The story so far:The Goods and Services Tax (GST) Council met on Thursday (October 8, 2026) for the 57th time since GST was introduced a little more than nine years ago. In the run-up to the meeting, officials in the Finance Ministry said that GST rates would not be discussed in this meeting, something that was confirmed by Finance Minister Nirmala Sitharaman following the meeting. Nevertheless, the decisions that were taken by the Council stand to significantly alter GST in the medium and long term. 

What was the plan for this meeting?

The Centre has realised that, nine years on, the GST system has largely settled down now in terms of revenues. That is, the monthly collections are stable and do not vary by a large degree; the number of return filers has also stabilised, and businesses around the country have become familiar with the GST procedures. 

Having implemented wide-ranging GST rate changes in its last meeting in September 2025 that not only rationalised rates across a wide range of products and services but also reduced the number of slabs in GST, the Council could now look at substantial reforms in the administrative and procedural aspects of GST — which so far have remained a big pain point for businesses. 

According to sources in the Finance Ministry, the Centre entered the meeting with a five-pronged proposal ranging from process reforms, structural reforms, and ease of living and doing business aspect, to the exports of services, and e-commerce related complications.

Several of these proposals were accepted by the Council while some have been slated for further discussion. However, as per Ms. Sitharaman, all of them will come into force from April 1, 2027 onwards. 

How has the Council eased GST-related paperwork?

One of the more far-reaching steps approved by the GST Council is a system that will provide greater certainty about the documents required during registration. As per the government, 61% of taxpayers are already being granted automatic registration within three working days. 

Now, the upgraded system is expected to further streamline the process for remaining low-risk taxpayers by doing away with unnecessary queries and rejections as far as possible. That is, the system is moving to a black-list, where most applications are accepted and only a few might get rejected, from the current white-list kind of system where each company has to go through the registration process before it can do business in the GST system.

The new system will also incorporate a simplified registration mechanism for small taxpayers who provide supplies through e-commerce platforms, such that they will have to register in only their home State rather than in each State that they want to sell in. The process for amendments and cancellation of registrations has also been eased. 

In what could substantially ease the paperwork process for small businesses, the Centre has shared a concept note with the GST Council and has received its in-principle approval for an optional scheme where business-to-consumer (B2C) firms with a turnover of up to ₹5 crore a year that supply to consumers can file returns one a year instead of quarterly. This will be taken up again in the next GST Council meeting. 

Regarding refunds, the new system aims at a faster processing time of acknowledgements of 10 days, down from the current 15 days. The system will also conduct a risk assessment using Customs and banking data and release 90% of the refund claims within three working days of acknowledgement. 

At the moment, additional business expenditure or expenditure incurred in the normal course of doing business, including employee health and life insurance, is not eligible for input tax credits. The new system will now make such expenditure eligible. 

How does the new system reduce litigation and harassment?

In a major departure from the earlier system, the GST Council has recommended removing the arrest powers of GST officers and has increased the prosecution threshold from ₹1 crore to ₹5 crore. The general penalty will also be reduced from ₹25,000 to ₹10,000. 

In addition, it said that only GST officers in originating or destination States can inspect, detain, or seize inter-State supplies. That is, no officer in a State in between the source and destination can interfere with the supply of goods. Further, such interceptions can only be done with the authorisation of a joint commission-level officer and that too only after “specific intelligence” has been obtained about the consignment. 

A major issue taxpayers have been facing over the years has been that the system rejects their claim for input tax credits because their suppliers have not filed their returns. So, even though a business receives supplies, has the invoice, and pays the tax on these supplies, it often cannot get a refund until the supplier themselves file their returns. This has been leading to a lot of businesses seeing their working capital being locked up.

The GST Council has instructed its officers’ committee to examine this issue. A decision on this will be taken so that it can be implemented by April 1, 2027.

