GST's credit challenge: Why input tax credit remains the biggest challenge

GST's credit challenge: Why input tax credit remains the biggest challenge

Business Standard, 1 Jul 2026

The ITC Question Returns To Centre Stage

A report published by Business Standard on 1 July 2026 revisits a familiar fault line in India's Goods and Services Tax architecture: the input tax credit mechanism. The article frames ITC as the single largest challenge confronting the GST system, signalling that the issue continues to occupy the attention of policymakers, practitioners and taxpayers alike. Rather than announcing a specific reform or ruling, the piece examines why the credit chain remains the most contested element of the indirect tax regime.

For an audience that deals with GST compliance daily, the framing is significant. ITC is the mechanism that prevents tax from cascading through the supply chain, allowing a registered person to set off tax paid on inputs against output liability. When that chain functions smoothly, GST behaves as a tax on value addition. When it does not, the cost of credit denied, delayed or disputed flows directly into working capital and, eventually, pricing.

Why It Matters For Businesses

The persistence of ITC as a challenge touches nearly every compliance function. Businesses must reconcile purchase records with supplier filings, track credit reflected in their electronic ledgers, and respond to mismatches that may arise from counterparty defaults or reporting gaps. Each of these steps carries administrative cost and, where credit is questioned, potential cash-flow strain.

The concern is not confined to large enterprises. Smaller taxpayers, who often lack dedicated tax teams, face a disproportionate burden in matching invoices and pursuing suppliers for timely reporting. For advisers and compliance professionals, the recurring nature of the issue means ITC reconciliation remains a core engagement area, from annual returns to departmental audits and appeals.

The article's central observation, that ITC remains the biggest …