Proposed GST 2.0 reforms on Input Tax Credit (ITC) and refunds could unlock an estimated ₹50,000–60,000 crore annually for Indian businesses, according to tax experts. The proposals seek to widen refunds to accumulated credit relating to input services and capital goods, potentially reducing working-capital blockage, particularly for industries affected by inverted duty structures.
The next phase of GST reforms could provide a significant liquidity boost to Indian businesses, with proposed changes to the Input Tax Credit and GST refund framework estimated to unlock ₹50,000–60,000 crore annually once fully implemented.
The estimate has been reported by Financial Express based on assessments of three tax/public-finance experts. Importantly, the ₹50,000–60,000 crore figure is an expert estimate and not an official government revenue or refund estimate. The actual benefit will depend upon the final rules, eligible expenditure and manner in which the reforms are implemented.
Why ₹50,000–60,000 Crore Matters for Businesses
Accumulated ITC may appear as an asset in the books of a business, but until it can be utilised or refunded it represents blocked working capital.
Unlocking even a part of the estimated ₹50,000–60,000 crore could potentially allow businesses to:
improve cash flows, reduce borrowing requirements, lower financing costs and deploy additional funds towards capital expenditure and expansion.
The reforms could therefore have an impact beyond merely simplifying GST compliance.
Important: ₹50,000–60,000 Crore Is an Estimate, Not Yet an Approved Refund
Businesses should note that the ₹50,000–60,000 crore figure should not presently be treated as an amount already approved by the GST Council.