GST reforms gain momentum with focus on quicker refunds and broader input tax credits

The GST Council is considering significant reforms aimed at easing compliance, accelerating refunds, and expanding input tax credits, promising potential relief for businesses and lower costs for consumers.

The GST Council’s latest meeting is being watched closely by businesses hoping for a lighter compliance load, quicker refunds and fewer blocked tax credits, even though the proposals under discussion are still only anticipated changes. In a briefing with The Economic Times, Bipin Sapra of EY India said the main questions for companies are whether the tax system will finally become less restrictive on input tax credit, whether refunds will arrive faster and whether those changes could filter through to lower costs for consumers.

Much of the attention is on input tax credit, the mechanism that lets firms offset tax already paid on business inputs against their GST liabilities. According to reporting from The Economic Times and other business publications, the Council is expected to examine whether credits can be claimed more broadly on expenses that are currently disputed or restricted, including employee insurance, outdoor catering, telecom towers, pipelines and some vehicles. If adopted, such a move could reduce tax leakage inside supply chains and ease pressure on company cash flow.

Refunds are another area where industry has been pressing for change. Business Standard reported that companies want a more automated process that relies on existing data to clear routine mismatches, rather than forcing firms into lengthy manual reconciliations. EY India chairman and chief executive Rajiv Memani has also argued for simpler refund rules and quicker resolution of accumulated input tax credit, particularly where businesses are stuck waiting on working capital. For smaller firms, delayed refunds can be especially painful because they often have less cash to absorb the gap.

Exporters could be among the biggest beneficiaries if the Council approves a broader zero-rating regime for overseas supplies. Moneycontrol reported that more than 38,000 exporters may receive cash refunds on taxes paid on services and machinery, while overseas deliveries could be treated as zero-rated exports. The GST Council’s own agenda also points to changes around deemed exports and refund settlement under export schemes such as Advance Authorisation and EPCG, suggesting the aim is to reduce friction for companies with international exposure and to release cash more quickly back into the economy.

The wider reform pitch is not only about lower costs, but also about making the system less cumbersome. The proposed rationalisation of e-way bill requirements and faster registration procedures would, if implemented, reduce administrative burden for businesses that move goods across states or through e-commerce networks. Sapra has said that the tax system should use the information it already holds to identify and resolve mismatches automatically, rather than passing that work on to taxpayers. For now, though, the Council’s deliberations remain prospective, and any effect on prices or private investment will depend on the final shape of the decisions.