GST Council may clear sweeping compliance reforms; e-commerce sellers, genuine buyers to get relief

The GST Council is expected to evaluate a series of major procedural reforms aimed at simplifying tax compliance for businesses. Key measures on the table include permitting small e-commerce merchants to use platform-managed warehouses for GST registration, safeguarding input tax credits for legitimate buyers, and curbing low-value tax litigation, according to sources.

Forming part of the "GST 2.0" operational updates, these recommendations intend to streamline registration and return filing processes, enhance predictability for goods in transit, and minimize friction between taxpayers and tax authorities.

Expanding market access for small e-commerce sellers


One core proposal enables small vendors on e-commerce platforms to designate the platform’s warehouse as their official registered place of business in states where they lack physical premises. Under this setup, a seller would undergo physical verification and Aadhaar authentication in their primary home state. Once established, they could secure GST registrations in additional states via the e-commerce platform's consent, eliminating the need for further interaction with regional tax officers.

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Sources indicate this provision could empower roughly 9.5 lakh small sellers to expand nationwide without opening brick-and-mortar offices in every inventory-holding state, while simultaneously establishing tax parity across varying e-commerce models.

Protecting input tax credit for genuine buyers

The Council will also discuss protecting the input tax credit (ITC) of legitimate buyers possessing valid invoices, even if a supplier further up the chain fails to remit the tax. Recovery procedures would instead target the non-compliant seller. This initiative aims to remove a significant point of litigation and commercial uncertainty, particularly for firms buying from smaller or newly established suppliers.

Curtailing low-value disputes

To ease litigation volumes and administrative burdens, the Council is considering prohibiting the issuance of GST demand notices for amounts under Rs 10,000.

While these low-value cases represent nearly 20 percent of total litigation volume, they account for an insignificant share of revenue. If approved, this minimum threshold could apply retroactively to pending cases at both the adjudication and appellate stages.

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For demands exceeding Rs 10,000, officers would be required to issue an initial intimation, allowing taxpayers an opportunity to respond prior to issuing formal notices.

Additionally, standardized guidelines are proposed for issuing and resolving tax demands. These include clear instructions for drafting and serving notices, differentiating deliberate fraud from simple short-payments, conducting hearings, and delivering reasoned decisions. If a taxpayer decides to resolve a dispute instead of litigating, the settlement amount would be classified as a "charge" rather than a penalty.

Streamlining registrations and return filings

The GST registration framework is being revamped to ensure applications are submitted accurately on the first attempt.

The redesigned interface will guide users step-by-step, displaying only relevant sections and offering a customized document checklist for upload. Existing registration details from one state can be auto-populated for others, enabling multi-state filings in a single workflow. The platform will also automatically assign the correct tax jurisdiction based on the business address.

Further reforms under consideration include a unified registration document workflow, simplified annual return forms, and a quarterly tax payment option for consumer-facing MSMEs.

Targeted transit checks and rate adjustments

Logistics oversight may shift toward an intelligence-driven model. Under this setup, transit vehicles could only be intercepted with explicit authorization from a senior officer, typically restricted to the state of origin. Exceptions would remain for unmanifested goods or cases where tax is payable directly by the recipient. This approach seeks to eliminate redundant border stoppages, lower transport delays and costs, and streamline domestic and export supply chains.

The Council may also assess introducing a flat 5 percent GST rate (without input tax credit) covering delivery charges for goods bought via e-commerce platforms.

Other proposals on the agenda include:

• Clarifying the export classification of services delivered via overseas branches of Indian firms.
• Ending the IGST exemption on gold, silver, and platinum imports by designated banks and nominated agencies.

Preparatory work for these GST 2.0 proposals involved over eight meetings of the joint Centre-State officers' working group and three sessions of the GST National Coordination Committee over the past year.

"The process reforms proposed under GST 2.0 take forward the trust that the government reposes in taxpayers and make life easier for businesses and traders by reducing compliance," a source said.

AMRG Global Managing Partner Rajat Mohan said the proposals address several structural concerns that businesses and tax professionals have highlighted since the introduction of GST.

"After years of experience with the law, the focus is now shifting from revenue protection through restrictions and procedural controls towards a more mature system built on seamless credit, working-capital efficiency, taxpayer certainty and technology-led enforcement," Mohan added.

(With inputs from Agency)