India

GST Council Approves Major Procedural Reforms, Keeps Rates Unchanged

By Banikinkar Pattanayak, Dhirendra Kumar, Vijay C Roy

The Goods and Services Tax (GST) Council, chaired by Union Finance Minister Nirmala Sitharaman, approved a significant overhaul of the indirect tax regime on Thursday, while leaving tax rates unchanged to maintain stability. The council’s decisions, debated for months, aim to expand and speed up refunds, reduce the power of officers to arrest suspected evaders, shift verification to system‑driven risk rules, and provide greater certainty for day‑to‑day compliance.

Key measures include: - Establishing an officers’ committee to consider allowing honest buyers credit when suppliers default. The committee will report in three months, with implementation planned for April next year. - Broadening the refund mechanism to cover GST paid on input services such as factory rent, consultancy fees, and logistics, as well as on plant and machinery, spread over five years. Refund claims will be acknowledged within 10 days, and 90% of exporter and inverted‑duty claims will be released automatically within three days after a risk check. - Raising the prosecution threshold for duty evasion to ₹5 crore from ₹1 crore and reducing the general penalty to ₹10 000 from ₹25 000. - Standardising GST notices and proceedings across the country. - Limiting checks to the state of origin or destination, allowing only intelligence‑based and authorised interceptions. - Relaxing export benefit conditions: firms billing or receiving payment through their own overseas branch will qualify as exports, and the requirement that supplier and recipient not be establishments of the same person has been removed. - Job work on foreign‑owned goods will be treated as export if the customer is abroad, even if goods remain in India. - Automating GST registration under Rule 14A to be completed in three working days, and streamlining deregistration by removing the need for an officer visit when taxes are paid and no probe is pending. - Applying a ₹10 000 minimum threshold for show‑cause notices under Sections 73, 74 and 74A.

Bipin Sapra, Partner and Indirect Tax Policy Leader at EY India, said the reforms restore GST’s promise of seamless credit by extending refunds to input services and capital goods.

Jharkhand Finance Minister Radha Krishna Kishore proposed keeping coal outside GST and allowing states to levy VAT on it, arguing that GST on coal is passed on to consuming states under the destination principle, depriving Jharkhand of revenue needed to address resource depletion and environmental costs.

Punjab Finance Minister Harpal Singh Cheema supported the reforms and called for a common AI‑based enforcement architecture, integrating tax, vehicle and movement data to provide risk intelligence to central and state officers.

The council’s decisions come as India seeks sustained private investment growth, faces export challenges due to the West Asia war, and realigns global supply chains. The reforms aim to reduce costs, ease liquidity pressures and simplify compliance for businesses, supporting manufacturing and the principle of a single national market.