GST Council bets on faster refunds, lower penalties to ease business burden

The 57th GST Council meeting has shifted focus from rate rationalisation to easing compliance, accelerating refunds, and reducing litigation, tax experts said, while flagging potential legal challenges to a proposed provision that would validate multi-year notices.

The recommendations include scrapping GST officers' arrest powers under Section 69, raising the prosecution threshold from Rs 1 crore to Rs 5 crore, and cutting the general penalty from Rs 25,000 to Rs 10,000. A Rs 10,000 threshold for show-cause notices is expected to curb low-value disputes.

“Where the 56th meeting rationalised rates, the 57th turns to process and trust,” said Niilesh Zaveri, partner at Khandelwal Jain & Co.


Businesses also stand to benefit from faster input tax credit (ITC) refunds, wider eligibility for credits under the inverted-duty structure and the removal of restrictions on treating certain cross-border services between distinct persons as exports.

However, Zaveri warned that the proposed validation clause for multi-year notices could face constitutional challenges, as several courts have held similar provisions invalid. He said the fine print of the amendments will ultimately determine whether the reforms are upheld.

Jitendra Motwani, partner, tax practice at Trilegal, said the measures signalled a shift towards proportionate enforcement and greater taxpayer confidence.

Under the proposed refund framework, acknowledgement timelines will fall from 15 days to 10 days, while 90% provisional refunds will be issued within three working days. This could ease working-capital pressures, particularly for smaller businesses and exporters.

The phased extension of inverted-duty refunds to input services from November 1, 2026, and plant and machinery from April 1, 2027, could unlock credits in textiles, footwear, pharmaceuticals and manufacturing.

Other proposals include simpler registration, clarity on the export treatment of testing and research and development services, and a faceless adjudication framework. Their impact will depend on the final amendments and implementation.