When GST was rolled out in 2017, it was hoped to be a game-changing reform – to ease India's indirect tax architecture by scrapping the various structures such as VAT, Service Tax, and Excise Duty – and combining them into a single structure.
The promise of one unified tax was supposed to mean simpler compliance and an even simplified tax environment.
The truth after GST implementation for most businesses, professionals, and exporters has been a perplexing maze rather than a straightforward path. Compliance has presented more hurdles than ease of business, courtesy of ITC disputes, audit notices, and delayed refunds.
Common Challenges Businesses Face
The challenges vary depending on the nature of the business. The fear of penalties looms large, and the time spent on reconciliations often eats into energy that should be spent on growth. Despite investing significant resources, various businesses are still plagued with payment delays, ITC restrictions, mismatches between GSTR-2B and GSTR-3B, and compliance notices – all of which can cripple operations and cash flow:
- Startups/SMEs → Issues with registration, turnover thresholds, filing accuracy
- Freelancers/Service Providers → Uncertainty around GST applicability across states
- Exporters → IGST refund delays due to documentation errors
- Large Corporates → Multi-state audits, complex ITC reconciliations, compliance manpower costs
Real-Life Hypothetical Case Studies
Case Study 1: The Cash Crunch of a Startup
A Bangalore-based SaaS startup filed late GST returns due to uncertainty regarding thresholds and turnover applicability. It led to penalties and detained ITC of ₹12 lakhs, tightening their working capital at the very moment when they were seeking investor funding.
Case Study 2: The Exporter's Refund Conundrum
An export apparel unit received notices for non-compliance due to discrepancies in shipping bills and GST returns. Refunds amounting to ₹80 lakhs remained held up for six months, reflecting directly on their cash flows to pay overseas suppliers on time.
Case Study 3: The Corporate Reconciliation Nightmare
An FMCG multinational with corporate offices in 12 states was grappling with ITC reconciliation across its branches. Small discrepancies triggered state-level audit notices, swallowing weeks of compliance resources and increasing litigation risks.
The pattern we can identify is that GST challenges cut across businesses of all sizes, and the core issues remain cash flow, compliance, credibility, and disruptions in the operations of the business.
Why Compliance Matters
Being compliant with GST is not a choice but a requirement for businesses to run operations smoothly. Non-compliance can result in penalties, blocked ITC and reputational damage, while effective and prompt compliance guarantees smooth audits, quicker refunds, and enhanced credibility with regulators, customers, and suppliers.
How Professional GST Support Simplifies Compliance
A reliable GST consultant, with years of experience in handling complex matters, becomes your trusted partner by taking the compliance burden off your shoulders.
This can be done by:
- GST Consultation & Structuring – Guidance on classification, valuation, supply location, and transaction structuring
- GST Compliance Management – Support in registration, modifications, monthly and yearly GST return filing, and ITC reconciliation (GSTR-2A/2B)
- GST Health-Check & Diagnostic Reviews – Analysis of compliance risks and areas of optimization opportunities
- Indirect Tax Litigation & Representation – Representation in audits, departmental inquiries, and appellate proceedings
- OIDAR Compliance & Advisory – Foreign digital service provider registration, tax return filings, and litigation support
- E-Commerce Operator Compliance – Advisory and support on TCS, reporting, and tax liability management
- Refunds & SEZ Enablement – GST refund support for exports, SEZ units, and inverted duty structures
- Customs & Trade Advisory – Classification support, valuation, import-export documentation, and dispute resolution
- Automation & ERP Integration – GST compliance integrated into ERP systems, such as API-based filing solutions
Step-By-Step GST Issue Resolution
Step 1: Identifying the problem
Begin by identifying the source of the problem. This may be a delayed GST return, outstanding GST refunds, unpaid GST notices, or ITC mismatches between GSTR 2B and GSTR 3B. Proper identification of the problem enables determination of the appropriate corrective action.
