Circular 125 GST Refund explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Circular No. 125/44/2019-GST dated 18 November 2019 is the CBIC's master circular on GST refunds. It moved refund processing fully online and set out how officers handle each stage, from ARN to payment. Parts of it have since been modified, so it has to be read with later circulars and rule changes.
Circular 125/44/2019-GST is called the "Master Circular-Refund". From 26.09.2019, every refund category is filed in FORM GST RFD-01 and processed electronically, and no physical submission is needed. It covers the ARN date as the filing date, deficiency memo rules, full sanction within 7 days for zero-rated claims in place of a provisional refund, re-credit on rejection, single-authority disbursal through PFMS, adjustment against demands in RFD-06, and its Annexure-A list of statements and documents per category. The ban on clubbing periods across financial years was later removed by Circular 135/05/2020-GST.
Online filing and the ARN
With effect from 26.09.2019, the Refunds Handbook (January 2026) records that all these categories are filed in RFD-01 on the common portal and processed electronically:
| Zero-rated and ITC categories | Tax-paid and other categories |
|---|---|
| ITC on exports without payment of tax | Excess balance in electronic cash ledger |
| Export of services with payment of tax | Excess payment of tax |
| ITC on SEZ supplies without payment | Intra-State held inter-State and vice versa |
| SEZ supplies with payment of tax | Assessment / provisional assessment / appeal / other order |
| ITC accumulated due to inverted tax structure | "Any other" ground |
| Deemed exports (supplier or recipient) |
Key procedural points:
- No physical submission. Neither RFD-01 nor any supporting document has to be taken to the tax office. Everything is uploaded.
- ARN comes last. It is generated only after filing is complete, all documents are uploaded and, where required, the ledger is debited.
- ARN date = filing date. The application is deemed filed under Rule 90(2) on the ARN date. The 15-day window for acknowledgement or deficiency memo runs from then.
- Wrong jurisdiction. An application that lands with the wrong officer is to be reassigned within three working days. No deficiency memo may be issued merely for that reason.
If you are dealing with a claim where one of these rules was not followed, our GST refund process service can take it up with the officer.
Deficiency memos
The circular's deficiency memo rules, as the Handbook summarises them:
- Once an RFD-02 acknowledgement issues, no deficiency memo can follow on any ground.
- After an RFD-03, the application is not processed further. You file a fresh RFD-01 with a new ARN.
- Any ITC or cash debited is re-credited automatically when the memo issues. No PMT-03 is needed.
- On the fresh application, no second memo on the same ground may issue, unless the earlier deficiency remains wholly or partly unrectified or a new substantive deficiency appears.
A later rule change (Rule 90(3) proviso, 2021) excludes the time between the original filing and the memo from the two-year limit. See how to respond to an RFD-03.
Provisional refund and full sanction
For zero-rated supplies, section 54(6) gives a 90% provisional refund in RFD-04. The circular clarified that nothing stops an officer who is fully satisfied from issuing the final RFD-06 within 7 days of acknowledgement, instead of the 90% provisional order. It also said no adjustment or withholding under section 54(10)/(11) applies to a provisionally sanctioned amount. Where dues are outstanding, the officer should finalise the refund early and recover from it.
What changed: Rule 91(2) was substituted with effect from 01.10.2025. RFD-04 now issues within 7 days of acknowledgement on system-based risk evaluation. The officer may, for reasons recorded, decline provisional refund.
Rejection, SCN and re-credit
Where an ITC refund is to be rejected because the credit is ineligible, the Handbook describes a combined route:
- RFD-08 notice under section 54 read with section 73 or 74. It asks why the refund should not be rejected and why the ineligible ITC should not be recovered with interest and penalty.
- RFD-06 order after hearing. Any confirmed recovery goes to the liability register through DRC-07, or you pay voluntarily by DRC-03.
- PMT-03 re-credit of the rejected amount, only after you undertake not to appeal or the appeal is finally decided against you.
