GST rates likely unchanged as 57th Council meeting focuses on reforms

GST rates are likely to remain unchanged at the 57th GST Council meeting scheduled for October 8, with the meeting instead expected to focus on a broad package of procedural and structural reforms covering registration, refunds, input tax credit and enforcement, Finance Ministry sources said.

The Council is unlikely to take up any major rate revisions, with only a limited number of rationalisation and clarification matters expected to be considered, according to the sources.

As part of the proposed reforms, GST rate revisions could be considered once a year in the future and made effective from April 1, a move aimed at providing greater predictability to the tax system.

Officials said the performance of the two-rate GST structure over the past year also supports maintaining rate stability. Between October and July, taxable supplies grew 25.8 per cent year-on-year, while gross tax liability increased 13.6 per cent. The effective tax rate on domestic taxable supplies fell to 13.13 per cent from 14.55 per cent.

Changes to input tax credit rules are also likely to come up before the Council. Under the proposal, a buyer who has a valid invoice, has received the goods and has made full payment to the supplier, including the tax, would be able to retain the input tax credit even if suppliers further along the chain default.

The proposed changes also aim to bring certain business expenses currently excluded from the credit chain within its scope and avoid double taxation when a service is resold within the same line of business.

The Council is also expected to consider measures to speed up GST refunds. At present, refund claims take an average of around 25 days to process. Under the proposed framework, claims would be acknowledged within 10 days, while 90 per cent of eligible refunds could be released following a risk assessment. Data would be automatically sourced from customs and banking systems.

The proposed changes would also expand refund eligibility to include tax paid on services as well as plant and machinery.

Further automation of GST registration and amendment processes is also on the agenda. Around 61 per cent of registrations are already approved within three working days without intervention by tax officers, while approximately 66 per cent of amendment applications are proposed to be processed automatically.

The proposals also include automatic restoration of registrations suspended due to procedural lapses once the issue is rectified. The process for cancelling registration after closure of a business is also proposed to be simplified.

For exporters, the reform package seeks to ease several GST-related requirements. Under the proposal, billing a foreign client through an overseas branch would not result in the loss of export status.

Testing, repair, certification and research services provided to overseas clients could also be treated as exports even when the goods remain in India. Requirements related to realisation of payments would be aligned with Reserve Bank of India norms.

The proposals also seek to simplify compliance for e-commerce sellers by allowing small businesses to complete verification in their home state before selling their products across the country. Officials said nearly nine out of 10 sellers operating on digital platforms are small businesses.

The tax treatment of transactions would also be determined by the underlying service rather than the contractual arrangement used by an online platform, according to the proposals.

Changes to GST enforcement are also part of the package, including a proposal to remove several offences from the criminal provisions of the law.

Cases involving delays, inadvertent mistakes or shortfalls in tax payments could instead be handled through tax recovery, interest and proportionate penalties. Officials described the proposed approach as enforcement that “works through money rather than through custody.”

The reform proposals have been prepared by the Law Committee and Fitment Committee following consultations with states. Any changes approved by the GST Council are expected to be implemented in phases through 2027.