Who this is for
- Factories and industrial units — engineering, fabrication, auto components, electronics, plastics, food processing, textiles.
- MSMEs, both as suppliers and as buyers from other MSMEs.
- Multi-state operations with more than one GST registration under a single PAN.
- New plants in the capex phase, where the credit position is decided rather than discovered.
The dates and tests that nothing reminds you about
| What | When it is decided | What a monthly return tells you |
|---|---|---|
| MSME payment rule | Fixed at 31 March — no relief for paying later | Nothing |
| Job work return period | 1 year (inputs) / 3 years (capital goods) from despatch | Nothing until the deemed supply has already arisen |
| Inverted duty refund | Limitation runs from a relevant date, oldest first | Nothing |
| ISD distribution | Monthly, but a wrong allocation is silent | Nothing |
| Factory capex credit | At contracting and capitalisation | Nothing — and it is unfixable afterwards |
That column of “nothing” is the whole argument for looking at these on a cycle rather than at year end.
⚠️ The 31 March cliff
Deductions allowed on payment normally carry a forgiving rule: pay before the due date for filing the return and the deduction survives in the year it was incurred. For micro and small enterprises that relief does not apply.
An amount outstanding beyond the permitted window at 31 March is disallowed for that year and allowed only when paid. There is no remedial payment and no filing-date rescue. On 1 April the position is fixed.
The window is 45 days with a written agreement and 15 days without one — and businesses assuming 45 days frequently do not have the agreement that would give it to them. It reaches micro and small only; medium enterprises and traders are generally outside it, so indiscriminate provisioning overstates the exposure as often as ignoring it understates it. See the MSME 45-day rule.
Credit that does not come back
Three separate leaks, with different causes:
- Factory construction. Credit on constructing immovable property on your own account is blocked. The functional-plant route opened by Safari Retreats was closed by a retrospective amendment to 1 July 2017. What survives is credit on plant and machinery — so the value now sits at the boundary, and the boundary is set by how contracts are split and how assets are capitalised during capex, not afterwards.
- Inverted duty. Where inputs are taxed above your output, credit accumulates. The refund covers inputs only — not input services or capital goods — and the formula apportions by turnover, so the recovery is structurally smaller than the balance. The residue is often permanent, which makes it a pricing and balance-sheet question rather than only a refund one.
- Multi-state distribution. Credit taken by the wrong registration is wrongly taken, whatever the group position, and it accumulates without ever being flagged.
Job work — an ageing problem, not a filing one
Goods sent to a job worker move on a delivery challan without tax, and that is not a supply — provided they come back in time: one year for inputs, three for capital goods, with tooling treated separately.
Miss it and the supply is deemed to have occurred on the date of despatch. The consequence is entirely backdated: tax as of that date, and interest running from then rather than from when the lapse was noticed. A consignment sent in April and found missing eighteen months later carries eighteen months of interest.
Separately, the rate on the job worker’s own invoice changed on 22 September 2025 — and for general engineering, fabrication, auto parts, electronics assembly and plastics it went up, from 12% to 18%. See job work: challans, time limits and rates.
Scrap — the obligations sit with the buyer
From 10 October 2024, a registered buyer of metal scrap pays GST under reverse charge where the supplier is unregistered, and deducts 2% GST TDS where the supplier is registered and the contract crosses the threshold.
Both landed on the purchaser, which is not where a manufacturer who thinks of itself as a scrap seller looks. Buying from unregistered yards also affects your registration position, because reverse-charge liability requires registration and the turnover threshold does not shelter it.
The corporate rate election
Worth stating plainly because a great deal of published material has not caught up: the 15% concessional rate for new manufacturing companies has lapsed. It required manufacturing to commence by 31 March 2024 and was never extended, so it is closed to new entrants — though companies that qualified and opted in continue.
The realistic comparison for a new plant is now the general 22% regime. That election is irrevocable for subsequent years and is conditional on forgoing specified deductions, so a company with substantial unabsorbed depreciation can be worse off under the lower headline rate. It has to be modelled on projected numbers before it is made. See is the 15% rate still available?
What to send
- Creditor ledger with supplier Udyam status and category — micro, small or medium, and manufacturer, service provider or trader
- Ageing of goods lying with job workers, by despatch date
- Credit ledger and your input/output rate profile, if credit is accumulating
- The list of GST registrations under your PAN, and how common costs are currently allocated
- For a plant under construction, the capex schedule with contractor invoices and how each asset is being capitalised
The last one is the only item on this page where timing is genuinely one-way: the credit position on a new plant is decided while the contracts are being written, and reconstructing a split from a composite works contract afterwards is much weaker. Where a notice has already been issued, see tax notices and assessments.