GST@9: Unlocking growth in financial services through rationalisation, digitalisation, policy reforms

GST Transformation of Financial Services Sector

It has been nine years since the goods and services tax (GST) was introduced and since then India’s largest tax reform continues to reshape the country’s financial services industry (FSI) through deep digitalisation, compliance evolution, proactive policy reforms and a responsive tax administration. The GST interplay within FSI has accelerated operational transformation and structural rationalisation, thereby influencing pricing, profitability, and overall customer experience. A recent overhaul of the GST regime has resulted in simplification and rate rationalisation, driving widespread acceptance across India Inc. The positive momentum captured in Deloitte India’s recent GST@9 Survey underscores a highly encouraging journey so far, while outlining the industry's collective vision for future progress.

GST journey: Increased industry confidence

GST reflects strong industry confidence evidenced by near-universal acceptance and continued emphasis on digital compliance, data accessibility and automated processes powered by the GSTN portal. Over the years, participant sentiment and operational outcomes have shown a clear upward path, with the trend deeply visible within the financial services ecosystem. Survey analytics reveal that positive sentiment has steadily strengthened from 59% in 2022 to 84% in 2026, while negative sentiment has cratered to less than 1%, reflecting increasing maturity and acceptance of the regime. The consistency of compliance digitalisation as a top benefit (69% in 2026) underscores the vital role of technology in improving operational efficiency, particularly for large FSI entities managing high transaction volumes and multiple registrations. Additionally, audit and litigation dynamics indicate a structural shift—audit-to-demand conversion has risen significantly (from 14% in 2024 to 28% in 2026), signalling heightened scrutiny and compliance expectations for financial institutions. Concurrently, industry reliance on core GSTN capabilities has deepened, with features such as auto-population, real-time transaction tracking, and instant data retrieval consistently ranking among the most valued functionalities across years. These trends collectively indicate that while confidence and digital maturity have improved, regulatory enforcement intensity and interpretational challenges continue to evolve alongside.

Exemption for life and health insurance – emerging policy perspective

A major development in the GST landscape has been the momentum to rationalise rates, particularly for life and health insurance products, through exemptions. Recent survey insights indicate that removal of the tax drag on these products is seen as a positive change to support affordability and improve insurance penetration. This shift helps meet wider national policy objectives of improving financial protection and social security. Historically, the standard 18% GST rate has been cited as a deterrent to wider adoption.

Credit Distribution Reform: Transition to Mandatory Input Service Distributor

Further, recent structural reforms have transformed the ISD mechanism from an optional tool into a compulsory compliance framework for all shared third-party input service invoices. Acknowledging this tight mandate, FSI stakeholders are advocating (45%) for a simplified ISD process under current GST laws. Streamlining this transition for multi-state corporate entities is a vital step towards enhanced compliance and ITC distribution.

Operation of Goods and Services Tax Appellate Tribunal

The functional rollout of the Goods and Services Tax Appellate Tribunal (GSTAT) has been a milestone in dispute resolution. The creation of dedicated national and state benches is a welcome move in regulatory certainty for the financial services industry which often grapples with complex tax disputes across multiple jurisdictions.

Moreover, adoption of paperless replies to notices and appeals has notably improved, particularly in the FSI.

Road Ahead: Challenges and GST 2.0 Expectations

Looking ahead, the roadmap for GST 2.0 is firmly anchored in data-driven reform priorities. The survey identifies resolving legal ambiguities (85%) and unlocking working capital (67%) as critical policy expectations across industrial sectors. Operationally, establishing uniformity in audits (61%) and faster refunds (36%) emerges as key enablers for ease of doing business, particularly for financial institutions managing complex, multi-state operations. On the technology front, the next phase of GST regime is expected to be led by digital transformation, with 89% of respondents favouring AI-led data processing and reconciliations, paired with growing demand for unified compliance platforms that integrate e-invoicing, e-way bills, and returns. Further, global best

practices such as centralised audit frameworks (72%) and simplified, single-rate GST structures (64%) indicate a clear direction towards reducing complexity and litigation.

Other enthused expectations from the sector include:

- Enabling CGST credit transfers between distinct GST registrations under a single corporate PAN to immediately free up restricted working capital. Refund accumulated ITC at the end of the financial year.

- Establishing a mechanism to refund unutilized ITC at the end of each financial year to boost liquid capital.

- Permitting businesses to pay reverse charge mechanism (RCM) tax liabilities using existing electronic credit ledgers instead of requiring mandatory cash outlays

- Eliminating deeming fiction provisions for import of services on intra-company service transactions, specifically regarding head office-branch office allocations.

Collectively, these strategic expectations map out a future GST framework that is more predictable, technology-driven, and aligned with global standards—a critical shift to drive capital efficiency and maximise international competitiveness across India’s financial services sector.

(Bihani is Partner, Deloitte India; Jaiswal is Partner, Deloitte India. Views are personal.)