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India’s GST rate changes took effect on September 22, 2025, and a September 2026 commentary linked the rate rationalisation to renewed demand. But businesses can still owe GST in cash while holding unused input tax credit (ITC): current restrictions can prevent credit from being used against particular liabilities or across separate state registrations. Ahead of the GST Council meeting scheduled for October 7, 2026, industry groups were reported to be seeking changes to both rules. Those requests were proposals, not approved changes, as of October 3, 2026.
What GST 2.0 changed—and what the demand figures show
The GST Council Secretariat’s September 2025 newsletter states that the rate changes took effect on September 22, 2025. The Economic Times commentary published on September 30, 2026, argued that rate compression and rationalisation helped revive demand.
That commentary reported net GST revenue collections for the Centre and states grew 9.2% in April–July 2026 compared with April–July FY26. This is the commentary’s reported figure; it was not independently checked against a primary collection release. It is a revenue comparison, not by itself proof that the rate changes caused demand to rise.
Why available ITC may not cover a business’s GST bill
ITC is intended to let an eligible business offset GST paid on inputs against GST payable on its later supplies. When credit cannot be claimed, refunded, transferred or used against the liability that arises, it can remain stranded rather than operating as a neutral pass-through. The business may then have a credit balance on its records and still need to pay a particular liability in cash.
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The Economic Times commentary groups the obstacles into three broad kinds:
- Legal limits: rules can restrict which liabilities a credit may offset.
- Structural gaps: some supplies fall outside GST, while rate inversion can contribute to accumulated credit.
- Operational limits: credit held under one state registration cannot simply be transferred to another state registration.
Historical GST Council materials show that accumulated credit and inverted rates have been recurring policy issues. The 53rd GST Council meeting materials provide context, but do not establish the rules or decisions applicable to the Council’s October 2026 meeting.
Two separate changes industry reportedly wants
Business Standard reported two distinct requests ahead of the meeting. One concerns how a liability is paid; the other concerns where credit is held. Neither report described an approved change or supplied draft legal wording.
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|---|---|---|---|
| Reverse-charge GST | Allow accumulated ITC to be used against reverse-charge liabilities, which businesses currently pay in cash. | The permitted payment method for those liabilities. | CII and ASSOCHAM, according to Business Standard’s September 23, 2026 report. |
| Credit across state registrations | Allow a company to offset credit held by a unit in one state against a tax liability of its unit in another state. | Whether credit can move or be offset across state registrations. | Industry sources, according to Business Standard’s September 8, 2026 report. |
What each proposal could address
Using ITC against reverse-charge liabilities
Under the reported request, a business with accumulated ITC could use that credit to meet a reverse-charge liability instead of paying the liability in cash. The issue is not that the two kinds of liability are the same; it is whether the rules should permit this credit balance to discharge the reverse-charge bill. CII and ASSOCHAM were named in the report as seeking this change.
Offsetting credit between states
A company may have credit attached to its registration in one state while another state registration has GST to pay. The reported proposal would make that credit more usable across the company’s state units. It is a different problem from reverse charge: it raises the question of moving or offsetting credit between registrations, rather than changing the payment method for a particular liability.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What was known about the October 7 Council meeting
Business Standard reported that the GST Council meeting was scheduled for October 7, 2026. As of October 3, the meeting was still in the future. The two proposals therefore describe industry requests, not decisions or rules in force; the available reports do not specify a final design.
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