Paras Nagpal, Business Consultant, GetMyCA | 21 October 2026 | 10 min read
Reviewed by: GetMyCA GST Advisory Team
Pharmaceutical manufacturers may accumulate input tax credit on APIs, excipients, packaging, laboratory supplies, testing services and machinery. Whether that credit can be refunded depends on the supply type, the refund route, the calculation and the supporting documents.
Quick Answer
A GST refund consultant for pharma manufacturers can review accumulated input tax credit (ITC), reconcile GST returns and assess whether a business may qualify for a refund. Regular reviews can help identify eligible monthly claims and manage working capital. Certain domestic machinery transactions under EPCG may also qualify for a separate refund route. Eligibility depends on the applicable rules and documents; filing does not guarantee approval or payment.
Key Takeaways
- Pharma manufacturers may be able to claim a GST refund on eligible unused GST credit, subject to the applicable rules.
- A refund may be available when GST paid on eligible inputs is higher than GST charged on taxable finished products.
- Export refunds and refunds for eligible domestic machinery under EPCG follow different rules.
- Regularly checking GST returns, invoices and GST credit balances can help identify eligible refunds and correct mistakes.
- Filing a refund claim every month does not guarantee monthly approval or payment.
Why Do Pharma Manufacturers Need GST Refund Support?
Pharmaceutical manufacturers buy raw materials such as active pharmaceutical ingredients (APIs), excipients and packaging materials. They may also pay GST on laboratory supplies, testing services and machinery. The GST treatment of these purchases can differ from the treatment of finished medicines.
In some cases, eligible input tax credit builds up in the electronic credit ledger. When eligible credit remains unused, it can tie up money that the business could otherwise use for raw materials, production, salaries and other operating costs.
A GST refund consultant for pharma manufacturers can help review this credit, reconcile purchase invoices with GST returns and identify which refund route, if any, may apply. The aim is to claim the full amount allowed under the law - not to treat the entire ledger balance as refundable.
GetMyCA supports pharma businesses with refund eligibility reviews, ITC reconciliation, claim calculations and documentation. GetMyCA reports work with 150+ pharma clients. Its existing pharma refund service page also cites 500+ pharma manufacturers helped and ₹47 crore recovered. Refund eligibility and outcomes for an individual business depend on its facts, documents and the rules that apply.
When Can a Pharma Manufacturer Claim a GST Refund?
The right refund route depends on the type of supply, the credit accumulated and the applicable GST provisions. Three situations are particularly relevant to pharma manufacturers.
1. Refund Under the Inverted Duty Structure
An inverted duty structure may arise when GST paid on eligible inputs is higher than GST charged on the taxable finished products. This difference can lead to unused input tax credit.
Section 54(3) of the CGST Act allows a refund of unutilised ITC in specified situations, including an inverted duty structure, subject to statutory conditions and exclusions.
The GST rate changes effective from 22 September 2025 set the rate on other drugs and medicines at 5%, except medicines specifically covered by a nil rate. Where eligible inputs continue to attract higher GST rates than taxable finished medicines, the difference may contribute to accumulated credit. The actual position depends on the product classification and GST treatment of the inputs and finished products.
Important: A lower GST rate on finished medicines does not automatically make every manufacturer eligible for a refund. Nil-rated and fully exempt outward supplies are subject to specific exclusions under the inverted duty structure provisions.
Rule 89(5) of the CGST Rules sets the formula for calculating an inverted-duty refund. Under the current formula, eligible ITC on inputs (goods other than capital goods) is included in Net ITC. ITC on input services and capital goods is excluded from this formula. The refundable amount may therefore be lower than the balance shown in the electronic credit ledger.
For further clarification, refer to CBIC Circular No. 181/13/2022-GST on refund-related issues.
2. Refund on Eligible Export Supplies
Pharma manufacturers exporting medicines, formulations, APIs or other eligible products may qualify for a refund under the zero-rated supply provisions.
For example, an eligible exporter making zero-rated supplies under a Letter of Undertaking (LUT), without payment of IGST, may claim a refund of unutilised ITC, subject to the applicable conditions.
The calculation under Rule 89(4) differs from the inverted-duty formula. Under the current framework, eligible ITC on inputs and input services may be included in the calculation, while ITC on capital goods is excluded.
Before filing, manufacturers should reconcile export invoices with GST returns, books of account and supporting export records. The export details, turnover figures and refund calculation should be consistent.
