GST Council meet starts with focus on ease of doing business, ITC overhaul and decriminalisation on agenda

New Delhi: The 57th GST Council meeting begins with a significant focus on input tax credit (ITC) reforms, to consider a series of measures that could ease credit restrictions for businesses, address supplier-default issues, simplify registration and refund process and widen the scope of eligible credits across key sectors.

The council will also take up proposal to decriminalise number of offences under GST, doing away completely with arrests.

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At the heart of the proposals is a move to protect a genuine buyer's ITC from being denied solely because of an upstream supplier's default, subject to prescribed safeguards. The measure could provide greater certainty to businesses that have complied with their tax obligations but face credit disputes because of a supplier's non-compliance.

The Council is also expected to consider expanding ITC eligibility across several areas currently facing restrictions, including insurance, exports and infrastructure.

The proposals include allowing ITC on employee health and life insurance, potentially easing a long-standing area of dispute for businesses.


Credit is also proposed to be expanded for eligible passenger vehicles, vehicle leasing and hiring, as well as telecom towers and external pipelines.

For automobiles, the proposal could cover passenger vehicles with capacity of up to 13 seats, while EV-related services are expected to get greater parity with their internal-combustion-engine counterparts.

In the hospitality and services sectors, the Council is expected to consider allowing ITC for same-line resales, including specified hotel, fitness, beauty and health services. The proposals also seek to address ITC restrictions on outdoor catering and hotel accommodation up to the prescribed threshold.

Existing restrictions on works-contract services and construction of immovable property are expected to continue, with relief targeted at specific assets such as external pipelines and telecom towers.

Easy Refunds

The Council is also expected to consider significant changes to the refund mechanism, allowing release of 90% of eligible refunds after automated or risk-based checks, improving cash flows for exporters and other businesses that currently face delays in obtaining refunds.

Tax paid on plant and machinery and input services could become eligible for refunds under specified conditions.

MSME compliance relief

Beyond ITC, the Council is expected to consider a package of measures aimed at reducing the compliance burden on small businesses.

These include an annual return option for small B2C taxpayers, quarterly tax payment for eligible MSMEs and faster GST registration, with eligible applications proposed to be processed within three working days.

The council may also look at proposal to end small-value disputes, and keeping a ₹10,000 threshold for issuing GST notices, and withdrawing pending cases below the threshold.

The meeting is also expected to take up major changes to GST enforcement.

The proposals include removing GST arrest provisions and raising the prosecution threshold from ₹1 crore to ₹5 crore. If approved, the measures could significantly alter the enforcement framework for businesses, particularly in cases involving tax evasion allegations.

Exports and e-commerce

The Council is expected to consider measures to simplify export treatment, including clearer treatment of foreign-client job work and supplies involving an exporter's overseas branch.

Small e-commerce sellers could also get a simplified mechanism for multi-State GST registration, while platform-based deliveries are proposed to be standardised at 5% GST under the specified framework.

And while no rate changes are on cards, several targeted changes are expected to be considered to remove any existing anomalies in rates.

These include cutting GST on retreaded tractor tyres to 5%, moving psyllium seeds to the nil rate and extending exemptions for seed warehousing, coffee curing and medicines for seven additional rare diseases.

The Council is also expected to consider changes covering shipping, telecom, hospitality, intellectual property and waste and scrap transactions.

The proposals, if cleared, could mark a significant shift from rate rationalisation towards credit certainty, faster refunds, simpler compliance and more targeted enforcement.