The Goods and Services Tax (GST) Council is preparing to introduce a new wave of reforms aimed at easing compliance and boosting efficiency for businesses across India. Expected to be approved at a meeting on October 8, these changes will focus on streamlining registrations, accelerating refunds, and simplifying input tax credit (ITC) processes.
Faster Refunds and Easier Registrations
A key proposal includes a drastically expedited refund process. Under the new system, refund applications would be acknowledged within 10 days, with 90% of the amount released after a risk assessment. The remaining balance would then be processed within seven days, bringing the total refund time down to approximately 17 days, a significant improvement over the current 21-45 day acknowledgement period.
GST registration is also slated for simplification. While 61% of taxpayers already receive registration within three working days, the process for others will be streamlined to minimize queries and rejections. Additionally, businesses that are closing down will find it easier to cancel their GST registrations, potentially eliminating the need for physical verification if tax liabilities are cleared and all returns filed.
Unlocking Input Tax Credit and Reducing Litigation
In a major relief for sectors like FMCG and exports, the Council plans to review and revise provisions governing blocked input tax credit. This could allow ITC on certain services and plant and machinery, thereby unlocking crucial working capital for many enterprises.
Specific areas under review for ITC eligibility include:
- Outdoor catering
- Health and life insurance
- Telecommunication towers
- Pipelines laid outside factory premises
- Free samples
- Goods destroyed on expiry (where mandated by law)
- Vehicles with seating capacity up to 13 persons (including their insurance, servicing, and upkeep)
- Leasing and hiring of vehicles
To curb litigation, the government intends to standardize notices, hearings, and orders, and establish a threshold below which notices would not be issued. Furthermore, proposals for decriminalizing certain GST offenses are being considered, potentially removing arrest provisions and shifting enforcement towards civil consequences like tax recovery, interest, and penalties.
Implementation Timeline
While the amendments are expected to be approved this week, their introduction will be gradual, with most changes anticipated to take effect from April 2027. Rate changes, however, are not on the agenda for this meeting and are expected to be considered annually, effective April 1 of each financial year, according to Finance Ministry sources.