- GST Council targets system overhaul to simplify processes by 2027.
- Refund processing speeds up; input tax credit expands significantly.
- Automation drives compliance, faster registration, reduces manual intervention.
Having spent the past year rewriting GST’s rate structure, the GST Council is now turning its attention to the system’s plumbing, refunds, registrations and enforcement. The Council’s 57th meeting, scheduled for October 7, is expected to take up a package of measures aimed at speeding up tax refunds, widening input-tax credit, pushing compliance towards automation, and drawing more small businesses into the formal supply chain.
If approved, the changes would roll out in phases through 2027, with proposals ranging from faster refund processing to the removal of arrest powers from GST law altogether.
A Year After Rate Cuts, GST Council Turns to Processes
GST 2.0 was first unveiled in September 2025, following Prime Minister Narendra Modi’s Independence Day announcement a month earlier. That phase replaced the tax’s multi-rate, complex structure with a simpler two-rate system of 5% and 18%, alongside a special 40% rate for demerit and sin goods.
A senior government official framed the shift in priorities this way: “Having touched the rates and seen their stabilisation over the last 12 months, we hope that, with the system and processes now being simplified and reformed, the entire next-generation GST will see stability over the next five years or more.” The aim, the official added, is a trust-based framework similar to the one already in place for direct taxes, reported The Financial Express.
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GST Refund Rules Set for Major Overhaul
Refunds would extend to a broader range of services as well as plant and machinery, on top of the credit already available for raw materials. Tax paid on equipment could be recovered over five years, matching the asset’s useful life, a change meant to ease upfront project costs and free up working capital.
Small businesses with annual turnover up to Rs 5 crore, selling exclusively to GST-unregistered consumers, could get the option of a single annual return with quarterly tax payments, a step beyond the current quarterly-return, monthly-payment norm. Since their customers cannot claim input-tax credit, officials see little need for more frequent filing in such cases.
Refund processing itself is being redesigned around government-held data rather than manually submitted paperwork, with acknowledgements due within 10 days; claims left unactioned past that window would be deemed acknowledged, the report said. Exporters and businesses hit by inverted duty structures could receive 90% of eligible refunds upfront based on risk assessment, while balances sitting in electronic cash ledgers could be returned without a separate application. Show-cause notices would be restricted to cases where the tax demand exceeds Rs 10,000.
Exporters claiming duty drawback would become eligible for refunds too, with the cap linked to domestic prices scrapped. Interest on delayed refunds would start accruing from the date a refund is withheld, and the Rs 1,000 minimum threshold would be calculated across combined tax heads, Central and State GST together, letting businesses recover smaller sums that currently go unclaimed.
Input-Tax Credit to Cover Insurance, Vehicles, Telecom Towers
Genuine buyers would retain their input-tax credit even if a supplier further up the chain defaults, provided they weren’t party to any fraud. Eligibility would extend to health and life insurance, vehicles with up to 13 seats, telecom towers, pipelines, samples and expired goods, as well as services taxed at 5%, hotel stays up to Rs 7,500, restaurants and fitness services among them.
A handful of anomalies are also set to be ironed out. Overseas branches, for instance, would no longer count against export status, letting Indian service exporters quote prices without embedded domestic tax.
GST Registration, Return Filing Set for Automation
Eligible businesses can already secure GST registration within three working days without officer intervention, a route that currently covers 61% of registrations. Those who don’t qualify for this fast-track process would instead see the system auto-populate information already held by the government and flag upfront what further documents are needed.
Under the proposed Rule 14A, taxpayers opting for the fast-track route who don’t intend to claim more than Rs 2.5 lakh of input-tax credit a month would get automatic registration within three working days, with no manual sign-off required.
Procedural suspensions could lift on their own once compliance is restored within a month, and cancelled registrations could be reinstated once the underlying lapse is fixed, changes officials say would cut waiting times and the need for professional follow-up.
On returns, invoice-level matching and corrections made through sales statements are meant to keep seller filings and buyers’ credit claims aligned, reducing the routine mismatches that, sources noted, currently generate more than 95,000 notices a year.
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No More Arrests Under GST
Perhaps the sharpest shift is in enforcement. As invoice-matching and data systems get better at flagging fraud, the Council is expected to move GST enforcement away from criminal prosecution and towards proportionate civil penalties, with arrest provisions proposed to be scrapped entirely.
Prosecution would be reserved for only the most serious cases, with the threshold raised from Rs 1 crore to Rs 5 crore. Of the current list of offences, nine would be dropped, 24 softened and 11 retained, alongside cuts to minimum sentences and certain penalties. The changes require amendments to the GST Acts, which could be carried out over the coming weeks, with rollout expected in early 2027.
A second official summed up the intent: “The objective is to simplify the process, reduce the burden, and decriminalise wherever possible. The larger principle is to make compliance simpler and fairer.”
The scale of the process overhaul doesn’t extend to rates themselves, which are expected to remain unchanged, preserving last year’s two-rate structure and giving businesses continued certainty on pricing and compliance. Attention instead turns to clarifications, exemptions and classification questions across sectors including electric vehicles, research, warehousing, co-lending and bullion.
Beyond GST Council: A Faceless Tax System Takes Shape
Separately, the Centre is building a centralised system for assessment, adjudication and related proceedings, with the eventual goal of a faceless process for registered taxpayers.
Of the roughly 6.5-6.6 million GST registrations currently in place, 6-6.2 million are held by businesses with a single central registration, while 0.3-0.35 million span multiple locations, around 80,000 of them across multiple states. This latter group would also be folded into the centralised system, though the government is still working out how to divide cases across jurisdictions without creating bottlenecks.
Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: abplive.com
