The Centre will propose a five-pronged plan for the next set of reforms to the Goods and Services Tax (GST) system at the upcoming GST Council meeting on October 8, according to sources in the Ministry of Finance.
These reforms are aimed at automating and easing a lot of the current administrative bottlenecks in the GST system, and reducing the compliance burden, especially for small businesses. Rates, including the GST on the Merchant Discount Rate (MDR) on UPI transactions, will not be on the agenda.
The five-pronged proposal covers process reforms, structural reforms, ease of living and doing business, exports of services, and e-commerce.
Some of the key changes proposed involve automatic invoice matching between buyers and sellers, reducing paperwork around claiming input tax credits (ITC), reducing the number of times small taxpayers have to file returns, and removing multi-state registrations for small businesses looking to sell across the country.
The proposals are to be discussed at the GST Council meeting and, if approved, will be implemented in a staggered manner to give businesses time to adapt to the new systems.
Easing of processes
At the moment, 61% of GST taxpayers receive their GST registration within three working days without the need for a tax officer’s involvement, an official in the Ministry of Finance said. The Centre will now propose a streamlining of processes for the remaining taxpayers so as to avoid “unnecessary queries” and avoid rejections.
Further, the Centre will propose an upgrade of the existing invoice management system to match invoices in such a manner that corrections and changes made to an invoice by the seller are recorded at each step and automatically reflected in the buyer’s invoice.
“This would avoid a large number of notices issued to taxpayers due to invoice mismatches,” the official explained. “The aim is to reduce these mismatch notices to zero.”
Credits and refund compliance
At the moment, businesses complain that their input tax credits are often held up from being credited to their accounts because their suppliers have not filed their returns. The Centre is now trying to address this issue.
“A buyer who holds the invoice, has received the goods and has paid his supplier in full, including the tax, should keep their credit,” the official said. “It should not depend on whether someone further up the chain has paid or not.”
Further, the Centre is proposing that ordinary business costs, that currently do not get refunded as ITC, should be brought into the ITC system. In addition, taxes paid on input services, earlier not eligible for ITC, will be proposed to be made eligible.
Refunds are also proposed to be acknowledged within 10 days, with 90% of the refund amount to be released on the basis of a ‘risk check’ using data obtained automatically from the Customs department and the banking system.
Reduced paperwork and costs
The Centre will be sharing a concept note with the States on allowing small taxpayers who supply only to consumers to file their returns once a year instead of once a month as is currently the case.
Another major demand of service providers is to widen the net of what constitutes an export. At the moment, providing a service to a foreign client through a branch abroad is not counted as an export of service. The Centre is proposing to amend this to categorise such business as an export.
Similarly, testing, repair, certification and research done in India for a client abroad is proposed to be classified as an export of services even if the goods stay within the country.
“For example, companies might send cars to India to be tested, which are then destroyed after the testing and not sent back,” the official explained. “That will now count towards services exports as far as tax treatment is concerned.”
Another proposal that could significantly reduce paperwork for small businesses is the one regarding where they are registered. At the moment, a seller needs a registered place of business in every State they sell in, which is not practical for most small sellers and thus limits them to their home State.
The Centre will propose that sellers be allowed to register once in their home State and, once verification is done, be granted access to sell in the rest of the country.
Published – October 06, 2026 05:51 pm IST
