GST Council approves next-gen reforms; 99% issues addressed, says FM Sitharaman
More reforms on the anvil, FM says process and rate measures now driven from a principle of trust
- Oct 8, 2026,
- Updated Oct 8, 2026 7:29 PM IST
With the Goods and Services Tax Council approving a wave of process reforms to ease the compliance burden under the indirect tax system, finance minister Nirmala Sitharaman on Thursday noted that most of the reforms under GST 2.0 have now been completed.
“For the next-gen GST reforms, 99% of the issues have been addressed. Everything on the process and rate side has been driven from a principle of trust,” the finance minister said after the 57th meeting of the GST Council.
Sitharaman, who chairs the Council, also noted that over the last nine years since its launch, GST has been a very positive story on many counts. The rate rationalisation undertaken in September last year did not impact revenues and every month revenue has been growing, she said, adding that she expects the process reforms also to be accepted by states and businesses and help in easier compliance and in doing business.
While no rate-related decisions were taken, the GST Council in its meeting took a number of measures to ease the compliance burden with regard to registrations, returns and refunds. As many as 90% of returns are likely to be cleared within 13 days of it being filed by the taxpayer. Acknowledgment would be given in 10 days and 90% of refunds would be sanctioned within three days of the acknowledgment.
Changes in registration, apart from the place of business as well as cancellation of registration, will be automated processes. Notices will not be sent for amounts below Rs 10,000, and all such notices sent will be withdrawn. The Council also recommended issuance of a circular to provide comprehensive guidelines to the tax officers to streamline the process of issuance of demand notices, adjudication orders and appeals. It also recommended reducing the maximum general penalty under section 125 of the CGST Act to Rs. 10,000 from Rs 25,000. Arrest powers of tax officers under the GST system will now be taken away, while prosecution would be above the monetary threshold of Rs 5 crore as against the current Rs 1 crore.
Starting November 1, 2026, the Council has also approved refund of accumulated input tax credit on input services for refunds of inverted duty structure. Similarly, it has also proposed amendments to enable availment of ITC on the supplies of outdoor catering, health and life insurance, telecommunication towers, pipelines laid outside factory premises, free samples, goods destroyed or written off on expiry of shelf life as required by law.
More measures on the anvil
The GST Council also gave an in-principle to a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with aggregate turnover equal to or less than Rs 5 crore in the preceding financial year and engaged exclusively in supplies to unregistered persons. This is likely to be taken up in its next meeting.
Sitharaman also announced the formation of a committee of officers on two issues that had certain concerns by states and where decisions have been deferred. First, the committee will look into the proposal of permitting input tax credit for motor vehicles with seating capacity of 13 persons or more.
Second, the committee will review a proposal for ITC availment under Section 16(2)(c) of the GST Act to help honest taxpayers. At present, the section restricts registered taxpayers from claiming ITC unless the tax has actually been paid. “This often creates challenges for honest taxpayers who are unable to claim ITC due to someone else in the supply chain,” the FM said, adding that the proposal is to limit it to the person next in the chain to the business that has not paid the tax. However, there were concerns over fake invoicing and wrongful availment of ITC.
The officers committee is expected to finalise its report within the next three months, and it will be taken up by the GST Council after that with the expectation that it may get implemented by April 1, 2027.
The finance minister also announced a new faceless assessment scheme for Central GST taxpayers on the lines of a similar scheme for direct tax assessees.
Welcome relief
Experts welcomed the new set of reforms, noting that it will benefit trade and industry. Abhishek Jain, Indirect Tax National Head and Partner, KPMG in India, said the decisions mark a clear shift toward trust-based tax administration and greater ease of doing business. “Rationalising arrest powers, raising the monetary limit for prosecution and restricting random roadside inspections will bring much-needed certainty for businesses,” he said.
Sohrab Bararia, Partner, Grant Thornton, said the refund-related measures are a welcome move, particularly as delays in refunds have been a genuine working-capital concern for businesses. Faster acknowledgement and sanction of refunds, along with extending inverted duty refunds to ITC accumulated on input services, can provide meaningful relief to taxpayers, he said.