Finally, the GST has also announced common standards for notices and proceedings, under which no notices will be sent for a tax amount below ₹10,000. All pending notices so far issued that fall below this threshold will be withdrawn, the government said.

What has been done for services?

Service exporters have, in particular, had a problem with the GST system. India’s service export industry usually functions through branches abroad. However, the system currently says that the business done by those branches can’t count as exports. That is what the GST Council has now decided to change. Basically, an Indian company selling its services to a foreign client through an overseas branch can now avail of export benefits under the GST system. 

Another issue is that the GST system currently says that something can be classified as an export only if it leaves India. However, there are a number of services offered by Indian companies where the final product does not leave Indian shores. For example, when a car or a phone is sent to India for testing, it is destroyed after that testing is done and not sent back. So far, this was not classified as an export of services. 

Now, the GST Council has said that testing, repair, certification, and research done in India for a client abroad will be classified as an export of services even if the goods stay within the country. 

There have also been some compliance issues regarding when a payment has been deemed to have been received by an Indian exporter, with different bodies having different rules on the matter. The Council has now decided that the date on which an export payment is deemed to have been received will follow the Reserve Bank of India’s rules. 

Overall, these changes will not only eliminate uncertainty but will allow exporters of services to recover the tax paid on the export of their services and also recover this amount faster.

What more remains to be done?

During her press conference, Ms. Sitharaman said that 99% of GST reforms relating to rates as well as processes will have been completed when this latest tranche of changes comes into effect. She said that the Council is open to more reforms, and that those will be taken up as and when needed. However, the overwhelming bulk has been sorted out. 

In an indication of the incremental work that remains to be done, the Union Finance Minister announced that the Centre was going to be rolling out a faceless assessment system for Central GST-registered companies along the line of the system that is currently in place for income tax. It will be up to each State to come up with a similar system in their own jurisdictions. 

There are also some inverted duty structure issues that remain. Ms. Sitharaman said that rates were not discussed during this GST Council meeting. She added that rates will now be discussed once a year, and that any changes would be applicable from April 1 of the subsequent financial year. 

With the Goods and Services Tax (GST) system having settled down, revenues remaining steady, and rates having been rationalised, tax experts across the board say the priority for the GST Council in its 57th meeting on October 8 should be on decisively easing the compliance burden for taxpayers. 

The GST Council will meet in New Delhi on October 8 for the first time after its meeting on September 3-4, 2025, when it had introduced wide-ranging rate and slab changes. Sources in the Ministry of Finance have confirmed that the meeting will not deliberate on GST rates and will instead focus on a five-pronged effort to reform the tax system and its administration. 

Tax analysts agree that this should be the priority of the Council.

Right time for reforms

The GST system turned nine years old on July 1, 2026. Through this time, the Council has met 56 times, has reformed the GST slabs, successfully implemented the 5-year compensation period to States, and the system has stabilised in terms of revenue.

“With high GST collections across the past few months, the GST Council in its next meeting scheduled on October 8, would be able to decide on several issues faced by businesses including relaxation of input tax credit restrictions, reducing complaints for service providers, providing faster refunds, etc, without being unduly worried about the impact of such measures on the GST collections,” MS Mani, Partner at Deloitte India, said.

The Hindu had reported on October 6 that the proposals by the Centre for the GST Council’s consideration would cover process reforms, structural reforms, ease of living and doing business, exports of services, and e-commerce. The final decisions will, however, be made clear only once the Council’s meeting concludes. 

Several areas for improvement

“The most important process reforms will be allowing automatic and easy refunds especially to exporters, and preventing ITC accumulation, because these are economy wide effects on working capital for firms,” Rahul Ahluwalia, Founder Director of the Foundation for Economic Development said.

Prabhat Ranjan, Senior Director at Nexdigm, a business and tax consultancy, said that while rate rationalisation remains important, certainty of tax treatment can be as important as the rates themselves.  

