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Informist, Monday, Oct. 5, 2026

 

NEW DELHI – The GST Council will likely make a host of changes to processes in the goods and services tax structure Wednesday to support businesses and boost the ecosystem small enterprises operate in by simplifying refunds related to the inverted duty structure and supporting investment activities. The Council, in its upcoming 57th meeting here, also plans to remove the tax officials' power to arrest in relation to GST disputes such as fake invoicing and fake credit, according to a government official. 

 

When the GST was brought in, the power of arrest was one of the few tools available against fake invoicing. However, now the invoice matching system links what a seller reports with what a buyer claims, the official told Informist. The mapping of the input and output ledgers with the summary return completes that link, the official said, adding that GST disputes will now be resolved only through civil consequences – recovery of the tax, interest for the delay, and penalty.

 

Prosecution under the GST structure will remain available, but the provision will likely be reworked, another official said. The Council will weigh decriminalising 10 provisions, softening 24 and retaining 11 provisions under the law. The Council will also weigh raising the threshold for prosecution to INR 50 million from INR 10 million currently. This will reserve the criminal process for cases whose scale warrants it, the official said. "It keeps it away from the ordinary run of disputes about classification, valuation and credit, where a business and the department simply take different views of the same transaction."

 

Regarding refunds, the Council will likely take up easing refund processes for exporters of goods and services. The Council will likely widen the pool of recoverable GST under refunds, the first official said. For an exporter, this is money that was locked inside the tax system and will now be available as working capital, the official said. Exporters who claim duty drawback will also be equally eligible for a refund, and the cap that measured an exporter's claim against his domestic prices will likely be lifted, the official said. 

 

The Council will also discuss reducing GST litigation and setting a common standard for how GST demands are raised and decided, remove the smallest disputes from the system, and lower the cost of contesting a demand, the second official said. The same standard is proposed to be applied across central and state formations, on matters the courts have had occasion to address more than once. 

 

To add to this, the Central Board of Indirect Taxes and Customs is also working towards a centralised system for taxpayers in its jurisdiction. Under this, hearings and orders will be handled on one national platform rather than through individual formations, the official said. "A taxpayer operating in several States would then deal with one system instead of several offices, and the standard described above would be applied by the system itself rather than depending on the practice in each formation," the official said. "The work is at the design stage, and it is the direction in which Central administration of this tax is moving."

 

The Council will also likely remove the provision for GST notices to be issued when the amount at stake is below INR 10,000. "For a small business, a notice of this size costs more to answer in fees and time than the amount in dispute. Removing that category is a real relief, and it frees officers for matters of substance," the official said.

 

Reforms related to banking, insurance, and financial services have also made it to the Council's agenda, with one item reaching every employer in the country. The Council will likely consider allowing credit on health and life insurance. When a business provides insurance to an employee, the business pays tax on the insurance cover, and until now the business could not recover it. "That tax could now be recovered as a credit," the official said. "Almost every organised employer provides cover for its workforce, so the cost of providing it comes down, which should assist the spread of cover as well as the insurance industry itself," the official said. 

 

The Council, chaired by Finance Minister Nirmala Sitharaman, is mandated to meet once every three months, but this will be its first meeting in over a year. At its 56th meeting in September last year, the GST Council had reduced the number of GST slabs and cut rates to spur consumption.

 

According to a government official, the rate changes have "worked well for consumers, for industry, for revenue and for the economy" and the Council will not make more changes to rates as granting them would "unsettle a structure that has only just bedded down, and would invite the next set of requests (for rate changes)," the official said. However, the Council may give clarity regarding the classification of some items, and that may lead to changes in rates for a few items, effectively. The Council will work on removing the ambiguities around rates rather than reopening it, the official added.

 

Last year, Sitharaman had said the next leg of reforms for GST will be process reforms. "Together, these (the proposed) measures would go a long way in improving ease of doing business and delivering on GST's original promise," said Abhishek Jain, indirect tax head and partner, KPMG. As of Jun. 30, there were 16.71 million active GST taxpayers, with 3.9 million migrating from the pre-GST era.  End

 

Reported by Priyasmita Dutta

Edited by Deepshikha Bhardwaj

 

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