Pre-Budget Expectations: Industry Urges GST 2.0 Boost to Simplify Credit, Reduce Dispute

As per a report by Grant Thornton Bharat, the GST 2.0 regime has remained at the forefront of making the Indian system of indirect taxes more robust, with the GST kitty touching new milestones each month, consistently exceeding ₹1.7 lakh crores. As the nation strives towards the next level of tax reforms in the pursuit of the dream of becoming a Developed nation by the year 2047, an optimistic and consistent GST structure that is fair and neutral is the need of the hour.

One of the most important demands in the Budget for 2026 is for greater progress to be made concerning rate rationalization. There are still concerns over issues such as valuation, place of supply, and blocked credits, according to the report.

One of the major demands of the industry is that petroleum products, natural gas, and alcoholic liquids should also be brought under the GST structure. These are taxed outside the GST structure, and taxes are paid through a combination of VAT and excise duties, and there is a problem of tax cascading. Bringing petroleum products under GST, according to industry, will help in ensuring a smooth flow of credits, decreasing operational expenses of sectors such as transport, aviation, and logistics, managing fuel prices, and decreasing inflationary pressure.

Another major requirement is the reversal of ITC within interest if the payment to the suppliers is not made within 180 days from the date of the invoice. Organizations have pointed out that this supresses the credit period agreed by the parties going into the bargain and ends up punishing the recipients even if it is for valid reasons for the delay. A more sound policy is being sought on this aspect by shortening or waiving the requirement for the 180 days.

Issues relating to refund in the context of the inverted duty structure (IDS) are another important consideration in the Budget expectations relating to tax reform measures. Refunds on accumulated ITC are permissible only on inputs and not on input services or capital goods. This has caused liquidity problems, especially for micro, small, and medium enterprises and small manufactures. It is advised to make changes to the refund provisions to also permit refund on input services and capital goods to facilitate the flow of money.

There is also an attempt at gaining more clarity on the transition treatment of compensation cess credits in respect of withdrawal of cess on motor vehicles under GST 2.0. Since substantial cess funds are lying locked in the e-credit ledger, businesses are trying to obtain clear provisions on carry forward and utilization or refund of the said credits.

Other demands include easing ITC restrictions related to office fit-outs, and the solar power sector. The industry thinks that the Budget 2026 offers a chance to translate the journey of the GST reform into concrete steps towards ease of business, as long as consistency is kept in view.

"As India positions itself for stronger global integration, a predictable and investment-friendly indirect tax framework anchored in clarity, consistency and digital certainty will be essential," Manoj Mishra, Partner, Tax Controversies Management Leader, Grand Thornton, said. "The Budget has the potential to convert the reform trajectory into meaningful, sector-wide ease of doing business.”