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57th GST Council Proposes Expanded Refund Rules
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57th GST Council Proposes Expanded Refund Rules

October 10, 2026

57th GST Council recommends extending ITC refunds to capital goods and input services under inverted duty structure and zero-rated supplies.

57th GST Council Proposes Inclusion of Capital Goods in ITC Refund

The 57th meeting of the GST Council recommended amending refund mechanisms to include Input Tax Credit (ITC) accumulation on capital goods and input services, particularly in cases of inverted duty structure and zero-rated supplies.

Currently, refund eligibility for inverted duty scenarios is limited to inputs and input services directly in the supply chain. The proposed expansion addresses long-standing industry concerns about blocked working capital due to high GST on capital assets.

"The Council recognized the need to mitigate cash flow stress in manufacturing, infrastructure, and export-oriented sectors,"
said official sources.

If implemented, the change will require amendment to Rule 89 of the CGST Rules. Practitioners should anticipate revised refund applications to include machinery, plant, and equipment-related credits. The move aligns with global best practices in VAT design and could enhance compliance by reducing ITC pendency.

Citations

  • CGST Rules, Rule 89
Practice Areas:taxgst

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