GST Council Reforms: Refunds Made Easier, Arrest Powers Curtailed

The 57th GST Council meeting approved a series of reforms to simplify GST compliance, speed up refunds, reduce litigation and ease the burden on small taxpayers.The Council also recommended removing GST officers’ arrest powers, raising the prosecution threshold and introducing greater certainty in GST rate changes.

GST Rates

• No GST rates were changed at the meeting.
• Future GST rate revisions will normally be considered only once a year and implemented from the beginning of the next financial year.
• The move aims to provide greater tax certainty and predictability.

Arrest and Prosecution Powers

• The Council recommended scrapping the power of GST officers to arrest taxpayers.
• The prosecution threshold is proposed to be raised from ₹1 crore to ₹5 crore.
• The general penalty is proposed to be reduced from ₹25,000 to ₹10,000.

Easier GST Refunds

• Refund applications are proposed to be acknowledged within 10 days, instead of the present 15 days.
• Based on risk assessment, about 90% of eligible refund claims are expected to be released within three working days of acknowledgement.
• The objective is to improve cash flow and reduce delays for businesses and exporters.

Simplified Registration

• GST registration will become more automated and less paperwork-intensive.
• Around 61% of taxpayers already receive automatic registration within three working days.
• A simplified mechanism is proposed for small sellers operating through e-commerce platforms.
• Such sellers may be allowed to register in one State instead of every State where goods are sold, subject to the final framework.

Relief for Small Taxpayers

• The Council will examine allowing eligible small taxpayers to file GST returns once a year.
• An optional scheme has received in-principle approval for businesses with turnover up to ₹5 crore supplying directly to consumers.
• Notices involving amounts below ₹10,000 are proposed to be avoided, with certain pending notices being cancelled.

Input Tax Credit Reforms

• The Council approved measures to simplify Input Tax Credit (ITC) procedures and reduce procedural delays.
• Export of services is proposed to be brought more effectively within the ITC/refund framework.
• The reforms aim to remove unnecessary disputes and improve working capital availability.

Interstate Movement of Goods

• Goods moving between States may be inspected, detained or seized only by an officer of the supplier State or destination State.
• Officers in transit States would not ordinarily be able to interfere with such consignments.
• Interception would require specific intelligence and authorisation at the Joint Commissioner level.
• The measure seeks to prevent arbitrary checks and delays in interstate movement of goods.

Faceless Assessment

• The Centre plans to introduce a faceless assessment system for Central GST, similar to the Income Tax system.
• A framework is expected to be released for consultation before Budget 2027.
• Implementation is proposed during 2027–28.

Significance

• The reforms shift GST administration towards a more trust-based, faceless and technology-driven system.
• They are expected to reduce litigation, compliance costs, refund delays and discretionary enforcement.

Small businesses and exporters are likely to benefit most from simpler registration, faster refunds and reduced penalties.