GST Council to focus on auto refunds, swifter ITC, fewer notices

NEW DELHI: The Goods and Services Tax (GST) Council is set to push through a major ease-of-doing-business reset on October 8, with the government proposing automatic registrations and refunds, wider and swifter input-tax credits, fewer tax notices and a sharp reduction in criminal provisions, while leaving the current rate structure untouched, a senior official said.

The government is preparing to transition the GST regime toward a trust-based tax administration. This shift includes introducing sweeping decriminalisation for tax offenses, suggesting fewer notices for invoice mismatches and doing away with arrests without evidence or prior to prosecution, aiming for “enforcement to work through money rather than custody”.

The council will also discuss allowing e-commerce sellers to be verified just once in their home state to sell nationwide, eliminating the need to establish a physical registered place of business in every state where they operate.

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Additionally, future rate changes will only be considered once a year and will take effect on April 1. The official added that a fixed annual window will allow businesses to price long-term contracts and plan capital expenditure without the uncertainty of mid-year tax changes.

The proposal suggests unblocking input-tax credits and introducing a 90% risk-based refund system. It also aims to slash the average registration time to three days and allow compliant taxpayers who have filed all returns and paid their taxes to voluntarily cancel their registrations immediately.

Simultaneously, the Centre is working on faceless GST, which may take a “few more months”.

The changes would be implemented in phases through 2027, allowing businesses enough time to prepare.

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“Some states may object to the proposal as they may take it as officials losing power to arrest. However, there is no arrest provision in any other tax law, except excise, and even states may see virtue in a trust-based taxed administration,” another official said.

The council is meeting a year after the rate rationalisation.

The official assessment is that the new structure has worked without the feared revenue shock. Between October 2025 and July this year, taxable supplies increased 25.8% year-on-year, business-to-consumer supplies grew 26.7% and the gross tax liability went up 13.6%, the official said.

The effective tax rate on domestic taxable supply has fallen to 13.13% from 14.55%, while revenue remained positive through all 12 months, with growth accelerating over the past four months.

“This has strengthened the case for moving the GST into a period of rate stability,’ the second official added.

The council is also looking to remove differences in GST treatment arising from different platform business models.

The government also proposes to bring ordinary business costs-which are currently excluded-back into the credit line to prevent a service from being taxed twice when resold within the same line of business.