With the Goods and Services Tax Council approving a wave of process reforms to ease the compliance burden under the indirect tax system, finance minister Nirmala Sitharaman on Thursday noted that most of the reforms under GST 2.0 have now been completed.
“For the next-gen GST reforms, 99% of the issues have been addressed. Everything on the process and rate side has been driven from a principle of trust,” the finance minister said after the 57th meeting of the GST Council.
Sitharaman, who chairs the Council, also noted that over the last nine years since its launch, GST has been a very positive story on many counts. The rate rationalisation undertaken in September last year did not impact revenues and every month revenue has been growing, she said, adding that she expects the process reforms also to be accepted by states and businesses and help in easier compliance and in doing business.
While no rate-related decisions were taken, the GST Council in its meeting took a number of measures to ease the compliance burden with regard to registrations, returns and refunds. As many as 90% of returns are likely to be cleared within 13 days of it being filed by the taxpayer. Acknowledgment would be given in 10 days and 90% of refunds would be sanctioned within three days of the acknowledgment.
Changes in registration, apart from the place of business as well as cancellation of registration, will be automated processes. Notices will not be sent for amounts below Rs 10,000, and all such notices sent will be withdrawn. The Council also recommended issuance of a circular to provide comprehensive guidelines to the tax officers to streamline the process of issuance of demand notices, adjudication orders and appeals. It also recommended reducing the maximum general penalty under section 125 of the CGST Act to Rs. 10,000 from Rs 25,000. Arrest powers of tax officers under the GST system will now be taken away, while prosecution would be above the monetary threshold of Rs 5 crore as against the current Rs 1 crore.
Starting November 1, 2026, the Council has also approved refund of accumulated input tax credit on input services for refunds of inverted duty structure. Similarly, it has also proposed amendments to enable availment of ITC on the supplies of outdoor catering, health and life insurance, telecommunication towers, pipelines laid outside factory premises, free samples, goods destroyed or written off on expiry of shelf life as required by law.
More measures on the anvil
The GST Council also gave an in-principle to a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with aggregate turnover equal to or less than Rs 5 crore in the preceding financial year and engaged exclusively in supplies to unregistered persons. This is likely to be taken up in its next meeting.
Sitharaman also announced the formation of a committee of officers on two issues that had certain concerns by states and where decisions have been deferred. First, the committee will look into the proposal of permitting input tax credit for motor vehicles with seating capacity of 13 persons or more.
Second, the committee will review a proposal for ITC availment under Section 16(2)(c) of the GST Act to help honest taxpayers. At present, the section restricts registered taxpayers from claiming ITC unless the tax has actually been paid. “This often creates challenges for honest taxpayers who are unable to claim ITC due to someone else in the supply chain,” the FM said, adding that the proposal is to limit it to the person next in the chain to the business that has not paid the tax. However, there were concerns over fake invoicing and wrongful availment of ITC.
The officers committee is expected to finalise its report within the next three months, and it will be taken up by the GST Council after that with the expectation that it may get implemented by April 1, 2027.
The finance minister also announced a new faceless assessment scheme for Central GST taxpayers on the lines of a similar scheme for direct tax assessees.
Welcome relief
Experts welcomed the new set of reforms, noting that it will benefit trade and industry. Abhishek Jain, Indirect Tax National Head and Partner, KPMG in India, said the decisions mark a clear shift toward trust-based tax administration and greater ease of doing business. “Rationalising arrest powers, raising the monetary limit for prosecution and restricting random roadside inspections will bring much-needed certainty for businesses,” he said.
Sohrab Bararia, Partner, Grant Thornton, said the refund-related measures are a welcome move, particularly as delays in refunds have been a genuine working-capital concern for businesses. Faster acknowledgement and sanction of refunds, along with extending inverted duty refunds to ITC accumulated on input services, can provide meaningful relief to taxpayers, he said.