GST Practical Problems Still Unresolved: Kerala FM Flags Key Issues
Kerala’s Finance Minister K. N. Balagopal recently highlighted that several GST practical problems are yet to be resolved, despite the system nearing its 8-year mark. His comments during the 53rd GST Council Meeting reflect the growing need to address taxpayer difficulties, especially around compliance complexity and ITC mismatches.
Let’s break down what remains unresolved and what it means for Indian businesses and professionals.
What Did Kerala FM Say?
During the 53rd GST Council Meeting, FM Balagopal stated:
“The GST system still has unresolved practical problems that are affecting compliance and creating confusion for taxpayers.”
This isn’t an isolated concern. Multiple states have echoed similar views, particularly regarding:
- Input tax credit mismatches
- Lack of clarity in GST rate notifications
- Pending GST compensation dues
- Classification disputes (e.g., EV batteries, ice cream parlours, online gaming)
Key GST Practical Problems Faced by Taxpayers
Here are some of the major unresolved issues under GST that professionals and small businesses continue to face:
1. Input Tax Credit (ITC) Complications
- Frequent ITC mismatches in GSTR-2B vs. GSTR-3B
- ITC blocked under Rule 86A without timely redressal
- Credit reversal due to minor clerical vendor errors
- Refund delays for zero-rated exports
Legal Angle:
Rule 86A of CGST Rules allows officers to block credit on suspicion, often without formal notice. HC judgments (e.g., Kalpsutra Gujarat HC 2023) have criticized arbitrary use of this rule.
2. Compliance Burden on Small Businesses
- Monthly GSTR-1, GSTR-3B filing for even small taxpayers
- Complicated e-invoicing norms (now mandatory for turnover ₹5 crore+)
- Interest and late fee on minor delays (even nil returns)
Expert Tip:
Even if no business was done, GSTR-3B must be filed to avoid ₹20 per day late fee. Automation tools like Efiletax’s GST compliance dashboard help reduce this burden.
3. Rate and Classification Confusion
Despite GST aiming to be a “one nation, one tax” system, multiple slabs and overlapping rules create confusion:
| Item | Tax Rate | Issue |
|---|---|---|
| EV battery | 18% | Higher than EV vehicle (5%) |
| Ice cream parlour | 18% | Dispute over restaurant vs. supply |
| Online gaming | 28% | Retrospective demand challenge in SC |
Official Source:
CBIC Clarifications (Circular No. 189/01/2023-GST) have tried to resolve classification disputes but many issues still go to litigation.
GST Compensation Dues: Kerala’s Core Concern
Kerala is among the states claiming that pending GST compensation dues from the Centre are impacting state finances. Although the five-year compensation period ended in June 2022, some states demand extensions or revised sharing formulas.
Fact Check:
As per PIB data, ₹86,912 crore was released as compensation in FY 2021–22. Post that, states like Kerala argue they’re still facing shortfalls.
What Can Be Done?
The Finance Minister’s remarks highlight a deeper structural need:
- Simplify ITC rules – Consider automatic matching or de-linked credit model
- Streamline returns – Merge forms or offer quarterly filing to more taxpayers
- Harmonise rates – Fewer slabs, clearer definitions
- Redressal systems – Faster AAR, appellate authority decisions, and tech support
One Step Forward: What the 53rd Council Did Decide
To be fair, some pain points were addressed in the recent 53rd GST Council Meeting:
- Amnesty for GSTR-4, GSTR-9, and Revocation of Cancellation
- Clarification on ISD mechanism
- Reduction in late fees for FY 2017–18 to 2019–20
- CBIC instructed to issue fresh FAQs and consolidate circulars
Read our full breakdown of the 53rd GST Council updates here.
Final Word: Don’t Let Complexity Delay Your Filing
While policy reforms may take time, non-compliance today leads to penalty tomorrow. Whether it’s ITC reconciliation, late filing, or invoice matching — Efiletax helps you stay compliant without the headache.
Start your GST filings today with expert support, affordable pricing, and smart automation.
FAQs
1. Is GST compensation still available to states?
No. The 5-year GST compensation period ended in June 2022. States like Kerala are seeking extensions or new formulas.
2. Why does ITC get blocked under Rule 86A?
If GST officers suspect fraud or ineligible credit, they can block ITC without prior hearing, though this is being challenged in courts.
3. Is GSTR-3B filing mandatory if there’s no sale?
Yes. Nil returns are compulsory, and skipping them leads to late fees.
Summary
GST practical problems like ITC mismatches, compliance overload, and rate confusion remain unresolved, says Kerala FM. Know what’s still broken and how to stay compliant with Efiletax.