Daijiworld Media Network - New Delhi
New Delhi, Oct 7: The GST Council is expected to take up the next phase of GST 2.0 at its 57th meeting on Thursday, with the focus likely to shift from rate rationalisation to simplifying compliance and reducing the administrative burden on businesses.
After the first phase of GST 2.0 overhauled the indirect tax structure in September last year, the Council is unlikely to make major rate changes at this meeting, apart from possible clarifications. Instead, it is expected to consider measures to address inconsistencies and ambiguities in the GST regime and make its implementation more aligned with the principles of GST 2.0.
The proposals are the outcome of nearly nine months of consultations with states, including three National Coordination Meetings and discussions by several working groups comprising state officials. The exercise was based on data from the GST system, with proposals examined before being placed before the Council.
Officials said the GST system has matured considerably since its launch in 2017. While the initial years focused on bringing businesses into the new tax system, stabilising revenue and curbing tax evasion, the system now has access to extensive transaction-level data, invoice matching and technology-driven tools to identify suspicious transactions.
This is expected to allow tax authorities to increasingly target tax evaders rather than imposing the same compliance burden on all businesses.
Prashanth Agarwal, partner at PwC India, said the meeting could bring significant changes to the GST ecosystem by focusing on process and structural reforms and making critical processes more system-driven rather than officer-driven.
The Council is also expected to consider changes to the GST enforcement framework. One proposal seeks to raise the threshold for launching prosecution from Rs 1 crore to Rs 5 crore. Another proposal could remove the power of GST officers to arrest taxpayers, with any arrest requiring judicial authorisation.
A government official said only two states were opposed to removing the arrest provision and that the Centre expected to convince them at the Council meeting.
The Council may also consider measures aimed at reducing the cost of doing business. These include protecting genuine buyers from tax demands arising from supplier defaults, allowing input tax credit on more legitimate business expenses such as motor vehicles and group insurance, and permitting refunds of input-service credit in cases involving inverted duty structures.
Faster refunds are another key part of the agenda. Sources said the government is considering greater automation in refund processing, including the possibility of releasing a substantial portion of eligible claims without requiring manual processing by an officer. The move could help businesses, particularly exporters, recover working capital faster.
Sameer Gupta, national tax leader at EY India, said the focus should now be on reducing credit blockages, resolving inverted duty structures and rate anomalies, and ensuring timely refunds. He also said a more centralised and technology-driven administration, along with less punitive provisions and fewer classification disputes, could improve certainty and ease of doing business.
Vivek Jalan, partner at Tax Connect Advisory Services, said most taxpayers were compliant but the wider business community often bore the compliance burden, litigation exposure and penal consequences designed to deal with a small proportion of non-compliant entities.
As GST enters its 10th year, experts said the proposed changes indicate that the initial phase of implementing the tax regime is largely complete and that the system is moving towards a simpler, technology-driven and more business-friendly framework.