GST Council to weigh cross-state tax credit offset for businesses

The Goods and Services Tax Council is expected to deliberate on a significant tax administration issue that has long been a point of friction for multi-state businesses operating across India. Industry representatives are seeking the ability to set off tax liability incurred by one operational unit against unused input tax credits available with their arms in other states, a move that could substantially improve cash flow management for large enterprises.

Currently, businesses cannot offset tax liabilities and credits across state boundaries under the GST framework, forcing companies to maintain separate credit accounts for each jurisdiction. This restriction has created inefficiencies, particularly for organizations with operations spanning multiple states, where one unit may accumulate excess credits while another faces pending liabilities.

The proposed cross-state credit offset would streamline tax compliance and reduce the working capital burden on businesses with geographically dispersed operations. Proponents argue the measure aligns with the principle of a unified national goods and services tax, facilitating smoother inter-state commerce and reducing administrative friction.

The October 7 Council meeting will provide a formal platform to present this demand alongside other pending GST policy matters. Any decision to permit such cross-state credit adjustments would require consensus among Council members representing state and central governments, making the outcome uncertain at this stage.