Sarwar Kawoosa | Onlykashmir.in News Desk
New Delhi: The 57th GST Council meeting, chaired by Union Finance and Corporate Affairs Minister Nirmala Sitharaman, was held in New Delhi, with the Council recommending a wide range of measures to make the GST system simpler, more transparent and increasingly automated. The meeting was attended by Chief Ministers, Deputy Chief Ministers, Finance Ministers and senior officials from various States and Union Territories, along with senior officials of the Ministry of Finance and CBIC.
The recommendations focused on GST registration, returns, refunds, ITC, dispute resolution, arrest and prosecution provisions, E-way Bill procedures, exports and measures to facilitate trade and reduce compliance burdens.
Easier GST Registration
The Council recommended comprehensive guidelines and FAQs specifying the documents and information required for GST registration. The GST REG-01 application is proposed to include options for selecting prescribed documents, while the GST portal will be made more user-friendly through clearer navigation, drop-down menus and contextual guidance. The measures aim to reduce rejection of applications and unnecessary queries arising from incomplete or incorrect information.
The amendment process will also be simplified. Amendments to most registration particulars, except those relating to the Principal Place of Business, are proposed to be accepted automatically. For taxpayers registered under the automatic route, amendments including those relating to the Principal Place of Business would also be accepted automatically.
The Council also recommended a more automated cancellation mechanism. In specified cases, cancellation applications may be approved automatically once pending returns are filed and outstanding dues are paid.
Relief for Small E-commerce Sellers
Small suppliers selling goods through Electronic Commerce Operators in States or Union Territories where they have no physical presence will be provided a simplified GST registration mechanism. Subject to specified conditions, the warehouse of an ECO may be declared as the Principal Place of Business, allowing registration through an automated process.
Reforms in Returns and ITC
The Council recommended improvements in GSTR-1, GSTR-1A and IFF to improve reconciliation between reported liabilities and the GSTR-3B return.
Electronic statements are proposed for reporting tax paid under Reverse Charge and ITC claimed. The Invoice Management System will allow recipients to accept, reject or keep documents pending on the portal. A separate electronic statement for ITC reversal and reclaim has also been proposed.
The proposed alternative mechanism for correcting tax liabilities and ITC is recommended to come into force from the April 2027 return.
Faster and Automated Refunds
The Council recommended system-based processing and sanctioning of refunds. Full refunds of excess balances in the electronic cash ledger may be sanctioned automatically without officer intervention.
The period for issuing an acknowledgement or deficiency memo is proposed to be reduced from 15 days to 10 days. For zero-rated supplies and inverted duty structure claims, 90% of the claimed amount may be sanctioned provisionally through an automated, risk-based system.
The refund application will also be modified to capture information in a system-readable format, with the requirement of uploading scanned documents proposed to be removed for certain refund claims.
Dispute Resolution and Penalties
The Council recommended comprehensive guidelines for issuing demand notices, adjudication orders and appeal orders, with emphasis on timely action, quality of orders and adherence to principles of natural justice.
No show-cause notice would be issued where the tax amount involved is below ₹10,000. In non-fraud cases, a reduced penalty of 5% has been proposed where tax and interest are paid within the specified period. The maximum general penalty is also proposed to be reduced from ₹25,000 to ₹10,000.
For cases involving only penalties and no tax demand, the Council recommended an upper limit of ₹40 crore on the pre-deposit required for filing an appeal.
Expansion of ITC Benefits
The Council recommended removing certain restrictions on ITC, including those relating to outdoor catering, health and life insurance, telecommunication towers, pipelines outside factory premises, free samples and goods destroyed or written off as required by law.
Refund of accumulated ITC on capital goods and certain input services has also been proposed for zero-rated supplies and inverted duty structure cases. Refund of ITC on capital goods would be spread over 60 months and would apply to ITC availed on capital goods from April 1, 2027.
Boost to Exports
Changes have been proposed in the rules governing export of services to facilitate export benefits for Indian service providers dealing with foreign offices or branches. The Council also recommended clarification regarding receipt of export payments in foreign exchange or in Indian rupees wherever permitted by RBI.
Changes in GST Arrest and Prosecution Provisions
One of the major recommendations concerns arrest powers under GST. The Council recommended omission of Section 69 of the CGST Act, effectively withdrawing arrest powers under GST.
The monetary threshold for prosecution is proposed to be increased from ₹1 crore to ₹5 crore, while certain offences and their corresponding punishments would also be rationalised.
Changes in E-way Bill Procedures
The Council recommended that a conveyance carrying goods should be intercepted only on the basis of specific intelligence and with authorisation from an officer not below the rank of Joint Commissioner.
Interception would generally not be permitted in transit States. However, goods may still be inspected, detained or seized where no E-way Bill has been generated or where required documents showing the origin or destination of goods are unavailable.
Relief for Small Taxpayers
Taxpayers with annual turnover of up to ₹5 crore in the preceding financial year would receive relief from late fees on certain delayed returns, subject to filing within the prescribed period.
The Council also approved in principle an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with turnover up to ₹5 crore who exclusively make B2C supplies.
Wider E-invoicing Coverage
The Council recommended extending E-invoicing to domestic supplies received from unregistered persons where tax is payable under Reverse Charge, as well as to import of services, for taxpayers with annual turnover of ₹5 crore or more.
Clarifications on Goods
The Council recommended clarifications on the classification of sublimation paper, GST treatment of toys, seaweed-based bio-stimulants, ITC for second-hand vehicle dealers and the taxation of plastic, electrical and electronic waste, tyre waste and used cooking oil.
Psyllium or Isabgol seeds would attract NIL GST, while the GST treatment of re-treaded tractor tyres would be aligned with that applicable to new tractor tyres.
Major Measures for Services
A 5% GST option, with restricted ITC, has been proposed for passenger transport and rental services involving Electric Vehicles. Certain delivery services supplied through e-commerce platforms would also attract 5% GST without ITC.
Limited ITC has been proposed for specified restaurant and outdoor catering, hotel accommodation, gym and fitness services.
Passenger transport by helicopter on a seat-sharing basis from or to airports and helipads in the North-Eastern States, Sikkim and Bagdogra has been proposed for GST exemption. Storage or warehousing of seeds meant for sowing and certain agricultural services relating to coffee curing have also been proposed for exemption.
For Research and Development services, a simplified self-certification mechanism by the head of the institution or organisation has been proposed. Certain import-of-services transactions involving Indian establishments of foreign shipping companies would also be exempted.
GST treatment of concession rights and certain operation and maintenance services under the NHAI Toll Operate Transfer model for highway projects has also been proposed for simplification.
Overall Impact
The recommendations of the 57th GST Council seek to make the GST regime simpler, more automated, transparent and taxpayer-friendly. Faster refunds, easier registration and cancellation, improved ITC management, relief for small businesses, changes in prosecution provisions and streamlined E-way Bill procedures are among the key measures.
However, these are currently recommendations of the GST Council. They will acquire legal force only after the necessary amendments to the relevant CGST and IGST laws, rules, notifications and circulars are issued.
