The GST Council is scheduled to meet on September 12, focusing on compliance procedures, the inverted duty structure, and a potential tax rate reduction for mobile handsets. Industry experts highlight key operational challenges, including working capital locks, input tax credit protections, and accumulated compensation cess.

The GST Council is preparing to meet on September 12 following a 374-day hiatus, with the agenda centered on overhauling compliance procedures and addressing structural taxation concerns. While the previous session focused on tax rate rationalization, the upcoming meeting is expected to prioritize easing compliance burdens for businesses.

Rate adjustments remain under consideration, notably a proposed reduction of the Goods and Services Tax on mobile handsets from the current 18 per cent to a lower bracket amid a slowdown in handset demand. However, the official agenda has not yet been circulated, and rate proposals remain unsettled until the Council takes a formal decision.

A primary structural concern on the agenda is the inverted duty structure, where the GST paid on inputs exceeds the tax payable on the final product. This issue has led to an accumulation of credits for manufacturers, textile companies, pharmaceutical firms, and FMCG businesses. Industry experts note that while provisional refunds introduced in Budget 2026 provided some relief, the underlying issue persists because the refund formula excludes input services.

Legal and operational frameworks regarding Input Tax Credit (ITC) are also expected to come under review. Experts have pointed out the need to protect genuine, compliant taxpayers who lose ITC when a supplier subsequently defaults on tax payments. Additionally, the treatment of legacy and transitional credits following GST 2.0, particularly where legitimate credit remains embedded in inventory, requires statutory clarification.

Another significant issue is the fate of accumulated Compensation Cess. Following the discontinuation of the levy, businesses—particularly in the automobile sector and among coal users—have been left with an estimated ₹6,000 crore in accumulated cess. Companies have absorbed the impact, passed it on to consumers, or initiated litigation, making a resolution mechanism from the Council necessary.

Beyond credit and taxation issues, discussions are expected to cover greater automation and predictability in administration. Proposals include risk-based automated refund processing using GSTN and e-invoicing data, seamless transfer of ITC for businesses operating across multiple states, and the rationalization of blocked credits relating to construction and works contracts. Experts have also suggested a preemptive "clarify before litigate" mechanism to resolve recurring disputes over ITC, place of supply, and classification.

The upcoming meeting signals a strategic shift from broad rate rationalization toward resolving operational, legal, and cash-flow gaps that have emerged for businesses operating under the current tax framework.

"The upcoming GST Council meeting marks a critical shift from broad rate adjustments to solving operational bottlenecks. For businesses, especially manufacturers and MSMEs, unlocking working capital stuck in inverted duty structures and accumulated cess is essential for sustainable growth. Addressing ITC protections and enhancing administrative automation will provide much-needed legal certainty, lower compliance costs, and reduce recurring disputes across sectors." — Dr. Shishir Gupta, Founder & CEO, StartupLanes

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