Businesses will be able to reclaim accumulated GST credit on input services from November and on plant and machinery from April 2027, alongside wider credit eligibility for workplace catering.
India’s Goods and Services Tax Council has approved a set of changes that could ease a long-running strain on businesses caught in the inverted duty structure, where taxes on inputs are higher than on final supplies. According to reporting by Business Standard, the council has opened the door to refunds on accumulated credit tied to input services from 1 November and on plant and machinery from April 2027, widening relief beyond the limited framework that has been in place until now.
The reform matters because the existing refund regime has largely helped businesses recover credit on input goods, while leaving credit linked to services and capital equipment stranded. Tax specialists say that has tied up cash for manufacturers, exporters and other firms with heavy upfront spending, forcing them to carry extra financing costs while waiting for tax relief. Under current GST rules, the refund formula has been governed by Section 54(3) of the CGST Act and Rule 89(5) of the CGST Rules, but capital goods have remained outside the refund calculation, and input services have also faced restrictions.
Manoj Mishra, a partner and tax controversy management leader at Grant Thornton Bharat, said the move would be a structural correction for sectors such as pharmaceuticals, fast-moving consumer goods, textiles and other capital-intensive industries. He argued that broadening refunds could free up working capital, make fresh investment more viable and reduce the cost of adding capacity. Mishra also said allowing exporters to recover credit on plant and machinery would help lower the tax burden on export-related capital spending, though he warned that the phased recovery over five years means execution will be crucial if the policy is to deliver real financial relief.
The council also backed wider input tax credit eligibility for certain business expenses, including outdoor catering services, a change that could have implications for factories, corporate campuses and technology parks where employers provide meals as part of workforce management. Mishra described that as an important shift because GST paid on such services has often become an embedded cost despite being closely linked to business operations. He said bringing these expenses back into the credit chain should reduce disputes, improve certainty and make the tax system more neutral, while signalling a broader willingness to revisit older restrictions that have long frustrated businesses.
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