As GST completes nine years on July 1, 2026, Business Standard reports that input tax credit (ITC) remains a major unresolved challenge for Indian businesses — supplier defaults, invoice mismatches and compliance rules routinely delay or deny credit, locking up working capital across the supply chain.
Nine years in, GST has done a lot right. But here's the thing no one puts on the anniversary cake: for thousands of businesses, ITC is basically a forced, interest-free loan to the government — and they don't even know it.
A quick explainer. Input Tax Credit (ITC) means when your supplier charges GST on what they sell you, you can offset that tax against the GST you owe on your own sales. Simple in theory. Brutal in practice.
Here's why it wrecks working capital. You pay ₹18 GST to your supplier today. But you can only claim that credit if your supplier has filed their return and it shows up clean in the government portal. If they're late, or their invoice doesn't match yours, the credit is blocked — sometimes for months. Meanwhile, you still owe GST on your own sales. You're out of pocket, earning zero return on that blocked cash.
A CFO reads this as a hidden receivable on the balance sheet — money you're owed but can't collect on any predictable timeline. It inflates your working capital cycle. Your Cash Conversion Cycle (CCC) gets longer. You borrow more, pay more interest, and your free cash flow shrinks.
The fix isn't just compliance hygiene. It's vendor selection. A supplier who files returns on time is literally worth more to you than one who doesn't — factor that into your procurement decisions. Working capital isn't just an accounting metric; it's the pulse of your business.
📚 Learn the concept: Working Capital
Source: https://www.business-standard.com/
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