The upcoming GST Council meeting on October 8 aims to shift its focus towards simplifying the system rather than adjusting tax rates. The 57th meeting is set to take place at Bharat Mandapam in New Delhi, following a rescheduling from its original date of October 7. While the formal agenda has not yet been released, it is anticipated that various proposals related to process improvements will be discussed.

Finance Minister Nirmala Sitharaman previously indicated a shift in priorities towards the “process” aspects of GST 2.0. During her remarks at an event by the International Tax Research and Analysis Foundation (ITRAF), she highlighted specific issues including e-invoicing and input tax credit (ITC). This move comes after a previous exercise aimed at rationalising tax rates in September 2025.

Unlike last month’s focus on rate adjustments, the government is now prioritising measures to enhance compliance and minimise disputes, potentially easing the burden on taxpayers.

Proposals for Enhanced Refund Mechanisms

One key proposal anticipated for discussion is the introduction of a broader refund mechanism for businesses facing issues related to inverted duty structures. Currently, there are instances where the GST paid on inputs is higher than the rate applicable on final products, leading to an accumulation of ITC. The Council may consider enabling refunds for such accumulated credits related to both input services and capital goods.

These changes could potentially be phased in, with refunds for input services possibly being implemented this financial year, while those concerning capital goods may be postponed until April 2027. These adjustments could provide businesses with access to funds that are currently tied up in unutilised credits.

Furthermore, the government is contemplating streamlining the GST registration process for small businesses operating through e-commerce platforms. This would leverage technology and artificial intelligence to make the registration less cumbersome for smaller sellers.

Review of Criminal Provisions in GST Law

Another significant topic on the agenda may involve revisiting the criminal provisions within the GST framework. The Council is expected to discuss changes that could potentially limit the authority of GST officials to arrest taxpayers in non-serious cases while still maintaining the ability to prosecute for deliberate fraud and other grave offences. Implementing such alterations would necessitate amendments to the existing GST law, thereby requiring Parliamentary approval.

Jitendra Motwani, Partner at Trilegal, remarked that these prospective adaptations stand to positively influence the treatment of honest taxpayers. By decriminalising routine disputes surrounding ITC and classification, taxpayers could be regarded as partners in the system rather than suspects.

Additionally, the discussions may extend to export-related provisions, especially concerning the treatment of services rendered through international branches of Indian companies. This is a pertinent area that has led to disputes in various sectors, including technology and business-process outsourcing.

Prospective ITC and Registration Reforms

Among the proposals under consideration is the introduction of an optional annual return system coupled with quarterly tax payments for businesses with an annual turnover of up to Rs 5 crore that primarily serve unregistered customers. This would aim to alleviate the compliance demands for smaller enterprises while not altering the collection method for taxes.

CA Mandar Telang, Vice President of the Bombay Chartered Accountants Society (BCAS), urged that the focus should expand beyond mere procedural changes, suggesting remedies for structural issues within GST administration. He advocated for not withholding ITC for genuine transactions marred by minor clerical errors in supplier returns.

Telang also proposed a more horizontal approach to GST registration, advocating for a centralised registration system for businesses operating in multiple states, which would allow for unused ITC transfers among state registrations within the same entity. His concerns include the compulsory reversal of ITC when payments are delayed and the need for a time-efficient process to restore canceled GST registrations.

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