GST Council to Prioritize Compliance Reforms and Inverted Duty Issues in Upcoming Meeting

India’s indirect tax framework could be set for another important round of reforms as the next meeting of the GST Council is expected to focus on simplifying compliance procedures, reducing litigation, easing registration requirements, and addressing long-standing concerns related to the inverted duty structure (IDS).

According to government sources, the meeting is likely to take place in late July or August and will build upon the reform agenda initiated during previous Council discussions. The focus is expected to shift from tax rate rationalization to administrative and procedural improvements that can make the Goods and Services Tax (GST) regime more efficient and business-friendly.

Focus Shifts from Tax Slabs to Process Reforms

After years of discussions around GST rate rationalization and slab restructuring, policymakers now appear ready to focus on operational improvements.

Simplification Becomes the Next Priority

A senior government official reportedly stated:

“The key issue of simplifying the slab structure has been resolved. Now, we need to focus on process reforms.”

This reflects the government's broader objective of improving the ease of doing business while reducing compliance costs for taxpayers. Industry bodies have long argued that procedural complexities often create a greater burden than tax rates themselves.

The upcoming meeting is therefore expected to emphasize simplification measures that benefit businesses of all sizes, particularly small and medium enterprises.

New GST Registration Framework for Small Businesses

One of the major agenda items is expected to be the approval of detailed frameworks for simplified GST registration schemes.

Relief for Small and Low-Risk Businesses

During the September 2025 GST Council meeting, members approved a simplified registration mechanism aimed at small and low-risk enterprises.

The scheme is expected to benefit approximately 96% of new GST registrants, significantly reducing paperwork and administrative hurdles during onboarding.

Special Framework for E-Commerce Sellers

The Council had also approved a separate registration model for small suppliers operating through electronic commerce platforms.

As online commerce continues to expand rapidly across India, simplified compliance requirements could encourage greater participation from small businesses and local entrepreneurs in the digital economy.

The detailed operational framework for these initiatives is likely to be presented for final approval in the upcoming meeting.

Inverted Duty Structure Remains a Major Concern

Another important issue expected to dominate discussions is the challenge posed by the inverted duty structure.

Understanding the Inverted Duty Structure

An inverted duty structure occurs when GST paid on inputs and raw materials is higher than the GST charged on the final product.

This often results in the accumulation of input tax credits that businesses are unable to fully utilize or claim efficiently.

Such situations create working capital pressures and can affect business profitability.

Key Industries Seeking Relief

Several major sectors continue to face challenges arising from inverted duty structures.

Industries Most Affected

The sectors most impacted include:

• Pharmaceuticals.
• Textiles and apparel.
• Footwear manufacturing.
• Food processing.
• Paper and packaging.
• Electric vehicles (EVs).

Why These Sectors Face Challenges

In many cases, businesses pay higher GST rates on:

• Raw materials.
• Logistics services.
• Technology investments.
• Machinery and capital goods.

However, the GST collected on finished products is comparatively lower, leading to blocked credits and liquidity constraints.

Industry representatives have repeatedly requested corrective measures to improve cash flow and enhance competitiveness.

Refund Mechanism Introduced to Ease Liquidity Pressures

Recognizing the financial strain caused by inverted duty structures, the GST Council previously approved a major reform.

90% Provisional Refund System

The Council introduced a system-driven mechanism that allows 90% provisional refunds for eligible IDS claims.

The objective is to:

• Improve cash flow.
• Reduce refund processing delays.
• Minimize manual intervention.
• Prevent prolonged liquidity crunches.

Experts believe this move could provide substantial relief to domestic manufacturers, particularly those operating on thin margins.

Digitalization Has Improved Compliance, But Challenges Remain

India’s GST ecosystem has undergone significant digitization since its introduction in 2017.

Progress and Persistent Issues

The GST Network (GSTN) has enabled:

• Online return filing.
• E-invoicing.
• E-way bills.
• Automated compliance systems.

However, businesses continue to face challenges such as:

• Frequent procedural updates.
• Complex compliance requirements.
• Technical glitches.
• Litigation arising from interpretational disputes.

Industry stakeholders are expected to push for greater consistency and predictability in GST administration.

Why These Reforms Matter for India's Economy

The government views GST reforms as a critical component of India's broader economic strategy.

Supporting Manufacturing and Competitiveness

Simplified compliance procedures can:

• Lower business operating costs.
• Encourage entrepreneurship.
• Improve tax compliance.
• Boost domestic manufacturing.
• Strengthen India's position in global supply chains.

As India aims to expand its manufacturing base under initiatives such as "Make in India," smoother tax administration is becoming increasingly important.

Conclusion

The upcoming GST Council meeting could mark the next phase of India's indirect tax reform journey. With major rate rationalization discussions largely settled, policymakers are now turning their attention toward practical improvements that directly affect businesses on a day-to-day basis.

Key proposals such as simplified registration systems, enhanced refund mechanisms, reduced litigation, and solutions for inverted duty structure challenges have the potential to significantly improve the business environment.

For sectors including pharmaceuticals, textiles, footwear, food processing, paper manufacturing, and electric vehicles, these measures could provide much-needed relief and support future growth.

If implemented effectively, the proposed reforms may not only reduce compliance burdens but also strengthen India's manufacturing ecosystem, improve liquidity for businesses, and enhance the country's competitiveness in an increasingly globalized economy.