New Delhi, Sept. 14 -- Representatives of a several industries, including pharmaceuticals, textiles, insurance, clean energy and farm equipment, have sought government intervention after the recently-announced cuts in goods and services tax (GST), posed a cashflow challenge.

While the tax rate cut-to come into effect on 22 September-is meant to boost demand for goods and services and spur industrial growth, it has also accentuated a system flaw. Mint takes a close look at what is coming in the way of businesses fully passing on the benefit of tax cuts to consumers.

GST is a tax on consumption, designed to be applied only on the margins of every stage of the supply chain. For it to effectively work, businesses need to be given credit for...