“A significant hidden cost of GST arises from interpretational uncertainty — whether on classification, input tax credit, valuation, place of supply or procedural requirements,” Mr. Ranjan explained. “When the same transaction can invite different positions across jurisdictions, businesses face not merely additional tax exposure but litigation costs, provisioning requirements, working-capital blockage and uncertainty in commercial decision-making.”

Technology to the rescue

Brijesh Agrawal, CEO of Busy Infotech, a company specialising in GST-related software services, said that the GST back-end system has become technologically sophisticated but everyday compliance remains complex for business owners. 

“Key priorities should centre on consolidating tax slabs to a maximum of three [currently there are 6 slabs, including Zero/Nil, 0.25% and 3%], eliminating cess and overhauling Section 17(5) to allow unconditional credit on all verifiable business-to-business  expenses,” Mr. Agrawal said. 

At the moment, ordinary business costs are not entitled to input tax credits and so not only add to the costs of doing business but also potentially add to the price of the final product being sold. 

The Hindu has learnt that the Centre is proposing a change in this regard, to allow ordinary business costs to also be included in the ambit of input tax credits. 

Single registrations and audit

Another proposal that will be put up before the GST Council is to allow businesses to register in a single State and sell across the country instead of having to register their business in each of the States they want to sell in. 

Nitin Vijaivergia, Partner, Price Waterhouse & Co further said that the proposed system of harmonising GST audits across multiple registrations would significantly ease the compliance burden on large taxpayers. 

“A unified approach to issues that cuts across State lines would curb duplicative information requests and eliminate the risk of divergent conclusions on the same transaction,” Mr. Vijaivergia said. 

“It would also equip tax authorities to deploy data analytics and risk parameters with precision, directing scrutiny where genuine risk lies,” he added. “For businesses, the dividend is clear: greater consistency, enhanced predictability and a leaner audit-related compliance cost.”

Published – October 07, 2026 05:44 pm IST

Jaisalmer:

The goods and services tax council on Saturday decided to levy an 18 per cent GST on margin value on the sale of used electric vehicles by businesses and agreed to keep jet fuel (ATF) out of the ‘one-nation-one-tax’ regime.

The GST Council in its 55th meeting also decided to clarify on taxability of popcorn, saying caramelised popcorn will continue to attract tax at the rate of 18 per cent. However, pre-packed and spiced popcorn will attract 12 per cent, while 5 per cent will be levied on unpacked and unlabelled ones.

It has been decided to regularise the issues for the past on “as is where is” basis… “It is a clarification being recommended by the GST Council to settle the disputes arising out of interpretation,” an official statement said.

The panel, headed by Union Finance Minister Nirmala Sitharaman and comprising representatives of all states and UTs, deferred decisions on reducing tax rate on insurance products as also on levy of the tax on food delivery by aap-based platforms.

The panel cut the tax rate on fortified rice kernels used for public distribution to 5 per cent from 18 per cent, Sitharaman told reporters after the meeting of the Council here.

The Council also decided that no GST will be payable on penal charges levied and collected by banks and NBFCs from borrowers for non-compliance with loan terms.

The panel deferred a decision on reducing the rate of tax on insurance premium, pending comments of the sector regulator, she said.

A group of ministers examining the issue had recommended exempting insurance premiums paid for term life insurance policies from GST and premium paid by senior citizens for health insurance cover. It had also suggested GST exemption on premium paid by individuals, other than senior citizens, for health insurance with coverage of up to Rs 5 lakh.

Alongside, the GoM on rate rationalisation, which is looking at tweaking rates on 148 items, will be given more time to arrive at a decision.

The finance minister said the council decided to raise the rate of tax to 18 per cent from 12 per cent on all used EV sales, just as in case of non-electric vehicles, and it will be applicable only on the value that represents margin – the difference between the purchase price and selling price (depreciated value if depreciation is claimed) – by businesses.

Sale and purchase of used vehicles by individuals will continue to be exempt from GST.