3. Refund on Domestic Machinery Under EPCG
The Export Promotion Capital Goods (EPCG) Scheme allows eligible authorisation holders to procure qualifying capital goods through permitted import or domestic sourcing arrangements, subject to the Foreign Trade Policy and applicable conditions.
Certain domestic supplies of capital goods against an EPCG authorisation are treated as deemed exports under the relevant GST framework. A refund of tax paid on qualifying deemed-export supplies may be available to the eligible supplier or recipient, depending on the route selected and the applicable requirements.
This is a separate route from an inverted-duty refund. Buying machinery in India does not automatically qualify a business for a GST refund under EPCG.
The parties should review the EPCG authorisation, domestic procurement arrangement, tax invoices and required supporting documents. Where applicable, an Invalidation Letter or Advance Release Order should also be checked as part of the EPCG documentation.
For the GST refund application, FORM GST RFD-01 and Statement 5B under Rule 89(2)(g) are relevant. The required declarations depend on whether the supplier or recipient claims the refund. Under the supplier route, the prescribed undertaking from the recipient addresses duplicate refund claims and ITC on the relevant supplies. Under the recipient route, the recipient must provide the prescribed declaration that the supplier has not claimed the same refund, and meet the applicable ITC and ledger requirements.
The supplier and recipient must coordinate their claims. The same tax amount cannot be refunded to both parties.
For the policy framework, refer to Chapter 5 of the Foreign Trade Policy 2023 and the CBIC Central Tax Notifications list, including Notifications No. 48/2017-Central Tax and 49/2017-Central Tax.
How Do the Main GST Refund Routes Differ?
| Refund route |
What it covers |
Important point |
| Inverted duty structure - Rule 89(5) |
Eligible unutilised ITC where GST on eligible inputs is higher than GST on taxable outward supplies |
The current formula includes eligible input-goods ITC, not input services or capital goods |
| Zero-rated supplies - Rule 89(4) |
Eligible export supplies under the applicable route |
Eligible input and input-service ITC may be included; capital-goods ITC is excluded |
| Domestic machinery under EPCG / deemed exports |
Qualifying domestic capital-goods supplies under the applicable scheme and GST conditions |
The supplier and recipient follow different documentation requirements; duplicate refund claims are not allowed |
ITC that can be used to pay output tax does not automatically qualify for a refund. The applicable refund category and its calculation must be checked separately.
What Should Manufacturers Know About Provisional Refunds and Recent GST Council Recommendations?
CBIC Instruction No. 06/2025-GST provides an interim risk-based mechanism for provisional sanction of eligible inverted-duty refund applications filed on or after 1 October 2025. Under this mechanism, applications categorised as low-risk by the system may qualify for provisional sanction of 90% of the claimed amount, subject to statutory conditions and the proper officer's powers. Not every claim qualifies, and provisional sanction is not final approval.
At its 57th meeting on 8 October 2026, the GST Council recommended further changes to refund eligibility and processing. These included proposed treatment for specified input-service ITC from 1 November 2026, specified capital-goods ITC from 1 April 2027 with the refund spread over 60 months, system-based processing and a proposed reduction in acknowledgement and deficiency-memo timelines from 15 days to 10 days.
These are recommendations, not automatically effective amendments. Until the relevant notifications and legal changes take effect, claims must be assessed under the provisions currently in force. Check the latest official notifications before relying on any proposed effective date.
See the official GST Council press release on the 57th meeting and the CBIC Instruction on the risk-based provisional refund mechanism.
How Can Monthly GST Refund Reviews Help Working Capital?
Regular reviews help manufacturers identify eligible credit and correct mismatches before preparing a claim. They can also make it easier to monitor older credit and refund deadlines.
A monthly review does not mean every month will produce a refundable amount. It means the business checks its position regularly and files when the relevant rules allow it. Filing does not guarantee approval or a bank credit every month; the claim still depends on eligibility, documents and tax-authority review.
Monthly GST Refund Review Checklist
- Reconcile purchase records: Compare purchase registers and tax invoices with GSTR-2B, where applicable.
- Check GST returns: Review GSTR-1, GSTR-3B and the books of account for mismatches.
- Review the credit ledger: Identify accumulated credit, utilisation and reversals.
- Separate credit types: Distinguish input goods, input services and capital goods because refund treatment differs.
- Choose the correct refund route: Assess whether inverted duty, zero-rated exports or deemed exports may apply.