Step 2: Assessing the Compliance Records
Conduct an in-depth review of GST records, reconciled bills, and outstanding documents to understand the lapse.
Step 3: Formulating the Corrective Actions
Once the review is completed, the next step is to figure out the corrective action. This may include revising returns, ITC claims adjustments, or writing a response to GST notices. Supporting documents like reconciliations, invoices, and working papers are gathered to support the amendments.
Step 4: Filing the Amendments & Applications
The next step is to file the refund requests and amendments on the GST portal. For exporters, this step also involves filing requests for unblocking notice-related delayed refunds.
Step 5: Representing clients during GST audits
During audits or summons, the consultant acts as representative of the client with GST authorities. Clarifications and supporting documents are provided until the issue is resolved completely and there is a formal closure or order for refund.
Latest GST Updates in 2025 - 56th GST Council Meeting Highlights
I. Major GST Reforms & Rate Rationalisation:
- Introduction of a simplified 2-rate GST structure: 18% Standard Rate; 5% Merit Rate and de-merit rate of 40% for few selected goods and services.
- Full GST exemption on life & health insurance policies.
- Rate Cuts from 28% to 18% on consumer durables:
- ACs, TVs, dishwashers, small cars, motorcycles ≤350 CC
- Uniform rate of 18% on all auto parts
- Significant relief on medicines:
- 33 drugs now taxed at 0% (down from 12%)
- 3 critical medicines used for cancer/rare diseases treatment now taxed at 0% (down from 5%)
- All other medicines taxed at 5% (down from 12%)
- Operationalisation of the Goods and Services Tax Appellate Tribunal (GSTAT) for accepting and filing appeals before or by the end of September 2025 and begin hearings by December 2025.
- Correction of inverted duty structures in manmade textile & fertilizer sectors.
Effective Date: All the recommendations (except sin goods rate changes) will be effective from 22nd September 2025.
II. Trade Facilitation Measures:
- Sanction of risk-based provisional refund for Zero-Rated supplies and Inverted Duty Structure (IDS): Allow 90% provisional refunds based on system-driven risk evaluation, with scrutiny in exceptional cases.
- Simplified, optional GST registration scheme for small and low-risk businesses (≤ INR 2.5 lakh/month tax liability) – registration within 3 working days.
- Export refunds reform: Threshold limit removed for low-value consignments.
- Simplified registration for small sellers on e-commerce platforms across states.
- Amendment to Place of Supply (POS) rules for intermediary services: Enabling Indian service exporters to claim export benefits.
- Post-sale discount reforms: Easier credit note-based adjustments, elimination of pre-agreement requirement.
- Retail Sale Price (RSP) – based valuation under GST for specified tobacco-based products.
Effective Date: Measures like risk-based refund and simplified registration for small businesses will be effective from 1st November 2025.
Practical Advice to Businesses to Remain GST Compliant
- Verify Registration: Ensure that GST registration and related business information is accurate.
- File Returns on Time: Ensure that you file all pending returns (GSTR-1, GSTR-3B, GSTR-9) on or before the due date to avoid the likelihood of paying a fine.
- Reconcile ITC Timely: ITC claims under GSTR-3B are to be reconciled with GSTR-2A/2B, and the differences must be resolved promptly.
- Maintain Documents: Keep electronic copies of invoices, vouchers, and returns for easy access.
- Update Knowledge: Monitor GST notifications, rate changes, and other circulars that will necessitate changing your process.
- Leverage Technology: Employ an ERP or accounting software to automate submissions and reconciliations.
- Seek Expert Assistance: Seek assistance from GST experts for intricate issues, audit, or health-checks.
Remaining GST compliant can be an intimidating exercise, but with proper support and by fulfilling obligations, it can be a strategic advantage and not a liability. Businesses of all sizes can maximize tax credits, simplify operations, and steer clear of expensive disputes with proper support.
At AKM Global, our Indirect Tax team has the expertise to help you resolve GST issues efficiently. Reach out to us today at [email protected] and get rid of your compliance burdens.