Without naming any state, she said the states wanted to continue to keep aviation turbine fuel (ATF), used in aircrafts, out of the goods and services tax (GST).

When the GST subsumed more than a dozen central and state levies into GST in July 2017, five products – crude oil, petrol, diesel, ATF and natural gas – were kept out of its purview. The central government levies excise duty on them and states levy VAT.

“Every state clearly said that ATF should not come into GST… States did not feel comfortable” to include ATF under the GST, she said.

She said black pepper and raisins when supplied by an agriculturalist is not liable to GST payment.

GoM on health insurance requires more work, she said, adding the same was the case with rate rationalisation GoM.

“No report (on rate rationalisation) has been finalised,” she said.

The GoM on GST compensation cess, under Minister of State for Finance Pankaj Chaudhary, has been given an extended deadline to submit its report. The earlier deadline was December 31, 2024.

On small companies facing registration problems, she said a concept note has received in-principle approvals. This may require amendments to be made to the GST Acts to make it easier for small companies to register.

The Council also decided to set up a Group of Ministers to mull over allowing states to levy cess under GST to overcome financial distress after natural calamities.

Finance ministers of Uttar Pradesh, Telangana and West Bengal would be part of the GoM.

The Council decided to form the GoM after Andhra Pradesh sought Council’s approval to levy 1 per cent cess to overcome financial distress post flood in the state.

No decision was taken on levy of tax on delivery charges by quick commerce and food delivery platforms. “This has been deferred,” she said, adding the Fitment Committee will again review it and the issue being debated is if the tax should be equivalent to 5 per cent GST levied on food or more. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

New Delhi:

The GoM on GST rate rationalisation on Monday decided to hike tax on sin goods like aerated beverages, cigarettes, tobacco and related products to 35 per cent from the present 28 per cent, an official said.

The Group of Ministers (GoM) on rate rationalisation under Bihar Deputy Chief Minister Samrat Chaudhary also decided to rationalise tax rates on apparel.

As per the decision, readymade garments costing up to Rs 1,500 would attract 5 per cent GST, those between Rs 1,500 and Rs 10,000 would attract 18 per cent. Garments costing above Rs 10,000 would attract 28 per cent tax.

In total, the GoM on rate rationalisation will propose tax rate tweaks on 148 items to the GST Council. “The net revenue impact will be positive,” an official said.

The GoM report is expected to be discussed by the GST Council — chaired by Union Finance Minister and comprising her state counterparts — on December 21. A final decision on GST rate changes will be taken by the council.

“The GoM has agreed to propose a special rate of 35 per cent on tobacco and related products and aerated beverages. The four-tier tax slab of 5, 12, 18, and 28 per cent will continue and a new rate of 35 per cent is proposed by the GoM,” said the official.

Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28 per cent.

Under GST, essential items are either exempted or taxed at the lowest slab, while luxury and demerit items attract the highest slab. Luxury goods like car, washing machine, and demerit goods like aerated water and tobacco products attract cess on top of the highest 28 per cent slab.

The official said the GoM on rate rationalisation has finalised its report on Monday to be presented before the council.

The council will now decide whether there is further scope for rate rationalisation and may decide to retain the GoM so that the rationalisation exercise continues periodically, the official added.

In its last meeting in October, the GoM had proposed reducing GST on packaged drinking water of 20 litres and above to 5 per cent from 18 per cent.

It had also decided to propose to the council to reduce GST on bicycles costing less than Rs 10,000 to 5 per cent, from 12 per cent.

Also, GST on exercise notebooks would be reduced to 5 per cent from 12 per cent. The GoM also proposed hiking GST on shoes above Rs 15,000/pair from 18 per cent to 28 per cent.

