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Introduction to GST Neutralization

Before the implementation of the Goods and Services Tax (GST), the Indian taxation system was complicated. It included a combination of central, state, and local taxes. These taxes affected Indian importers and exporters as they had to pay indirect taxes due to supply chain complexities. As a result, the tax burden was shifted to the international customers limiting exporters’ opportunities. GST neutralization was introduced to encourage exports, allowing exporters to claim a refund of the GST they pay for inputs used in the making of export goods.

GST neutralization is thus a refund scheme that reduces the tax burden on Indian exports. Let us explore the GST neutralization reactivation process in more detail in this blog.

Understanding the Need for Reactivation

GST neutralization enables Indian businesses to stay competitive in the international market. It helps with economic growth as it reduces the tax burden. As a result, the cost of the products is reduced for the consumers. The transparency ensured by the GST taxation system makes it easier for the authorities to monitor taxation on manufactured goods for export purposes.

If, for some reason, neutralization is deactivated for your GST registration, you must consider activating it. Otherwise, you will end up paying more tax than necessary. Offsetting the tax you have spent on inputs ensures your tax liability is lower.

Also, maintaining accurate GST registration and neutralization details is essential for GST compliance. When there are discrepancies, the tax authorities may issue assessment and audit orders, increasing your business costs.

Assessing the Current GST Neutralization Status

The streamlined GST system allows you to get all the information about your GST registration through the GST portal. With the launch of the GST network, all GST-related operations are completed online. Whether you want to obtain GST registration, submit GST returns, or request an assessment from tax authorities, all operations must be carried out online.

You can also view your current GST neutralization status on the GST portal. All you need to do is log into the GST portal and look for your neutralization status. Without neutralization, your potential tax liability will be much greater. This can have a significant impact on your manufacturing and export business.

Steps to Prepare for Reactivation

Enabling tax credit compliance is mandatory for GST-registered taxpayers. In case your neutralization status is deactivated, you must activate it promptly. The steps you need to follow are explained below:

Address the reason for deactivation

The first step to reactivating neutralization is identifying why your GST status is deactivated. Sometimes, it may be due to errors in GST return forms, or the authorities may need further clarification. When there is a change in the GST status, it will be communicated to you via online channels.

Check your email for any notification about the deactivation of neutralization status. You can also check your details on the GST portal. Ensure that you understand the reason for deactivation so that you can address those issues.

Resolve non-compliance

During your self-assessment, identify non-compliance issues that may have resulted in the deactivation of neutralization. The tax authorities want to ensure GST compliance at all times. The GST network automatically triggers deactivation, suspension, or cancellation based on specific parameters. If there are errors in your return filings, outstanding tax liabilities, or missing documentation, it can result in the deactivation of GST registration.

Conduct a self-audit

Before involving tax authorities, conduct an internal audit to verify the authenticity of your financial transactions. Check related documentation to ensure completeness and accuracy. Gaps in GST compliance can also result in deactivation, which can be reinstated only if you rectify the underlying errors. Using an automated billing tool will help you establish a clear audit trail, which will be helpful in these cases. Otherwise, you can also seek help from a tax professional or external auditor to verify your financial records.

Reconcile financial statements

GST regulations require all financial transactions to be reconciled with bank accounts. Once you upload the GST return files, the system automatically matches, verifies, and cross-checks the details for reconciliation. The GST tool can also help with automatic reconciliation, saving your organization time and effort. Nevertheless, identifying errors and ensuring proper reconciliation is imperative for GST compliance.

Also Read: What are the steps to reactivate GST neutralization?

Resolving Compliance Concerns

GST compliance concerns enable businesses to adhere to GST regulations. When businesses are found to be non-compliant, their GST registration can be suspended. Tax authorities will need an explanation with reasons and supporting documentation for any errors. As a registered taxpayer, you are responsible for submitting accurate GST return forms.

So, when there are errors, you must make an effort to correct them. For example, if you entered the wrong details in the invoice, update your GST return with the correct details. If the payment or valuation of supplies has changed from what was present in the tax invoice, issue debit or credit notes to offset the difference. Maintain good relationships with your buyers and promptly issue tax invoices on the GST portal to reconcile outward and inward supplies.

You must always use the correct GST rate for your business for compliance. If you conduct operations across India and abroad, you have to deal with multiple types of GST and varied GST rates. In that case, ensuring compliance becomes difficult.

The complexity of GST compliance can be significantly reduced with the use of automated GST billing software such as CaptainBiz. The latest GST rates will be automatically updated so that your GST return forms are always accurate. Also, CaptainBiz will help you calculate the exact tax liability to avoid penalties, late fees, fines, and other charges.

Communication with Tax Authorities

After the launch of GSTN, communication with tax authorities is streamlined through the GST portal. Online communication is faster and better. Whenever you need clarifications from tax authorities, you can contact them through the GST portal help desk and submit support tickets.

The tax authorities now communicate all the information to the taxpayers directly through email or the GST portal. You may also be notified on your mobile number regarding your GST registration and neutralization status. You can use the grievance redressal section to launch a complaint or ask for clarifications.

If you prefer the offline method, contact the nodal offices in your state for GST and approach the proper authorities. You can also contact your local tax office for questions about GST. Whenever you reach out to tax authorities for clarification, keep accurate supporting documents in case you need to upload them.


Restoring the deactivated GST neutralization status will help in reducing the tax burden. Claiming a tax refund for tax paid on inputs for manufacturing goods will improve business cash flow. The tax credit and tax refund options allow businesses to reduce their tax burden and transfer the cost savings to the customers. It will result in economic growth for the country as well.

If your neutralization is deactivated, it is possible to reinstate it when you use the online GST portal. Maintain accurate records and use GST automation software for stress-free compliance.

CaptainBiz streamlines all GST operations for your business, from invoicing to online submission of tax returns. Integrating with the GST network ensures that GST rates are accurately calculated and GST forms can be uploaded without any manual effort. Automate reconciliation through CaptainBiz for comfortable GST compliance.

Also Read: GST Calculator Online – Simplify Your Daily Finances And Taxes


  1. What is GST neutralization?

GST neutralization is a tax refund option made available for businesses to offset the tax paid on inputs necessary for manufacturing goods for exports.

  1. Does my business qualify for GST neutralization?

Not all businesses qualify for GST neutralization. To check your status, visit the GST portal and access the relevant option.

  1. Can I reinstate GST neutralization now?

Reinstating GST neutralization was available for a short duration, but whether you are allowed to reinstate your status now depends on your case. Log into the GST portal to check whether this option is available for you.

  1. Can I continue to get the benefits of GST neutralization without reinstating it?

GST rules and regulations have been updated since the launch of the GST Act in 2017, and businesses must adhere to the latest rules. If you have not reinstated neutralization, it may not be possible to do so at this time.

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Niharika Kapoor Content Writer
Niharika is a Freelance Content Writer and Translator with a Master of Arts in Literature. She has 5+ years of working in the same and has worked in different industries.

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