Kashmir Impulse Desk
New Delhi, Oct 08
India’s Goods and Services Tax (GST) Council has approved a package of reforms to ease compliance, reduce enforcement pressure on taxpayers and accelerate refunds, including removing tax officers’ powers to arrest taxpayers and raising the criminal prosecution threshold to Rs 5 crore.
Finance Minister Nirmala Sitharaman said the changes, approved at the Council’s 57th meeting on Thursday, were intended to build trust between tax authorities and businesses and improve the ease of doing business.
The process reforms are scheduled to take effect from April 1, 2027, with the new system expected to take about a year to stabilise, she said.
“Business has to be trusted. Taxpayers have to be trusted,” Sitharaman told reporters, adding that 99 percent of key issues relating to GST rates and procedures had been addressed under the next-generation reform programme.
The package includes faster refunds, simpler registration procedures for small suppliers selling through e-commerce platforms, lower penalties and changes to input tax credit rules.
Refunds to be processed faster
The Council agreed to reduce the time for acknowledging refund applications from 15 days to 10 days. If neither an acknowledgement nor a deficiency memo is issued within that period, the application will be treated as acknowledged.
Based on risk assessment, the government expects to sanction 90 percent of refund claims within three working days of acknowledgement, Sitharaman said.
The move is intended to improve cash flow and free up working capital for businesses.
The Council also approved a concept note for an optional compliance scheme for businesses with annual turnover of up to Rs 5 crore that supply exclusively to consumers. Under the proposed arrangement, businesses would file one annual return and make quarterly tax payments. The detailed framework will be considered at the next Council meeting.
A Rs 10,000 threshold for issuing GST notices was also approved, while the general penalty was reduced from Rs 25,000 to Rs 10,000, Sitharaman said.
Changes to input tax credit
The Council recommended allowing input tax credit on health and life insurance purchased for employees, as well as on telecommunications towers and pipelines laid outside factory premises.
It also recommended credit for free samples and for stock written off after expiry where the law requires the goods to be destroyed.
A committee of officers will examine the treatment of genuine buyers who hold valid invoices, have received goods and have paid suppliers in full. The committee is expected to submit its report within three months.
The Council also approved a simplified process for changes to GST registration and measures to ease registration for small suppliers using e-commerce platforms.
Tighter rules for vehicle inspections
The Council recommended that vehicles carrying goods should be stopped for inspection only on the basis of specific intelligence, with prior authorisation from an officer of at least Joint Commissioner rank.
Only the state where goods originate and the destination state would be permitted to inspect a vehicle carrying the consignment. States along the route would not be allowed to stop it.
The changes form part of a broader effort to reduce discretionary enforcement and shift GST administration towards digital, data-driven processes.
Sitharaman said the Central Board of Indirect Taxes and Customs was working to introduce centralised assessment for about 200,000 taxpayers operating across multiple jurisdictions under the Central GST system by April 1.
Of the approximately 6.95 million taxpayers registered exclusively under the central GST jurisdiction, about 200,000 fall under multiple jurisdictions within or across states.
The proposed system would provide these businesses with a unified window for central GST-related functions, she said.
The Council met more than a year after the previous major GST rate rationalisation. Sitharaman said revenue collections had remained stable and grown despite the rate changes, with collections becoming less dependent on festival periods.
The Council’s decisions represent a shift in the enforcement framework introduced when GST was launched in July 2017. Tax authorities would continue to assess and recover tax, interest and applicable penalties, while the proposed changes would reduce the scope for arrest in tax investigations.
