The Goods and Services Tax (GST) Council has recommended several changes to make tax compliance easier for businesses, speed up refunds and reduce disputes with tax authorities. 

The decisions from its 57th meeting on October 8 focus on improving how the tax system works, rather than changing GST rates. The proposed reforms aim to reduce paperwork, improve cash flow and give businesses greater clarity on tax rules.

One of the key proposals is to shorten the time businesses must wait for GST refunds. The acknowledgement period for refund applications is expected to fall from 15 days to 10 days. The Council has also recommended that 90% of eligible provisional refunds be issued within three working days.

Faster refunds could help small businesses and exporters manage their working capital more efficiently. Businesses often have money tied up in taxes while waiting for refunds, which can limit the funds available for salaries, purchases and expansion.

The Council has also proposed expanding refund eligibility under the inverted duty structure, where companies pay a higher GST rate on inputs than on their finished products. 

Refunds for input services are proposed to begin from November 1, 2026, while eligible credits linked to plant and machinery are proposed from April 1, 2027. Sectors such as textiles, footwear, pharmaceuticals and manufacturing could benefit.

The Council has recommended reducing the general penalty for non-compliance from Rs 25,000 to Rs 10,000. It has also proposed raising the threshold for prosecution from Rs 1 crore to Rs 5 crore and removing GST officers’ arrest powers under Section 69.

A proposed Rs 10,000 threshold for issuing show-cause notices could also help prevent disputes involving smaller amounts from becoming lengthy legal matters. These measures are intended to make enforcement more proportionate and reduce pressure on taxpayers.

Tax experts have raised questions about a proposed provision that would validate certain multi-year tax notices. They warned that it could face legal challenges, depending on the final wording of the amendments.

The impact of the reforms will depend on their final approval and implementation. If introduced effectively, the changes could reduce compliance costs, release funds stuck in refunds and make GST administration more predictable for businesses.

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