- Recalculate and document the claim: Apply the relevant formula and prepare the required statements, invoices and evidence.
- Track the application: Monitor acknowledgements, deficiency memos, notices and refund status.
Eligible refund applications are generally filed electronically in FORM GST RFD-01 with the documents required for the relevant category.
What Is the Time Limit for a GST Refund Claim?
Section 54 of the CGST Act generally provides a two-year limitation period from the relevant date, but the relevant date depends on the refund category.
For an unutilised ITC refund arising from an inverted duty structure under clause (ii) of the first proviso to Section 54(3), the relevant date is the due date for furnishing the Section 39 return for the period in which the claim arises. For deemed-export supplies, the relevant date is the date on which the return relating to those supplies is furnished. Export and other refund categories have their own relevant-date rules.
Manufacturers should check the deadline for their specific refund route and review older periods promptly. Refer to Section 54 of the CGST Act, 2017 and the relevant refund provisions.
GST Refund Support for Pharma Manufacturers Across India
GetMyCA supports pharma manufacturers in Delhi NCR, Uttarakhand, Punjab, Haryana, Uttar Pradesh, Jammu, Himachal Pradesh, Rajasthan and Madhya Pradesh.
Support may include refund eligibility reviews, ITC and return reconciliation, claim calculations, document preparation, FORM GST RFD-01 filing support and assistance with refund-related queries. The appropriate service depends on the manufacturer's transactions and the refund category that may apply.
How Can GetMyCA Help With Monthly GST Refund Reviews?
A GST refund consultant for pharma manufacturers can help review accumulated ITC, reconcile GST records, assess the relevant refund route and prepare supporting documents. For qualifying domestic machinery transactions, the consultant can also help assess whether the EPCG deemed-export route may apply.
GetMyCA provides GST refund support for pharmaceutical manufacturers. For qualifying domestic machinery transactions, read the guide to GST refund on machinery purchase in India.
Request a GST refund eligibility review to understand which route may apply to your business and what documents may be needed. Refund eligibility, provisional sanction, final approval and payment depend on the facts of the case, documentation, applicable law and tax-authority assessment.
Frequently Asked Questions
Can pharma manufacturers file GST refund claims every month?
Eligible claims can be reviewed and filed by tax period, including monthly periods where the refund category and circumstances allow it. The manufacturer must meet the applicable conditions and provide supporting records. Monthly filing does not make every amount in the credit ledger refundable.
Does filing a GST refund claim every month guarantee monthly payment?
No. Regular reviews can help identify eligible credit and move a claim into the refund process, but filing does not guarantee approval or payment every month. The outcome depends on the claim, documents and tax-authority review.
Can a pharma manufacturer claim an inverted-duty refund?
A manufacturer may qualify if the transaction meets Section 54(3) and the applicable rules. The GST treatment of inputs and outward supplies, eligible ITC, exclusions and Rule 89(5) calculation must be checked. Nil-rated and fully exempt outward supplies are subject to specific exclusions.
Can domestic machinery qualify for a GST refund under EPCG?
Certain domestic capital-goods supplies under EPCG may qualify for deemed-export treatment. A refund may be available if the authorisation, transaction and documents meet the applicable conditions. Supplier and recipient requirements differ, and the same tax amount cannot be claimed twice.
Is the full electronic credit ledger balance refundable?
No. The ledger balance and the amount eligible for refund may differ. The amount depends on the refund category, statutory formula, type of credit, exclusions and other applicable conditions.
What documents are needed for a pharma GST refund review?
Documents may include GST returns, purchase and sales registers, electronic credit ledger details, tax invoices, reconciliation statements and earlier refund applications or departmental communications. Export records or EPCG authorisation and procurement documents may also be required, depending on the refund route.
What is the time limit for an inverted-duty refund?
Section 54 generally provides a two-year limitation period from the relevant date. For an inverted-duty refund of unutilised ITC, the relevant date is the due date for furnishing the Section 39 return for the period in which the claim arises. The applicable period should be checked before filing.
Sources and References
This article is for general informational purposes only and does not constitute tax or legal advice. GST refund eligibility and EPCG treatment should be assessed against the facts of each transaction and the applicable law in force at the time of filing.
Written by: Paras Nagpal, Business Consultant, GetMyCA
Reviewed by: GetMyCA GST Advisory Team
Last Updated: 21 October 2026