It also proposed hiking GST on wrist watches above Rs 25,000 from 18 per cent to 28 per cent in the previous meeting on October 19.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Union Minister of State for Finance Pankaj Chaudhary. File.
| Photo Credit: PTI

The Goods and Services Tax (GST) Council has set up a 10-member GoM, chaired by Minister of State for Finance Pankaj Chaudhary, to decide on the taxation of luxury, sin and demerit goods once the compensation cess ends in March 2026.

The Group of Ministers (GoM), which includes members from Assam, Chhattisgarh, Gujarat, Karnataka, Madhya Pradesh, Punjab, Tamil Nadu, Uttar Pradesh and West Bengal, will submit its report to the Council by December 31.

In the GST regime, compensation cess at varied rates is levied on luxury, sin and demerit goods over and above the 28% tax. The proceeds from the cess, which was originally planned for five years after GST roll-out or till June 2022, were used to compensate States for revenue loss incurred by them post the introduction of GST.

In 2022, the Council decided to extend the levy till March 2026 to repay the interest and the principle amount of the ₹2.69 lakh crore worth loan taken in the 2021 and 2022 fiscal years to make good states’ revenue loss during Covid years.

With just one-and-a-half year remaining for the cess to end, the GST Council in its 54th meeting on September 9 decided to set up a GoM to decide the future course of the cess.

“The Terms of Reference of the GoM is to make taxation proposal to replace compensation cess after its abolition,” the GST Council Secretariat said in an office memorandum.

The task before the GoM is quite critical as it would have to suggest whether the levy would continue as cess or additional tax. If it is called cess, then like any other cess under tax laws, the collection would go to the Centre.

If the GoM decides not to levy cess but impose additional taxes on luxury, sin and demerit goods, then it has to suggest what would be the rates, how many new slabs would be required and what are the legislative amendments that would be required.

Currently, GST is a four-tier tax structure with slabs at 5, 12, 18, and 28%. However, as per GST law, tax of up to 40% can be imposed on goods and services.

As per the calculations, the interest and principal of the ₹2.69 lakh crore loan would be repaid by January 2026. The collection from the compensation cess in February and March, 2026 is estimated to be ₹40,000 crore.

The GST law provides that any additional amount collected in the compensation cess pool would be divided equally between the Centre and states.

The GST Council would also have to decide whether it would continue with the compensation cess till March 2026 or end it by January 2026 or as and when the loan is repaid and bring in the new taxation proposal as per the suggestions of the GoM on GST compensation cess.

Nirmala Sitharaman, Union Minister of Finance and Corporate Affairs in a conversation with The Hindu in Chennai on September 21, 2024
| Photo Credit: Dinesh Krishnan

Union Finance Minister Nirmala Sitharaman on Saturday (September 21, 2024) said the Goods and Services Tax (GST) Council is looking at the GST rates, item by item, for rationalisation and the process was being discussed for a long time and delayed due to several factors including the impact of COVID-19.

In an interaction with senior journalists of The Hindu Group of Publications at The Hindu’s head office in Chennai, Ms. Sitharaman, while responding to a question on rationalisation of GST, said: “It has been delayed for a long time and it’s much overdue due to various factors including the impact of COVID-19, election in some States. Now there is the seriousness, saying we need to take this up. The committee [Group of Ministers committee on rate rationalisation] is looking into it item by item.”

On a question related to GST compensation and compensation cess, she said “Everyone knows that the GST compensation cannot continue after June 30, 2022, and that is by law. So paying off the compensation in the first five years after implementation of the GST continued and ended in June 2022. The cess continues to be collected. Whether it has to continue or not and the rate and items on which the cess should be levied is being discussed in the GST Council.”

According to her, “There are some States that want the GST compensation to continue. But, it cannot continue in the very spirit of how it was brought in. It was introduced to make sure that States don’t have any apprehensions about their revenue resources coming down to a drastically low level and that they cannot sustain themselves, after the implementation of the GST regime.”

