GST Council set to review blocked ITC and refund mechanisms

The Goods and Services Tax Council is scheduled to hold its next meeting on September 12, where policymakers are expected to examine ways to ease the handling of blocked input tax credit (ITC) and streamline refund norms that have long posed compliance challenges for the business community.

The agenda is likely to include discussions on modifications to rules governing blocked ITC—credit that businesses cannot claim on certain categories of expenses—as well as procedures governing the transfer of unutilised ITC between tax periods. These issues have remained contentious since GST implementation, with traders and industry associations consistently flagging operational difficulties.

Relaxing these provisions could provide relief to several sectors grappling with accumulated credit balances and procedural delays in obtaining refunds. The potential changes align with the government's broader push to simplify indirect tax compliance and reduce the administrative burden on taxpayers.

The council's deliberations will be closely watched by India's business community, particularly small and medium enterprises that have reported significant working capital constraints due to ITC restrictions and refund processing delays. Any approved changes would need to balance revenue considerations with the need to enhance ease of doing business.