The Federation of Indian Micro and Small & Medium Enterprises (FISME) on Thursday urged Finance Ministry and GST Council to introduce legislative safeguards to protect bona fide taxpayers following the Supreme Court's recent judgment that made supplier tax payment mandatory for Input Tax Credit (ITC).
NEW DELHI — The Federation of Indian Micro and Small & Medium Enterprises (FISME) on Thursday urged Finance Ministry and GST Council to introduce legislative safeguards to protect bona fide taxpayers following the Supreme Court's recent judgment that made supplier tax payment mandatory for Input Tax Credit (ITC).
The SC had upheld Section 16(2)(c) of the CGST Act, which permits denial of Input Tax Credit (ITC) where a supplier has failed to deposit tax.
The ruling made relief for bona fide taxpayers in case of supplier default, largely dependent on legislative and administrative reforms rather than judicial interpretation. The industry body emphasised the need for legislative action to ensure honest taxpayers are not penalised for supplier defaults beyond their control.
FISME called for a statutory Safe Harbour for bona fide taxpayers that ensures ITC to businesses with valid tax invoices, proof of receipt of goods or services, and banking-channel payments.
In case of supplier defaults, recovery should be pursued against the defaulting supplier, the industry body said.
FISME also sought a time-bound GST refund mechanism, including automatic payment of interest on delayed refunds, to prevent working capital from being locked up, particularly for MSMEs and exporters.
It also recommended simplifying GST compliance through faster implementation of the One PAN-One Administration framework to enable more centralised compliance and reduce duplication across registrations.
FISME stressed predictable technology rollouts with adequate transition periods and sandbox testing before major system changes, mandatory pre-notice reconciliation, faceless adjudication, and measures to reduce avoidable litigation.
"Our recommendations do not seek any relaxation in tax obligations. They aim to reduce compliance costs, improve certainty, unlock working capital, strengthen voluntary compliance and make GST administration more efficient, transparent and taxpayer-friendly," said Anil Bhardwaj, Secretary General, FISME.
As India's indirect tax regime GST enters its tenth year of implementation, the number of registered GST taxpayers has grown from 66.5 lakh in 2017 to over 1.65 crore as of May 2026.
The widening taxpayer base indicates the growing formalisation of India's economy.
Gross GST collections have also risen from INR 7.4 lakh crore in 2017-18 to over Rs 22.27 lakh crore in FY26, while July 2026 collections stood at INR 2.11 lakh crore, up 15.4 per cent year-on-year.
Meanwhile, MSMEs continue to remain the backbone of the Indian economy, contributing 31.1 per cent of GDP, 48.58 per cent of exports and 35.4 per cent of manufacturing output.