India’s GST rate changes took effect on September 22, 2025, and a 2026 commentary linked the rate rationalisation to renewed demand. But businesses can still owe GST in cash while holding unused input tax credit (ITC). Ahead of the GST Council meeting scheduled for October 7, 2026, industry groups were reported to be seeking two separate changes: using accumulated credit to pay reverse-charge tax and offsetting credit across a company’s state registrations. Neither request was an approved rule as of October 3, 2026.
What GST 2.0 changed—and what it did not
The GST Council Secretariat’s September 2025 newsletter says the GST rate changes took effect on September 22, 2025. The Economic Times commentary published on September 30, 2026, attributed a demand recovery to rate compression and rationalisation. It reported that net GST revenue collections for the Centre and states grew 9.2% in April–July 2026 compared with the same period of FY26. That figure is the commentary’s claim; it was not independently checked against a primary collection release.
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Lower or rationalised rates can affect what consumers pay and how demand develops. They do not, by themselves, remove the legal and administrative limits on where a business may claim, use, transfer or obtain a refund for its input tax credit. The current industry asks concern those limits, not another general rate cut.
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ITC is meant to let an eligible business offset GST paid on inputs against tax due on its later supplies, reducing tax cascading through the supply chain. A credit balance, however, is not necessarily usable against every liability or in every place where a company operates. If a rule prevents the business from applying, transferring or recovering that credit in the circumstances it faces, the business may still need to pay a liability in cash.
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The Economic Times commentary groups the obstacles into three broad types:
- Legal limits: rules can restrict which liabilities a credit may pay or when credit is available.
- Structural gaps: some supplies fall outside GST, while rate inversion can leave more credit accumulating on inputs than a business can absorb against output tax.
- Operational limits: credit is tied to state registrations, so a balance in one state may not be available to a registration with a liability elsewhere.
These are different problems. The first proposal discussed below concerns the permitted payment method for reverse-charge tax; the second concerns credit and liabilities held by separate state registrations.
Two reported proposals to make accumulated credit usable
| Proposal | Problem it addresses | What was reported | Status as of October 3, 2026 |
|---|---|---|---|
| Use accumulated ITC against reverse-charge liabilities | A business pays GST under reverse charge in cash even when it has an accumulated credit balance. | Business Standard reported on September 23, 2026, that CII and ASSOCHAM had asked for accumulated ITC to be usable for reverse-charge liabilities. Business Standard report | A reported industry request, not an announced rule change. |
| Offset credit between state registrations of the same company | One state registration may have unused credit while another registration of the company has a tax liability. | Business Standard reported on September 8, 2026, that businesses were seeking cross-state use of credit within the same company. Business Standard report | A reported industry request, not an approved mechanism. |
The reports do not set out final legal wording or an implementation design for either proposal. The reverse-charge request would alter how a particular liability can be paid. The cross-state request raises a wider question about whether credit could move between, or be offset across, distinct state registrations.
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A company operating in several states does not simply hold one undivided GST credit account. The reported proposal concerns credit recorded by one state registration and a liability of another registration belonging to the same company. Allowing an offset would therefore require a defined mechanism for reconciling the registrations and their tax accounts; it is not the same change as permitting ITC to pay reverse-charge tax within the relevant registration.
The September 8 report describes an industry request, but the available account does not establish how a transfer would be structured, what safeguards might apply, or whether the Council would accept it. Those details matter because an accounting convenience for a company also has to work within GST’s registration and settlement framework.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the Council meeting could—and could not—mean
Business Standard reported that the GST Council meeting was scheduled for October 7, 2026. On the date of this article, October 3, it had not yet taken place. The requests on the agenda of industry debate should not be mistaken for changes already in force, and no Council outcome can be stated here.
Older Council materials show that accumulated credit and inverted rates have been recurring policy issues, but they are historical context rather than evidence of a decision on these 2026 proposals. See the GST Council Secretariat’s 53rd GST Council Meeting materials.
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