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The Association of Indian Medical Device Industry (AiMeD) has welcomed the Government of India’s latest step to speed up GST refunds for exporters and manufacturers. GST 2.0 should complete manufacturing by including input services and capital goods in the refund process, it added.
The new system for faster refund, announced by the Central Board of Indirect Taxes and Customs (CBIC), allows 90% of the refund amount to be released quickly in all low-risk cases.
The move will make it much easier for companies to get back their tax refunds without long delays, said the Association. It applies to all refund applications filed on or after October 1, 2025 and covers both exports and inverted duty structure (IDS) cases, where the tax on raw materials is higher than the tax on the final product.
“This is a very welcome and practical step by the finance ministry and CBIC,” said Rajiv Nath, forum coordinator, AiMeD.
“Many Indian manufacturers, especially MSMEs, have experienced working-capital constraints as a result of delayed GST refunds. With the current approach of releasing 90% of refunds upfront for low-risk taxpayers, cash-flow challenges may be alleviated," he maintained.
Under the new instruction, if a tax officer decides not to give the 90% provisional refund, he or she must clearly record the reasons in writing. This is expected to bring more transparency and fairness to the refund process.
The medical-device industry has been significantly impacted by the inverted duty structure, wherein inputs such as plastics and components are subject to an 18% GST, while finished medical devices—previously taxed at 12%, now incur a 5% rate.
AiMeD has consistently raised concerns regarding this issue, advocating for expedited refunds and more equitable tax policies for reducing the rate of GST on inputs to avoid an inverted duty structure.
GST’s core principle is neutrality—tax the value added, not the working capital businesses need to operate. In categories where finished goods are at 5% while inputs and services are at 18%, accumulated Input Tax Credit (ITC) builds up quickly. Fast refunds change the game: lower borrowing costs, stronger cash flow, and more headroom for investment and exports.
Nath emphasized that GST 2.0 should complete manufacturing by including input services and capital goods in the refund process. Modern supply chains rely on spending on technology, machinery, logistics, rentals, and specialized services.
Input services: Enable refunds of ITC paid at 18% on services like rentals, logistics, warehousing, quality assurance, and outsourced processes to maintain neutrality.
The association also requested to allow refunds—or amortized refunds—of ITC on machinery and equipment, recognizing their long lifespan and capital intensity.
"With these additions, the 90% upfront refund would be comprehensive and consistent with GST’s intended design," said Nath.
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