55th GST Council Meeting: Reforms in inverted duty structure awaited
The 55th Goods and Service Tax Council meeting will be held on 21 December 2024 at Jaisalmer, Rajasthan. The council is a joint forum of the Centre and States having a constitutional mandate under Article 279A(4) to make recommendations on issues related to GST.
The meeting shall be against the backdrop of the industry's expectations seeking reforms, and clarifications in the GST regime for fulfilling the object laid for a seamless national market, reshaping India's tax landscape, and driving economic growth.
The inverted duty structure results in a situation arises when the rate of tax on input supplies is higher than the rate of tax on output supplies which results in an excess input tax credit situation and an accumulation of unutilized ITC in the electronic credit ledger.
Vivek Baj, Partner at Economic Laws Practice, "GST rate rationalization has sought to abridge the cascading effect of taxes and litigation inter-alia comprising of merging tax slabs and addressing input tax credit issues to create a transparent and efficient tax environment."
He added, "The primary issue being blockage of working capital due to accumulated ITC - leading to liquidity concerns, which necessitates rationalizing duty rates to ensure raw materials have lower duties than finished goods, streamlining refund process to improve cash flow and simplifying compliance requirements."
