The 57th meeting of the Goods and Services Tax (GST) Council, chaired by Finance Minister Nirmala Sitharaman, on Thursday retained the existing GST rate structure while announcing a wide-ranging set of reforms aimed at simplifying compliance, speeding up refunds and registrations, expanding input tax credit (ITC) relief and reducing litigation risks for businesses.
Rather than making changes to GST rates, the Council has shifted its focus towards improving the day-to-day functioning of the tax system.
The Finance Ministry said GST rate changes will now be considered once a year, signalling a move towards greater stability and predictability for businesses.
One of the major decisions relates to GST registration. The Council has proposed further automation of the registration and amendment process, with low-risk applications expected to receive automatic approval within three working days.
Around 61 per cent of GST registrations are already being approved within three working days without officer intervention, while nearly 66 per cent of amendment applications are proposed to be processed automatically.
Registrations suspended due to procedural lapses could also be restored automatically once the issue is corrected, while the process for cancelling registrations after business closure is proposed to be simplified.
The Council has also moved to make the GST refund process faster. The timeline for acknowledging refund applications has been reduced from 15 days to 10 days, while around 90 per cent of refund claims are expected to be sanctioned through a system-based risk assessment. Refunds from the cash ledger will also be made fully automatic, reducing the need for manual intervention.
Input Tax Credit rules are another major area of reform. The Council has expanded ITC relief to cover GST paid on employee health and life insurance in eligible cases.
Relief has also been extended to telecom towers and pipelines located outside factory premises, as well as free samples and certain expired stocks that have to be destroyed.
At the same time, the Council has asked a Committee of Officers to examine safeguards for genuine buyers who could lose ITC because of a supplier’s tax default or fraud.
The committee will study cases where buyers possess valid invoices, have received the goods and have made full payment to their suppliers. It is expected to submit its report within three months.
The Council has also approved changes relating to refunds under the inverted duty structure. Refund of input services under the inverted duty structure will be allowed from November 1, 2026.
A similar facility for plant and machinery is proposed from April 1, 2027, with the adjustment to be spread over a period of 60 months.
The meeting also brought significant changes to GST enforcement and prosecution provisions. GST officers’ powers of arrest have been proposed to be revoked, while the threshold for launching prosecution has been increased from Rs 1 crore to Rs 5 crore.
The minimum punishment for offences has also been removed, leaving courts to decide whether a fine, imprisonment or both should be imposed.
The general penalty applicable in cases where no specific penalty is prescribed has been reduced to Rs 10,000 from Rs 25,000. The Council has further proposed common standards for GST notices and proceedings. No notices will be issued for monetary amounts of Rs 10,000 or below, and pending notices below the threshold will also be withdrawn.