Ms. Sitharaman also pointed out that the GST compensation scheme was brought in at a fairly high rate. “No State was growing anywhere near 14%. Everybody who analyses the economy will know it. For instance, Tamil Nadu’s growth rate was around 6.5%, before 2017. The State would have earned around ₹4.23 lakh crore. Whereas, the State had earned ₹5.23 lakh crore, because of the compensation scheme and post that because of the GST. You [the State] are better off today. The wild allegations that come about the GST system will have to be countered with patience. But when it comes from a State government, whose Finance Minister is sitting in the [GST] Council, randomly because it politically suits them, I leave it as such. But it has no logic in it.”

She said the Constitution gives the Union government every right to levy cesses. “Though the money collected through cesses is not shared with the States directly through devolution, it goes for building roads, schools, ports and hospitals. It is perfectly constitutionally legitimate for the Centre to collect cess. It doesn’t go through the devolution which was designed by the Finance Commission, a constitutional body,” she added.

Finance Minister Nirmala Sitharaman speaks in the Rajya Sabha on August 8, 2024. Photo: Sansad TV via PTI

The Union government has nothing to do with imposing the goods and services tax (GST) on health insurance premiums, Finance Minister Nirmala Sitharaman insisted in the Rajya Sabha on Thursday (August 8, 2024), maintaining that the issue is entirely in the realm of the GST Council, which includes representatives from all State governments.

“Before GST too, medical insurance premiums were taxed,” she noted, during her reply to a debate on the Finance Bill. The Upper House returned the Bill following her reply, completing the process of approving the Union Budget for this financial year.

Countering charges that the Centre is pocketing the GST on health insurance premium, Ms. Sitharaman accused the Opposition of trying to gain political points on the issue. “Let the GST Council take a call,” she said, adding that every State levied taxes on health insurance premiums.

‘Write to State FMs’

Noting that the GST Council has discussed the issue thrice in the past, she said that the Finance Ministers of all States were present in the GST Council where decisions are taken by consensus. MPs who were protesting the tax with placards in Parliament must instead write to Finance Ministers in their respective States. “What stopped you?” she asked.

Objecting to allegations that the GST on health insurance premiums is “daylight robbery”, the Finance Minister pointed out that 50% of the GST collected goes to the States, and out of the Centre’s 50% share as well, 41% is given to the States.

Opposition members had also raised Union Minister Nitin Gadkari’s letter to Ms. Sitharaman on the matter. Without naming Mr. Gadkari, she said that the Opposition had got an opportunity to raise the issue with “some Ministers” writing a letter, claiming that “somebody” who was part of a delegation had put it out in the public domain without the Minister’s permission.

Balancing priorities

Ms. Sitharaman reiterated that the Union Budget balances several overriding imperatives, including growth, employment generation, capital investment, and fiscal consolidation. “We have tried to balance all these without compromising on any one sector,” she said.

The allocation for agriculture and allied sectors has increased in this Budget, the Finance Minister said. “₹1.44 lakh crore was the allocation last year, this time it has gone up to ₹1.52 lakh crore, that is ₹8,000 crore more,” she added. Ms. Sitharaman also questioned the conclusions of the Global Hunger Index, claiming that the report had been prepared without proper data from India.

New Delhi: Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi, Saturday, June 22, 2024.

The story so far: On June 22, the GST council recommended introducing biometric-based Aadhaar authentication for GST registrations, in a phased manner. In a media interaction after the conclusion of the council meeting, Finance Minister Nirmala Sitharaman stated that the measures endeavour to combat fraudulent input tax credit (ITC) claims made through fake invoices. She highlighted that the measure was formalised based on “good inputs” received from pilot projects run in Gujarat and Puducherry, in addition to a study in Andhra Pradesh. This is soon expected to be implemented across India.

What fraud the measure is trying to mitigate?  

