GST reforms: Refunds, wider ITC mark third phase of reform as India targets global supply chains, says PwC’s Pratik Jain

Nearly a decade since its roll out, the historic GST reform moved closer towards a pivotal point of maturity. Over the years, GST has largely evolved in two phases. While the first phase aimed at stabilisation of compliances, the second phase focused on rate rationalisation moving to a simplified three-tier rate structure in September 2025.

The announcements made in the 57th council meeting launch the third phase of evolution that focuses on bolder policy reforms and ease of doing business at a time when India aspires to stage itself as a critical player in the global supply chain. Key themes emerging from the progressive announcements are unlocking corporate capital, liberalising GST credits, and easing out onerous compliance obligations.

A bold and aggressive decision made by the council is to ease severe working capital stress by broadening and expediting GST refunds. The September 2025 rate rationalisation exercise (GST 2.0) induced several sectors into an inverted rate structure, resulting in accumulation of GST credits. In such cases, refundscould only be claimed for ITC accumulated on raw material so far. The proposed framework will expand the scope to allow refunds for input services as well as capital goods.


Another positive move is to allow GST credits on core business expenses like employees' insurance. This will help optimize the operational cost for businesses, especially the global capability centers.

A strong foundation has been laid for the next phase of transformative reforms, possibly GST 3.0. which could target a phased inclusion of petroleum, power etc. and align with global best practices. The timing is also right and perhaps provides a much-neededstimulus to the economy and stock markets, as global uncertainties hover around.