New Delhi: The 57th GST Council on Thursday approved a series of next-generation reforms aimed at simplifying tax compliance, speeding up refunds and easing the burden on businesses, with Finance Minister Nirmala Sitharaman saying nearly 99 per cent of issues related to rates and processes had been addressed.
The Council approved removing the power of arrest under the Goods and Services Tax (GST) law and raising the prosecution threshold fivefold from Rs 1 crore to Rs 5 crore. It also recommended removing the minimum punishment, leaving the nature and extent of punishment, whether a fine or imprisonment or both, to judicial discretion.
The Council also decided to reduce the general penalty, applicable where no specific penalty is prescribed, from Rs 25,000 to Rs 10,000. No notices will be issued in cases involving amounts below Rs 10,000, Sitharaman said.
The recommendations are aimed at ensuring that taxpayers who file returns late, make mistakes or fall behind on payments face recovery, interest and proportionate penalties, without further punitive action, she said.
The Finance Minister said the government intends to introduce faceless tax assessment for taxpayers registered under the Central GST (CGST) system across multiple states. The framework has been finalised and will be put up for public consultation before the next Budget, with implementation planned during the 2027-28 financial year.
The Council decided that GST rate changes would be considered only once a year. No rate changes were approved at Thursday's meeting.
On refunds, the Council approved reducing the time for acknowledging claims from 15 days to 10 days. It also recommended that 90 per cent of eligible refund claims be sanctioned on a risk-assessment basis, with orders issued within three working days of acknowledgement.
The Council approved extending refunds under the inverted duty structure to input services, with the change applying to input tax credit (ITC) availed on or after November 1, 2026. It also approved changes to the refund calculation for tax paid on plant and machinery, to be implemented from April 1, 2027.
The Council recommended allowing ITC on GST paid for employee health and life insurance, as well as on certain telecom towers and pipelines outside factory premises. It also addressed ITC treatment for free samples and stock written off after expiry where the law requires destruction.
To make registration easier for small taxpayers selling through e-commerce platforms, the Council approved allowing sellers to declare a platform's warehouse in another state as their principal place of business, subject to the platform's consent. Sellers must still have a physical presence in at least one state, and the registration would be limited to supplies made through e-commerce operators.
The Council also recommended common standards for notices and proceedings, along with a unified tax framework for taxpayers operating under multiple CGST jurisdictions.
On movement of goods, vehicles may be stopped only on the basis of specific intelligence and with prior authorisation from an officer not below the rank of Joint Commissioner. Consignments crossing multiple states will be checked only at the point of origin and destination.
The Council agreed in principle to an annual filing scheme for taxpayers with turnover of up to Rs 5 crore who supply only to consumers. Under the proposal, they would file annual returns and pay tax quarterly. The detailed framework will be considered at the next meeting.
Sitharaman said the Council had largely addressed anomalies linked to input tax credit and inverted duty structures, leaving few fundamental issues relating to ease of doing business or rate anomalies outstanding.
“You can say GST next generation GST, 99 per cent issues have been addressed, rate or process,” she said.
The reforms, she added, had been driven by the principle of trust.
“Business has to be trusted. Taxpayers have to be trusted. And businesses among themselves, with trust, if they do it, we shouldn't be too intrusive,” she said.
The GST Council, comprising Union and state finance ministers, held its 57th meeting in New Delhi on Thursday.
(With inputs from PTI & other sources)