CLAUSE BY CLAUSE ANALYSIS OF PROPOSED GST AMENDMENTS (PART 2)

Following is the snapshot of GST related changes (CGST & IGST) in the Finance Bill, 2026 (FB):

Section 54: Refund of Tax (Clause 139 of Finance Bill, 2026)

Clause 139 of the Finance Bill, 2026 proposes to amend section 54 of the CGST Act, 2017 dealing with refund of tax. Accordingly, following two amendments are proposed in sub-sections (6) and (12) of Section 54:

(a) in sub-section (6), after the words “supply of goods or services or both”, the words, brackets and figures “or of unutilised input tax credit allowed under clause (ii) of the first proviso to sub-section (3)” shall be inserted;

(b) in sub-section (14), after the words, brackets and figures “sub-section (5) or sub-section (6)”, the words “, other than cases where refund of tax is claimed on account of goods exported out of India with payment of tax,” shall be inserted.

According to Notes on Clauses to Finance Bill, 2026,Clause 139 of the Bill seeks to amend sub-section (6) of section 54 of the Central Goods and Services Tax Act to extend the provisions of provisional refund to refunds arising out of inverted duty structure. The clause further seeks to amend sub-section (14) of section 54 of the Central Goods and Services Tax Act to provide for removing the threshold limit for refund claim in case of goods exported out of India with payment of tax.

Presently, sub section (6) of Section 54 provides as follows:

Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent of the total amount so claimed, 9[****] in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant.

Presently, sub-section (14) of section 54 reads as follows:

Notwithstanding anything contained in this section, no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees.

Sub-section (6)

It is generally seen that certain taxpayers do face working capital blockage arising due to delay in refund on inverted duty structure, i.e., accumulated differential duty on inputs and output leading to refund. The taxpayers are eligible to claim refund but sanction and disbursement of refund takes time which blocks considerable working capital of companies. In order to address the issue of delayed refunds on inverted duty cases and ease out liquidity of such taxpayers, it is proposed to enable the revenue authorities to grant 90 percent of refund claimed on a provisional basis without waiting for overall claim being granted in ordinary course.

Presently under sub-section (6), there is a provision for 90 percent of refund on provisional basis in respect of zero rated supplies without payment of IGST but not in respect of refunds arising out of inverted duty structure. With the proposed amendment, provisional refund in case of inverted duty cases will also be allowed which will benefit taxpayers who suffer inverted duty levies and are thus unable to utilize input tax credit.

Sub-section (14)

Under sub section (14), which is a non-obstante clause, refund u/s 54(5) or 54 (6) shall not be paid to the applicant (taxpayer) if the amount involved is less than Rs. 1000. This is a provision applicable to all types of refunds across the board.

The proposed amendment carves out an exception to this provision so as to provide that where exports are being made on payment of IGST, refund shall be granted irrespective of the amount involved in the refund claim and the rule of Rs. 1000 shall not apply to such refunds. It would imply that even if amount of IGST refund is less than Rs. 1000, it shall be allowed. However, though a beneficial measure, there may be few such instances. Claiming refund of small amounts of less than Rs. 1000, would itself be cumbersome to apply.

Such a provision may be helpful to small or casual exporters who export goods through courier or post or by way of e-commerce transactions. This is not a provision for automatic refund but refund process will have to be gone through.

Monetary limit (threshold) for refunds u/s 54(5) and 54(6) read with u/s 54(14), shall therefore be as under:

It implies that for export of goods, refund can be claimed for any amount. In case of export of tax paid goods, there will be no monetary limit after the amendments are notified, post enactment of the Finance Bill, 2026.

Section 101A Constitution of National Appellate Authority for Advance Ruling (Clause 140 of Finance Bill, 2026)

Finance Bill, 2026 in clause 140 proposes to amend section 101A of the CGST Act, 2017 dealing with Constitution of National Appellate Authority for Advance Ruling (NAA AR). New sub-section 1A has been inserted along with an explanation as follows:

In section 101A of the Central Goods and Services Tax Act, after sub-section (1), the following sub-section shall be inserted, namely:––

“(1A) Notwithstanding anything contained in sub-section (1), till the National Appellate Authority is constituted under that sub-section, the Government, may on the recommendations of the Council, by notification, empower any existing Authority constituted under any law for the time being in force to hear appeals made under section 101B and in such case,––

1. the provisions of sub-sections (2) to (13) shall not apply; and
2. any reference to the National Appellate Authority under this Chapter shall be construed as a reference to such Authority.

Explanation.–– For the purposes of this sub-section, the expression “existing Authority” shall include a Tribunal.”.

In view of this, sub-section (1A) is being inserted in Section 101A of the Central Goods  and Services Tax Act, 2017 to provide that the Central Government may, pending the constitution of the National Appellate Authority, by notification empower an existing Authority, for hearing appeals under section 101B of the CGST Act, 2017; and to provide that the provisions of sub-sections (2) to (13) shall not be applicable where a Tribunal has

been so empowered under sub-section (1A). An explanation to sub-section (1A) is also being inserted to clarify that the existing Authority also includes a tribunal. This will come into effect from 01.04.2026.

The objective of new sub-section is to insert a new sub-section (1A) in section 101A of the Central Goods and Services Tax Act so as to provide that till the National Appellate Authority is constituted under sub-section (1), the Government may on the recommendation of the Council, by notification, empower any existing Authority to hear appeals made under section 101B. It further seeks to provide that in such case, the provisions of sub-sections (2) to (13) shall not apply. It also insert an Explanation in the said sub-section so as to provide that the expression “Existing Authority” shall include a Tribunal.

Presently, though section 101A of CGST Act, 2017 provides for Constitution of NAAAR, the new insertion of sub section (1A) provides for powers to the Government to notify by way of notification any existing authority to act as NAAAR to hear appeals u/s 101B of CGST Act, 2017.

The new insertion implies:

1. Government will be empowered to notify any existing authority to act as NAAAR.
2. Such existing authority may be any existing authority constituted under any law for the time being in force (i.e., not necessarily under GST law)
3. This arrangement shall be by way of notification.
4. Such notification shall be on the recommendation of CGST Council.
5. The notified authority as NAAAR shall function only till the NAAAR is constituted u/s 101A.
6. It shall hear appeals made u/s 101B of the Act which provides for appeals to National Appellate Authority.
7. For NAAAR notified u/s 101A (1A), sub-sections (2) to (13) of section 101A shall not apply.
8. Such notified authority shall be construed as National Appellate Authority referred to in provisions of Advance Ruling, Chapter XVII of the CGST Act, 2017
9. Existing authority shall include Tribunal

It may be noted that where Appellate Authority of Advance Ruling (AAAR) of two or more states or Union Territory give a conflicting advance ruling on same subject, appeal lies before the National Appellate Authority for Advance Ruling (NAAAR) u/s 101A and 101B of the CGST Act, 2017. In all likelihood, it appears that GST Appellate Tribunal (GSTAT) may be notified as such authority.

The provision of sub-section (1A) of section 101A shall come into force from 1st April, 2026.

(To be continued…)

**********