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New Delhi: In a major step to strengthen India’s indirect tax framework, the Government of India has notified the Goods and Services Tax Settlement Rules, 2025, aimed at improving efficiency, transparency and accuracy in the distribution of GST revenues between the Centre and states. The rules, published in The Gazette of India, will come into effect from April 1, 2026, and are expected to refine the mechanism for settlement of Integrated Goods and Services Tax (IGST)—a critical component of GST levied on inter-state transactions.

Structured Mechanism for IGST Distribution

The new framework introduces a well-defined system for apportionment of IGST, ensuring timely and accurate sharing of revenues between the Centre and state governments.

It clearly outlines the roles of key institutions, including:

• Central Board of Indirect Taxes and Customs
• State tax authorities
• Accounting agencies involved in GST settlement

This is aimed at enhancing coordination and accountability across jurisdictions.

Monthly Digital Reporting System

A key feature of the rules is the introduction of a technology-driven monthly reporting system.

Under this:

• The Goods and Services Tax Network will generate detailed reports by the 25th of every month
• Reports will include data on tax payments, input tax credit utilisation, cross-utilisation and final settlement amounts
• Data will be shared electronically with relevant authorities

This move is expected to reduce delays, minimise discrepancies and improve real-time monitoring of GST flows.

Handling Complex Tax Scenarios

The rules also address complex GST situations, such as:

• Cross-utilisation of input tax credit between IGST, CGST and SGST
• Delayed or rejected refunds
• Transactions involving imports and unregistered persons

Standardised procedures and formats have been prescribed to ensure uniformity and clarity in handling such cases across states.

Dispute Resolution Framework

To tackle discrepancies, the rules mandate:

• Identification and reporting of mismatches by the 20th of the following month
• Examination and revision of calculations where required

This structured reconciliation process is expected to reduce Centre–state disputes and enhance trust in the GST system.

RBI to Act as Nodal Agency

The final settlement of funds will be carried out through the Reserve Bank of India, which will facilitate transfers between the Consolidated Fund of India and state accounts based on approved settlement reports.

Boost to Fiscal Transparency

Officials said the new rules mark a shift towards a data-driven, transparent and standardised GST settlement system, ensuring smoother revenue flow and strengthening India’s cooperative federal tax structure.