GST Council Turns Focus to Faster Refunds and Easier Compliance; Major Rate Changes Unlikely

The GST Council is meeting in New Delhi on Thursday with a different kind of tax reform on its agenda. 

Instead of another round of sweeping rate changes, the 57th meeting is expected to focus on the everyday workings of GST how quickly businesses receive refunds, how input tax credit is handled, how long registration takes and when tax disputes should turn into criminal proceedings. 

No major change in GST rates is expected at the October 8 meeting, barring a limited number of clarifications or rationalisation issues. 

The broader aim is to make the nine-year-old tax system easier to navigate for businesses while reducing some of the delays and disputes that have become part of GST compliance. 

Faster Refunds Could Be a Major Focus 

One of the biggest proposals on the table concerns refunds. 

GST refund claims currently take about 25 days on average to process. The proposed framework could shorten that wait considerably. 

Applications could be acknowledged within 10 days, while 90% of eligible refunds may be released after a risk-based check rather than waiting for the entire verification process to finish. 

There is also a proposal to make the process more automatic. Information could be pulled directly from customs and banking systems, reducing the need for businesses to repeatedly submit supporting documents. 

The refund framework could also be widened to cover areas such as services and plant and machinery. 

Relief Proposed for Buyers on Input Tax Credit 

Input tax credit, an area that has frequently led to disputes, is also likely to receive attention. 

One proposal could protect genuine buyers when a supplier further up the chain fails to meet its tax obligations. 

Under the proposed approach, a buyer who has a valid invoice, has actually received the goods and has paid the supplier in full — including the tax amount — could be allowed to retain the credit despite a default elsewhere in the supply chain. 

The Council may also consider widening the expenses on which businesses can claim input tax credit. 

The changes, if approved, could reduce situations where compliant businesses lose credit because of actions over which they have little control. 

GST Arrest Powers May Come Up for Discussion 

Another significant proposal concerns enforcement. 

The Council may discuss removing arrest provisions under the GST law and relying more heavily on civil consequences such as recovery of unpaid tax, interest and penalties. 

That does not mean serious cases would escape prosecution. Criminal proceedings could continue where warranted. 

A separate proposal seeks to raise the threshold for prosecution from ₹1 crore to ₹5 crore. 

The issue, however, could see debate within the Council. At least five states — Maharashtra, Gujarat, Uttar Pradesh, Karnataka and Andhra Pradesh — have opposed the proposal to remove arrest powers, according to a report published while Thursday’s meeting was underway. 

Smaller Taxpayers Could See Simpler Processes 

The reform package also contains measures aimed at making routine compliance less cumbersome. 

Smaller taxpayers could receive relief through possible waivers of late fees for delayed returns, rationalisation of general penalties and faster registration for eligible applicants. 

Registration itself is another area where the government is looking to reduce delays. 

The idea running through many of these proposals is similar: routine GST processes should require less manual intervention and fewer repeated interactions with tax authorities. 

GST Rate Changes Could Become an Annual Exercise 

The Council is also expected to discuss a more predictable approach to future tax-rate changes. 

Instead of rates being reconsidered frequently, changes could eventually be taken up once a year and implemented from April 1. 

That would give businesses more time to prepare their pricing, accounting and technology systems whenever rates change. 

The proposal follows last year’s restructuring of GST into two principal slabs of 5% and 18%, with a 40% rate applying to a limited set of luxury and sin goods. 

This Meeting Is More About How GST Works 

Thursday’s meeting is therefore shaping up very differently from GST Council meetings dominated by questions over which products become cheaper or more expensive. 

This time, the bigger questions sit behind the tax rates themselves. 

How quickly can a business get its money back? Can a genuine buyer lose tax credit because another company defaults? How easily can a small business register? And at what point should a tax violation become a criminal matter? 

The proposals being discussed could change the answers to several of those questions. 

But they remain proposals for now. The final shape of the reforms will depend on what the GST Council approves at the conclusion of its meeting.