a critical source of working capital, particularly in sectors affected by inverted duty structures where GST paid on inputs exceeds GST collected on outputs.While GST has significantly improved compliance through digitisation and standardised processes, obtaining refunds remains a challenge. Businesses often face extensive documentation requirements, multiple verification checks and prolonged processing timelines. Delayed refunds lead to blocked tax credits, tighter cash flows and higher financing costs, affecting competitiveness and investment decisions.The issue has gained greater importance following the GST rate rationalisation exercise of September 2025. In several sectors, the resulting increase in inverted duty structures has led to the accumulation of unutilised input tax credits, making a timely and predictable refund mechanism even more critical.From Industry Expectations to Policy ActionA Deloitte survey conducted in June 2026 identified faster GST refunds as a key industry priority. Businesses favour a technology-driven approach that relies on system validations and exception-based scrutiny rather than extensive manual reviews. Such a framework can reduce compliance costs, improve consistency and expedite the release of legitimate refunds.Several recommendations of the 57th GST Council align with these expectations. Proposed measures include greater use of system-readable documentation, automated verification using government data and technology-enabled validation of refund applications.One important proposal is reducing the timeline for issuing refund acknowledgements from 15 days to 10 days. This could allow eligible taxpayers to access up to 90% of their refund amount provisionally at an earlier stage, easing liquidity pressures. The introduction of deemed acknowledgements, where no deficiencies are communicated within the prescribed period, would further enhance certainty and improve cash-flow planning.Another significant reform is the proposed change in the refund formula to include input services and capital goods, helping businesses with inverted duty structures to reduce the build-up of unutilised credits.The Next Frontier: Automation and Ease of Doing BusinessThe most transformative aspect of the proposed reforms is the move towards automated refund processing. Implementation is expected to be phased, beginning with low-risk claims and gradually expanding as technology systems mature.Using objective risk indicators such as outstanding tax demands, recovery proceedings and predefined exceptions, low-risk claims could be processed with minimal officer intervention. This would enable tax authorities to focus resources on higher-risk cases while providing compliant taxpayers with faster and more predictable outcomes.Greater automation can significantly reduce processing delays, minimise compliance burdens and accelerate the release of working capital.Expanding Refund ReliefThe reforms also seek to extend refund eligibility to categories that have historically faced challenges, including supplies to merchant exporters, taxes paid through export debit notes and accumulated credits arising from electricity exports.At the same time, greater integration between GST systems and platforms such as EDPMS, SEZ Online and the Electronic Export Declaration Form (EDF) framework can strengthen verification processes while reducing repetitive documentation requirements.A Refund Ecosystem Aligned with GrowthA transparent, risk-based and technology-enabled refund framework can unlock working capital, support investment, strengthen exports and enhance India’s competitiveness. If implemented effectively, the proposed reforms could transform GST refunds from a longstanding business concern into a hallmark of a mature and business-friendly tax system.Ultimately, the effectiveness of GST’s next phase will be measured by how quickly and reliably genuine refunds reach businesses. GST refunds are more than a tax administration issue. They are a vital liquidity lever for businesses and the broader economy. Accelerating their release can unlock capital, stimulate investment and support India’s next phase of growth.(The author is Partner at Deloitte)You use AI every day. Now get your AI Quotient. Take the AIQ test.