Input tax credit (ITC) claims are a means to reduce tax liability by indemnifying the tax already paid on inputs for the tax liability computed on the output. Let us say, a manufacturer pays Rs 120 as tax for purchasing certain inputs or raw materials for their business. Now, their direct tax liability – which is based on the production incurred, is Rs 300. This is where the manufacturer can make an ITC claim. Since s/he has paid a certain portion in taxes for the input procurement, the difference of Rs 180 would be the net payable tax. Rs 120 is offset by claiming ITC.  

Since the rollout of the GST regime, a large number of GST frauds involving the use of fake invoices to fraudulently avail an ITC claim, inflate turnovers and/or assist in money laundering have been observed. These frauds are facilitated with the use of fake invoices, that is, invoices generated without the actual supply of goods or services.

Central Board of Indirect Taxes and Customs (CBIC) in a 2019 office memorandum had noted three ways in which this was executed. The first is more direct, wherein the invoice is used, without receiving any goods or service, to show payment of tax. This is then used to avail an ITC claim translating to a loss for the exchequer.

The second entails issuing an invoice to one entity and the goods being diverted to some other entity. The purchaser in this case may actually not be involved in creating an output product or service – a prerequisite of an ITC claim. However, they too may avail a claim on their tax liability which could be unrelated to the transaction incurred. All in all, it may potentially entail shifting ITC from exempted supplies to taxable supplies. 

Finally, the last of these observed methods entails routing of invoices through a series of shell and/or dummy companies and transfer of ITC from one company to another in a circular fashion to increase the turnover. Again, there is no supply of goods or services but the credit is availed based on fake invoices. In such instances, utilising inadmissible credit alongside the utilisation of credit emanating from actual regular supplies results in a loss to the exchequer.

In May last year, CBIC had launched a drive against bogus registrations and issuance of fake invoices. Over a seven-month period since its initiation, the drive had detected a total of 29,273 bogus firms involved in suspected ITC evasion totalling to Rs 44,015 crore, a report in January 2024 noted. The CBIC further informed that the discovery translated to savings of Rs 4,646 crore, of which Rs 3,802 crore was because of the blocking of ITC claims. Rs 844 crores were saved by way of recovery. Lastly, 121 arrests were made in this regard.  

What is the motive of such frauds?  

Other than GST evasion, CBIC has observed that the frauds facilitate money laundering and showing fake purchases for getting income tax benefits. About the latter, showing reduced profit margins and higher expenses helps in reducing net profits while accounting. This helps entities acquire income tax benefits. On the other hand, those seeking to present an inflated turnover could benefit from a higher credit limit or overdraft from banks, obtain bank loans and improve their valuations for a stake sale or an IPO, among other things. The fake invoice paradigm could also be utilised to divert for company funds in a manner that helps the entity save up on taxes from the conventional route.  

Would these measures help?  

Shashi Mathews, Partner at INDUSLAW with a practice focussed on tax-related issues, states that the intent and objective of the measure might be “progressive in nature” and would help achieve its stated endeavour. However, he adds, “A lot does depend on each state government’s readiness including but not limited to ensuring adequate resources and training for GST officials to seamlessly carry out such functionalities to keep a check on GST frauds on a larger scale.” Further, Mr. Mathews states that, when the functionality is released on a large-scale, it must be user-friendly for it to be successful. 

Mahesh Jaising, Partner at Deloitte India observed that the focus on high-risk applicants, particularly those with a history of cancelled or suspended registrations underscores the commitment to institute a “credible and transparent GST system.” The measures, supported by the Directorate General of Analytics and Risk Management (DGARM) and GSTN, would enhance the security and integrity of the registration process, Mr Jaising states. Additionally, he observed, “Industry hopes for a single biometric authentication across India, allowing one-time verification in any State for companies with a presence in multiple States.” In this context, he believes that this move would help streamline the process further and reduce redundancy.

While stating that the measures would avert fake invoicing to a large extent, Mr Mathews noted, “One cannot rule out discrepancies in the Aadhaar information itself. But that does not take away the fact that a majority of registrations in the future would have credibility due to this exercise.”  

