The GST Council is set to meet for the first time in a year in New Delhi on September 12, with industry and tax experts expecting the 57th meeting to address pressing issues around input tax credit (ITC), litigation and compliance that continue to add to costs and uncertainty for businesses.
Experts expect the Council to take up issues including supplier defaults, inverted-duty refunds and the treatment of compensation cess.
“What September 12 must focus on is streamlining ITC by reducing blocked credits on works contracts and motor vehicles and allowing businesses to use accumulated ITC to pay GST under the reverse charge mechanism. It should also fix the refund formula so that input services are no longer excluded from inverted-duty refund calculations, and protect honest taxpayers from supplier defaults so that a buyer’s hard-earned credit is not held hostage to a seller’s non-compliance,” said Brijesh Kothary, partner at Khaitan & Co.
The previous GST Council meeting was held on September 3, 2026, when the Council approved a major rate overhaul, reducing the number of GST rates to three — 5%, 18% and 40%.
Experts said the key question is whether a compliant buyer should lose ITC because a supplier has failed to deposit the tax with the government. Vivek Jalan, partner at Tax Connect Advisory Services, said the Council should consider both legal and technology-led changes to safeguard bona fide recipients of ITC when suppliers default, citing the Maruti Enterprises ruling and the Supreme Court’s decision in Bhandari Scrap Traders.
Another major challenge is the growing volume of GST litigation. Manoj Mishra, partner and tax controversy management leader at Grant Thornton Bharat, said the Council should focus on reducing interpretational ambiguity and consider mechanisms to regularise legacy tax positions.
“Priorities include providing a mechanism to regularise legacy tax positions, particularly in online gaming, addressing genuine input tax credit hardships arising from supplier defaults and streamlining GST administration for large PAN-India businesses,” said Mishra.
The Council is also expected to consider the treatment of compensation cess following its abolition under the GST 2.0 reforms. Industry is seeking clarity on the treatment of credits embedded in existing inventories.
Automobile dealers alone have accumulated more than Rs 2,500 crore in ITC linked to the now-abolished compensation cess and fear that the blockage could lead to a working capital crunch.