IndiaPosted at: Oct 8 2026 6:40PM


GST Council clears major process reforms: Faster refunds, easier registration, fewer checks

New Delhi, Oct 8 (UNI) The 57th GST Council meeting has approved a wide-ranging set of process and compliance reforms aimed at making the Goods and Services Tax (GST) regime easier for businesses and taxpayers, while reducing physical interaction with tax officials.
The reforms come a year after the government introduced the two-rate GST structure. The Council has now shifted its attention from tax rates to the functioning of the GST system, covering registration, refunds, input tax credit, litigation, enforcement and e-commerce.
According to the government, taxable supplies have increased 25.8 per cent to Rs 50.58 lakh crore per month, from Rs 40.19 lakh crore, while supplies reported to consumers have risen 26.7 pc to Rs 7.58 lakh crore. At the same time, the effective tax rate on domestic supplies has declined to 13.13 pc from 14.55 pc.
GST refunds to become faster and more automated: One of the key decisions relates to the GST refund mechanism.
The time available for tax authorities to acknowledge a refund application will be reduced from 15 days to 10 days. If no acknowledgement or deficiency memo is issued during this period, the application will automatically be considered acknowledged.
Under the proposed system, the GST portal will sanction 90 per cent of the refund amount based on risk assessment, reducing the need for officer intervention. Once a claim is acknowledged, the refund order will have to be issued within three working days, compared with seven days currently.
Refunds of excess money lying in the electronic cash ledger will also be made fully automatic.
The changes could provide a significant working-capital benefit to exporters and businesses operating under an inverted duty structure. Around 65 per cent of GST refund claims are linked to exports or inverted rates, while another 19 per cent relate to excess cash ledger balances.
GST registration process to become more automated: The Council has also proposed changes to simplify GST registration.
Currently, low-risk applicants can obtain registration through an automated process within three working days. This route accounts for around 61 per cent of registrations.
The registration application will be redesigned so that taxpayers see only the fields relevant to their business, along with explanations about why particular documents are required.
Several routine amendments, including changes involving trade names, directors or partners and additional places of business, will also be processed automatically.
These categories accounted for 65.45 per cent of the 16.73 lakh registration amendment applications filed between November 2025 and September 2026.
More input tax credit for businesses: The Council has proposed widening the scope of input tax credit (ITC) in several areas.
Businesses will be allowed to claim ITC on health and life insurance policies taken for employees, telecommunications towers, and pipelines installed outside factory premises.
Credit will also be permitted on free samples and on inventory written off because of expiry, where the law requires those goods to be destroyed.
The Council has also proposed measures to prevent taxation at multiple stages in certain business-to-business service arrangements. Hotel accommodation costing up to ₹7,500 per night booked through an agent, along with restaurant, catering and passenger transport services, would be taxed only once under the proposed framework.
Inverted duty refund rules expanded: Manufacturers and exporters could also benefit from a major change to the inverted duty structure.
At present, refunds under the mechanism are restricted largely to credit relating to goods inputs. Under the proposed changes, input services will also qualify for refunds for credit availed from November 1, 2026.
The Council has also proposed removing the exclusion of plant and machinery from the refund mechanism.
For credit availed from April 1, 2027, refunds relating to plant and machinery would be calculated at one-sixtieth of the eligible credit for every month, corresponding to the asset's prescribed working life.
The government expects the changes to improve cash flows for sectors such as pharmaceuticals and FMCG, where inverted duty structures can lock up working capital.
Small consumer-facing businesses may get an annual return option: Small taxpayers could get a simpler compliance route under another proposal.
Businesses with annual turnover of up to ₹5 crore that make only consumer-facing supplies may be allowed to file their GST return once a year while paying tax on a quarterly basis.
The government estimates that 16.85 lakh of the 1.05 crore active GST taxpayers deal exclusively in consumer supplies. Around 99 pc of these taxpayers have turnover below Rs 5 crore and together account for less than 1pc of GST liability.
The detailed framework and necessary legal changes will be taken up at the next GST Council meeting.
GST checks on goods in transit to face tighter rules: The Council has proposed limiting physical inspections of goods being transported across states.
Under the new framework, a vehicle could be stopped only when there is specific intelligence, and prior authorisation from an officer of at least the rank of Joint Commissioner would be required.
Only the origin and destination states would be allowed to conduct physical inspections. States through which the goods are merely passing would not be permitted to stop the vehicle for inspection.
This could significantly reduce delays for interstate consignments. For example, a shipment travelling through five states could previously face checks at multiple points. Under the proposed framework, inspections would be concentrated at the beginning and end of the journey.
GST arrest power proposed to be removed: The Council has also proposed significant changes to GST enforcement.
The power of arrest under GST would be removed, while the monetary threshold for prosecution would be increased from Rs 1 crore to Rs 5 crore.
The mandatory minimum punishment would also be removed, leaving the decision on whether to impose a fine, imprisonment or both to judicial discretion.
The general penalty applicable in cases where no specific penalty has been prescribed would be reduced from Rs 25,000 to Rs 10,000.
The government said improvements in GST data analytics have made it possible to match invoices issued by sellers with those reported by buyers and identify fraudulent input tax credit closer to the point at which it is generated.
Services exporters get relief: The Council has proposed changes aimed at making India's services exports more competitive.
An Indian company providing services to an overseas customer through its own foreign branch would be eligible for export benefits, with the existing restriction preventing such treatment proposed to be removed.
The change could benefit businesses such as analytics companies, design firms, engineering consultancies and global companies operating through Indian offices.
Services performed in India on goods owned by overseas customers—including testing, repairs, certification, research and processing — would also qualify as exports of services even when the goods remain within India.
New GST route for small e-commerce sellers: Small sellers operating through e-commerce platforms could also get an easier route to establish a place of business in another state.
Under the proposed mechanism, a seller could declare an e-commerce operator's warehouse in another state as its principal place of business, provided the operator gives consent through the GST system.
The seller would still need to maintain a physical presence in at least one state, which would remain its home state. The additional registration would be restricted to supplies made through e-commerce platforms.
The Council also wants to bring greater consistency to taxation across different e-commerce business models, with GST treatment linked to the actual service supplied rather than the contractual arrangement used by the platform.
No GST rate changes at 57th meeting: Unlike the previous major GST exercise, the 57th GST Council meeting did not announce any changes to GST rates.
Going forward, rate-related decisions are expected to be considered once a year at a meeting dedicated specifically to taxation rates.
The latest meeting instead focused on addressing operational gaps and ambiguities that remained after last year's GST 2.0 changes.
UNI VK RSA
Tags: #GST Council clears major process reforms: Faster refunds# easier registration# fewer checks
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