Illustration (from the Handbook's example, in round figures). A ₹100 ITC refund is claimed. ₹80 is sanctioned, ₹15 rejected as ineligible ITC and ₹5 rejected for another reason. The RFD-08 covers rejecting ₹20 and recovering the ₹15. If you lose and do not appeal, ₹15 plus interest and penalty is recovered, and ₹20 is re-credited by PMT-03 after your undertaking. If an appeal later succeeds, you file a fresh claim under the "assessment/appeal/any other order" category.
Disbursal, bank validation and interest
- One authority pays all heads. If a Central officer handles the claim, that officer issues sanction (RFD-04/06) and payment (RFD-05) for all heads, including State tax. The same applies the other way round.
- PFMS validation. Bank details go to PFMS for validation. If validation fails, fix the account or add one through a REG-14 non-core amendment and reselect it. Using the same account in every claim avoids repeat validation. See PFMS bank account validation failed.
- Interest. 6% under section 56 from the day after 60 days until the amount is credited to your bank. Officers are advised to issue RFD-06 and RFD-05 within 45 days of the ARN.
- Adjustment. Partial or complete adjustment against any outstanding demand, including dues under the existing law, is made in RFD-06.
Other clarifications the Handbook ties to Circular 125
- Clubbing periods. A claim may be for one tax period or for successive periods clubbed together. The original bar on spreading a claim across financial years was removed by Circular 135/05/2020-GST. See refund claim bunching and the FY restriction.
- Drawback. From 01.10.2017, drawback limited to customs duties does not block ITC refund of CGST, SGST, IGST or cess.
- Late LUT. Para 44: the substantive benefit of zero-rating should not be denied merely because the LUT was filed late. The delay can be condoned and LUT allowed ex post facto.
- Deemed exports. A recipient claiming refund declares that the supplier has not claimed it (para 41).
- Statement of invoices. ITC-based claims carry an invoice-wise statement (Annexure-B) with eligibility declared per invoice. The matching base later moved from GSTR-2A to GSTR-2B for periods from 01.01.2022 (Circular 197/09/2023-GST). Following a 2026 GSTN advisory, Annexure-B for accumulated-ITC claims is filed through GSTN's offline utility.
- Order of debit. IGST first, then CGST and SGST equally. No adverse view is to be taken if the portal does not enforce this order. Compensation cess is computed and debited separately.
- Annexure-A. The category-wise list of statements, declarations, undertakings and documents. It is the basis of our declaration and undertaking formats.
Need help applying the circular to your claim?
Officers still cite Circular 125, sometimes selectively. It helps to know what it actually binds them to, such as no repeat deficiency memo on the same ground and no memo for wrong jurisdiction. If a claim has been stalled or rejected on grounds that do not match the circular, our GST refund process team can review the file and respond. For rejected claims, see GST refund rejection support, or start at the GST refund hub.
Key takeaways
- Circular 125/44/2019-GST (18.11.2019) is the master refund circular. All categories have been filed and processed online since 26.09.2019.
- The ARN date is the filing date. Wrong-jurisdiction claims are reassigned within three working days, not memo'd.
- After a deficiency memo, file afresh. No repeat memo on the same ground.
- The 7-day full sanction for zero-rated claims now sits alongside substituted Rule 91(2) (system-risk RFD-04 within 7 days, from 01.10.2025).
- The FY clubbing bar was removed by Circular 135. GSTR-2B replaced 2A for periods from 01.01.2022.
Read next
- Refund processing in a virtual environment
- GST refund forms list: RFD-01 to RFD-11
- Circular 135 GST refund explained
- GST refund complete process, forms and common issues
Disclaimer: Positions stated as on 30 September 2026, based on the CGST Act and Rules as amended, the Finance Act 2026, and the ICAI Handbook on Refunds under GST (January 2026). Verify current notifications before filing.