After a 374-day hiatus, the GST Council prepares to address structural issues in tax refunds and compliance, with a tentative move to reduce GST on mobile phones from 18% amid ongoing challenges over inverted duty structures.
The GST Council is set to meet on September 12 after a gap of 374 days, and the discussion is expected to shift away from broad rate rationalisation towards the harder task of fixing compliance, refunds and other structural frictions in the tax system. According to The Hindu BusinessLine, a possible reduction in GST on mobile phones from 18 per cent is also on the table, although the formal agenda has not yet been issued.
A central concern is the inverted duty structure, which arises when tax on inputs exceeds the levy on the finished product. BusinessLine said this has left manufacturers in sectors such as textiles, pharmaceuticals and fast-moving consumer goods with trapped input tax credits. The problem is not new: Business Standard reported that in March 2020 the Council raised GST on mobile phones and specified parts from 12 per cent to 18 per cent specifically to correct that mismatch, bringing handset rates in line with components and reducing refund pressure on industry.
Tax specialists quoted by BusinessLine said the current framework still leaves gaps, particularly because refunds do not fully extend to input services. Brijesh Kothary of Khaitan & Co argued that the deeper issue remains despite provisional refunds introduced in Budget 2026, while Sivakumar Ramjee of Nangia Global pointed to Supreme Court rulings in VKC Footsteps and Transtonnelstroy as leaving the policy choice with the Council. The article also noted calls for statutory protection for bona fide buyers who lose input tax credit when suppliers fail to pay their dues.
Other unresolved issues may also surface. Ranjeet Mahtani of Dhruva Advisors told BusinessLine that accumulated Compensation Cess, which he estimated at about ₹6,000 crore, has been left stranded after the levy was discontinued. The same report said experts expect the Council to consider faster automated refunds, easier transfer of credit across State registrations, tighter rules on blocked credits in construction and works contracts, and a more proactive system for resolving disputes before they harden into litigation. The mobile-phone proposal, meanwhile, should be treated as tentative until the Council formally decides.
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