The GST Council on Thursday cleared a major set of changes to GST administration, including ending the power of GST officers to arrest taxpayers, increasing the criminal prosecution threshold to ₹5 crore, reducing the general penalty to ₹10,000 and speeding up refunds for most claims.
The Council also approved simpler registration for small suppliers operating through e-commerce platforms, an easier mechanism for modifying registration details and a ₹10,000 threshold for issuing GST notices. It also decided to set up a Committee of Officers to look into the move towards invoice matching for input tax credit claims.
The committee is expected to submit its findings within three months and will consider safeguards for genuine buyers who possess valid invoices, have received the goods and have made full payment to their suppliers.
The process-related changes are scheduled to come into force on April 1, 2027. Speaking to reporters after the 57th Finance Minister Nirmala Sitharaman said GST 2.0 process reforms were based on the idea of greater trust and formed part of Prime Ministers ‘Reform Express’.
“Business has to be trusted. Taxpayers have to be trusted. And businesses among themselves with trust if they do it, we shouldn’t be too intrusive…In GST next gen reform, 99 per cent issues have been addressed, (both in) rate or process,” Sitharaman said.
Faster GST refunds
The Council agreed to shorten the timeline for acknowledging refund applications, bringing it down from 15 days to 10 days.
Where neither an acknowledgement nor a deficiency memo is issued within that period, the application will automatically be considered acknowledged. Sitharaman said risk-based processing is expected to enable the system to clear 90 per cent of claims within three working days after acknowledgement.
“So, refunds will become automatic and enhance working capital for businesses,” said.
Optional scheme for small businesses
The Council cleared a concept note for an optional arrangement for businesses with turnover of up to ₹5 crore that sell exclusively to consumers.
Under the proposed mechanism, these businesses would submit a single annual return while paying their taxes every quarter. The detailed framework will be placed before the Council for consideration at its next meeting.
Input tax credit changes
The Council recommended extending input tax credit to health and life insurance policies purchased for employees. ITC would also be available for telecommunication towers and pipelines installed outside factory premises.
The recommendations also cover input credit for free samples and goods written off after their shelf life expires, where destruction is mandated under law.
Rules for goods in transit
For goods being transported, the Council recommended that vehicles should be stopped only when there is specific intelligence indicating a need for inspection.
Any decision to stop a vehicle would require prior approval from an officer of at least the rank of Joint Commissioner.
Inspection would be restricted to the state from which the goods originated and the destination state. States through which the goods are merely passing would not be permitted to stop the conveyance.
Centralised GST administration
Sitharaman said the CBIC is preparing a centralised assessment mechanism for nearly 2 lakh taxpayers who fall under central GST jurisdiction but conduct business across multiple states.
There are currently around 69.5 lakh taxpayers exclusively under CGST jurisdiction, with about 2 lakh falling under multiple CGST jurisdictions either within the same state or across different states.
“Going forward, we intend to bring a centralised tax administration for these multiple CGST jurisdiction taxpayers with a unified window for all their CGST-related functions,” she said.
Sitharaman said the next-generation GST process reforms could take around a year to stabilise. She said the changes are expected to make it easier for businesses to comply while maintaining stable revenue for both the Centre and states.
She also said the tax rate cut introduced last year had not led to a decline in revenue, with collections continuing to rise steadily and becoming less reliant on festival-period months.
(With inputs from PTI)