Union Finance Minister Nirmala Sitharaman chairs the 53rd GST Council meeting, in New Delhi on June 22, 2024.
| Photo Credit: PTI

Union Finance Minister Nirmala Sitharaman said the 53rd GST council has taken a lot of decisions relating to trade facilitation and easing the compliance procedures for small businesses, MSMEs and other taxpayers.

Services by way of hostel accommodation provided to students outside educational institutions will be exempted from GST for services with a value of upto ₹20,000 per person per month, Ms. Sitharaman said.

Also Read | Move ahead: On GST and reform

This will be subject to the condition that such services are provided for a minimum continuous period of 90 days. This will particularly help students coming from rural areas, and will be a big relief for all students across India.

The GST Council has clarified that all solar cookers will attract 12% GST, whether linked to single or dual energy sources. the finance minister said.

The Council has also decided to exempt services provided by the Indian Railways to the common man such as waiting room, cloak room and so on, from GST. All intra-railway services will also be exempted from GST, she added.

The Council has decided to mandate biometric-based Aadhaar authentication for all GST registrations across the country in a phased manner. This is based on the successful rollout of pilot projects in Gujarat and Puducherry and will make the registration process quick while curbing the fraudulent use of input tax credits through fake invoices.

Bharatiya Janata Party (BJP) leader Nirmala Sitharaman arrives to assume charge as the Union Finance Minister, at the Ministry of Finance in New Delhi on June 12, 2024.
| Photo Credit: ANI

The Centre has decided to convene a meeting of the Goods and Services Tax (GST) Council on June 22, eight-and-a-half months after its last meeting, the Finance Ministry said on June 13, 2024.

“The 53rd meeting of the GST Council will be held on 22nd June, 2024 at New Delhi,” a ministry statement informed.

The Council that is generally expected to meet every quarter, has met just six times since 2022.

The agenda for the upcoming meeting is not known yet but State Finance Ministers can be expected to flag suggestions for the indirect tax regime that can be incorporated in the Union Budget likely to be presented next month.

Industry will also be keen for signals from the Council on the revival of a plan to restructure the complex multiple-rate tax structure, now that GST revenues have risen significantly, along with a promised review of the 28% levy on bets made in online gaming, casinos, and horse racing.

Consumers and industry would also be eyeing some visibility on the future of the GST Compensation Cess that was originally meant to be levied for the first five years of the GST regime that began in July 2017. The levy of the Cess, used to recompense States to come on board, had been extended after the pandemic.

At its last meeting held on October 7, 2023, the Council, headed by the Finance Minister, had initiated discussions on a “perspective plan” to impose a cess or surcharge on top of GST levies after March 2026, when the GST Compensation Cess is due to expire. The Council had then decided to meet in the future to discuss a replacement levy for the Cess and how those funds could be used.

Implementation of Bommai report

To rationalise and rejig multiple GST rates and simplify the tax structure, the Council had set up a group of ministers (GoM) under former Karnataka Chief Minister Basavaraj Bommai in late 2021. Some initial recommendations of the ministerial panel to withdraw exemptions and concessional rates on several items had been accepted by the GST Council in June 2022.

However, the panel did not move forward on its broader rate rationalisation mandate, with officials citing high inflation and revenue considerations as key factors to put the exercise on the backburner. The GoM also remained in suspended animation after Mr. Bommai’s party lost the Karnataka assembly polls last May. The GoM was reconstituted in late 2023 with Uttar Pradesh Finance Minister Suresh Kumar Khanna as its convenor.

Apart from broader reforms to the indirect tax regime, tax experts also hope for resolution of some long-pending operational issues and challenges at the upcoming meeting.

“Multiple clarifications are being looked after to including taxability for the online gaming sector before October, taxability of ESOPs, corporate guarantee taxability, and various rate-related clarifications are also anticipated due to recent litigations,” said Abhishek Jain, indirect tax head and partner at KPMG.