The GST Council has recommended allowing refunds on input services under inverted duty structures, alongside faster automated claims and clearer treatment of written-off stock.
India’s goods and services tax panel has moved to ease one of manufacturing’s most persistent cash-flow problems by expanding refund eligibility for tax credits tied to machinery and outside services, a change welcomed by medical-device makers and pharmaceutical firms. According to reporting on the 57th GST Council meeting in New Delhi on 8 October, the proposal is intended to make it easier for businesses to recover embedded tax costs that had previously been trapped in the system.
The change matters because companies operating under an inverted duty structure, where taxes on inputs exceed those on finished goods, have often been left with accumulated credit they could not easily use. Industry specialists say that was especially painful for firms investing in plants, production lines and support services such as consulting, security, warehousing and marketing. The Council’s recommendation would allow refunds on input services used in such cases, widening the pool of eligible credit and improving working capital efficiency.
The Association of Indian Medical Device Industry has been among the strongest backers of the move. Rajiv Nath, who serves as forum co-ordinator of AiMeD and managing director of Hindustan Syringes and Medical Devices, said the reform addresses a long-standing distortion in the tax system that had increased the cost of setting up factories and running them. His comments, carried in the Indian press, framed the decision as a boost for domestic manufacturing and a step towards the government’s “Make in India” ambitions.
Tax advisers say the proposal is part of a broader effort by the Council to make the GST framework more automated and less reliant on case-by-case intervention. EY said the meeting also recommended system-based processing of refunds, including a 90% provisional refund in some cases without direct officer involvement, a move designed to speed up claims and reduce compliance friction. The firm noted that the Council’s recommendations also extend to export-related services and other procedural simplifications, though several changes will need the necessary legal amendments before they take effect.
For the pharmaceutical sector, the meeting brought another measure with practical implications: clearer treatment of input tax credit tied to expired stock and products that must be written off. That should help companies that routinely face losses from damaged or unsellable inventory, including expired medicines and health products. Together, the measures suggest that the government is trying to move GST away from a punitive structure for manufacturers and towards a more predictable regime, although the fine print and start dates will matter. Some advisers say parts of the package may not be implemented immediately, with certain provisions expected to begin from November 2026 and others later, underscoring that the Council’s recommendations are only the first step.
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