Beyond its ‘cut tax’ bonanza that has excited middle-class India, there are a lot of vexatious points that will be on the plate of Union Finance Minister Nirmala Sitharaman as well as her state counterparts when they sit down for their keenly watched two-day Council Meeting today. The question is whether the council will have the time and bandwidth to touch upon many of the issues that have plagued the uniform tax system since its inception 8 years ago, or whether the meeting is likely to focus on the core tax cut agenda, with a possible roadblock from opposition states asking for revenue loss compensation that could even derail the whole council proceedings.
The champ amongst all these pending issues has to be the ITC, or input tax credit conundrum. ITC is claimable on a wide range of business expenses, including raw materials, components, packaging, fuel, and many other types of inputs. It operates on the concept that businesses can claim the tax they have already paid on the raw materials or services that went into the making of a final product, with only the differential needing to be paid.
Hon’ble Prime Minister Shri @narendramodi has also recently announced the creation of a ‘Task Force for Next-Generation Reforms’, with a clear mandate to simplify regulations, lower compliance costs, and build a more enabling ecosystem for start-ups, MSMEs and entrepreneurs.… pic.twitter.com/xHHWpZTmPB
— Nirmala Sitharaman Office (@nsitharamanoffc) September 2, 2025
However, it is easier said than done, and it has increasingly become an energy-consuming process for businesses. Entrepreneurs across the spectrum have toiled with the mismatch between the rate differentials between their inputs (raw materials) and the final product. In some instances, it has been pretty absurd, too, when makers of certain products that are exempt from tax, still face the irony of having to pay the ITC for the components/raw materials that go into the making, leaving no option for claims.
In fact, one item on the agenda is whether health and life insurance policies, currently taxed at 18 per cent GST but which the government is amenable to completely exempt from the tax, should be allowed input tax credit (presently it doesn’t, and it’s been a demand from the insurance companies for some time). Murmurs abound of giving concessional GST slabs for health and term life insurance premiums by bracketing them under essential services.
Another major peeve of businesses has been the multiple amendments in rules, which often leave taxpayers perplexed. It also adds to what has been a rising cost in compliance. Filing periodical returns, matching invoices with GSTR-2B, and the multiple procedures all add to the compliance burden. While Nirmala has spoken more than once on the need for simplifying the rules, it is yet to see the light of day.
The 56th Meeting of the GST Council will be held on 03rd & 04th September, 2025 at New Delhi
— GST Council (@GST_Council) August 23, 2025
Another long-standing demand has been for streamlining the backlog of tax appeals as well as simplifying the procedure. It is a surprise that unnecessarily convoluted filing process and compliance burden has made the simple act of a GST return akin to rocket science — this despite proposals like pre-filled forms, auto refunds and digital invoicing options languishing for long as most meetings end up contemplating more political matters, ranging from the compensation cess to state devolvement and, yes, even the complex tiers that pop corn taxation has to undergo, thanks to the hawkish eyes of the babus of Raisina Hills.
The setting up of an appellate tribunal for GST tax appeals has also been around for a long time, with many pointing out how this could reduce the backlog of cases, especially appeals that go to ‘regular’ high courts.
With technology and even business streams undergoing rapid change by the day, the Council will have its hands full slotting new-age businesses appropriately. This ranges from the likes of Global Capability Centres (GCC) to food delivery apps to drones to foreign consultancy.
Of course, the fear remains that between simplifying the slabs and re-categorising the many goods and services now under four basic slabs (plus cess and other charges) into two simplified tiers, itself a gargantuan task, and the chance that opposition ministers in the council may staunchly make their case for adequate compensation for what they fear will be tax revenue loss following the new simplification, the Council might just not have the bandwidth, or the time, to discuss many of these finer, and pending, demands. The only silver lining then is the fact that the Prime Minister’s Office had given, in principle, a go-ahead for a thorough reworking of the GST system.
