Businesses across India have urged the Finance Ministry to urgently fix ongoing problems related to Input Tax Credit (ITC) under the Goods and Services Tax (GST) system. They say that unresolved ITC issues are causing serious cash flow problems and slowing down investments across key sectors.
According to the CNBC TV 18 report, industry representatives explained that many companies are unable to use the ITC available to them due to technical mismatches in outward supply data. As a result, even though businesses have credit balances, they are being forced to make tax payments in cash, putting pressure on their working capital.
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One of the key demands is to allow ITC to be transferred between different branches or units of the same company. Currently, these credits are locked in separate GST registrations, making it harder for companies to use them efficiently.
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Businesses have also requested that the government allow the use of ITC to pay tax under the reverse charge mechanism, especially for payments like leasing charges. They want an option to convert accumulated ITC into tradable credits or scrips, which would help companies unlock funds stuck in their tax accounts.
Industry groups have pointed out that many companies have built up large amounts of unused ITC, especially in sectors with inverted duty structures, where input taxes are higher than output taxes. This is leading to operational inefficiencies and financial strain.
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The appeal also suggested other reforms, such as:
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The industry believes these changes would create a more business-friendly tax environment, attract greater investment, and strengthen India’s global competitiveness in trade and manufacturing.
Whether the Finance Ministry and GST Council act on these recommendations remains to be seen, but the industry has made it clear: unlocking ITC is now critical to easing liquidity pressure and supporting economic momentum.
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