GST 2.0: What to expect from the October 8 GST Council meeting

The GST Council is set to meet on October 8, and this time the focus is expected to be less about tax rates and more about making the system easier to use.

The 57th GST Council meeting, to be held at Bharat Mandapam in New Delhi, is likely to look at several process-related changes, including input tax credit (ITC), refunds, registration and return filing. The meeting was earlier scheduled for October 7.

The formal agenda has not been made public yet. However, several proposals are expected to come up for discussion.GST 2.0: FOCUS SHIFTS TO PROCESS REFORMS

Finance Minister Nirmala Sitharaman had indicated last month that the next GST Council meeting would focus on the “process” side of GST 2.0.

Speaking at a curtain-raiser event organised by the International Tax Research and Analysis Foundation (ITRAF), Sitharaman had specifically flagged issues around e-invoicing and input tax credit.

The move comes after the GST Council's rate rationalisation exercise in September 2025. With no major rate changes expected this time, the government is now looking at ways to make compliance simpler and reduce disputes.MORE REFUNDS FOR BUSINESSES FACING INVERTED DUTY

One of the key proposals expected to be discussed is a wider refund mechanism for accumulated input tax credit under inverted-duty structures, reported Business Today.

At present, businesses could face a situation where the GST paid on inputs is higher than the tax rate on the final product. This leads to ITC getting accumulated.

The Council could consider allowing refunds of such accumulated credit for input services and capital goods as well.

The changes could be introduced in stages. Refunds linked to input services could potentially be allowed during the current financial year, while those relating to capital goods may come into effect from April 2027.

For businesses, this could help unlock money that is otherwise stuck as unused credit.

Small businesses selling through e-commerce platforms could also get some relief.

The government is considering simplifying the GST registration process for such businesses, with greater use of technology and artificial intelligence.

The move could particularly help small sellers who find the existing registration process complicated or time-consuming.ARREST POWERS MAY BE REVIEWED

Another major proposal concerns the criminal provisions under the GST law.

The Council is expected to consider changes that could remove the power of GST authorities to arrest taxpayers in routine cases, while retaining prosecution for deliberate fraud and other serious offences.

Any such change would require amendments to the GST law and would therefore have to go through Parliament.

Jitendra Motwani, Partner – Tax Practice, Trilegal, said the proposed changes could mark an important shift in how honest taxpayers are treated.

“The proposed decriminalisation, with judicial oversight of arrests and routine ITC and classification disputes kept outside criminal reach, would be a forward-looking step that treats honest taxpayers as partners rather than suspects,” he said.

Motwani also pointed to the possible impact on working capital if credit is unlocked in areas such as employee group insurance and outdoor catering.

He said allowing genuine recipients to retain credit even when suppliers default could also be significant, as it would ensure that honest taxpayers are not penalised for someone else’s failure.

The Council may also look at export-related provisions, particularly the treatment of services supplied through overseas branches of Indian companies.

The issue has led to disputes and litigation, especially for technology and business-process outsourcing companies.

A clarification or change in the rules could provide greater certainty to companies that provide services through their overseas branches.

GST return filing could also be up for discussion.

One proposal being considered is an optional annual return system with quarterly tax payments for businesses with turnover of up to Rs 5 crore that mainly supply goods or services to unregistered customers.

The idea is to reduce the compliance burden for smaller businesses without changing the way tax is collected through the year.

CA Mandar Telang, Vice President, Bombay Chartered Accountants Society (BCAS), said the government should use the opportunity to address some of the structural problems in GST administration rather than focus only on procedural changes.

He said ITC should not be denied for genuine transactions simply because of bona fide clerical, arithmetic or procedural errors in a supplier's or recipient's return, provided the underlying supply is genuine and tax has been properly accounted for.

“A practical rectification mechanism, with suitable safeguards against misuse, would protect honest taxpayers without compromising revenue interests,” Telang said.

Telang also suggested a broader change in the registration system.

According to him, businesses operating across multiple states should be able to access a truly centralised registration framework rather than having to obtain separate registrations in each state.

He also suggested allowing businesses to transfer or cross-use unused ITC between registrations belonging to the same legal entity.

At present, such transfers are mainly dealt with in specific situations such as mergers, demergers or slump sales. Telang said the facility should also be considered for normal business situations where credit builds up in one state while tax liability arises in another.

Another issue flagged by Telang is the mandatory reversal of ITC when payment to a supplier is not made within 180 days.

He said the rule should be reconsidered where the delay is due to genuine commercial disputes or agreed deferred-payment arrangements.

He also called for a simpler and time-bound process to restore GST registrations that have been cancelled.

“These reforms would reduce avoidable litigation, ease working-capital pressures and make GST more aligned with its foundational objective of seamless flow of credit,” Telang said.

Despite the long list of possible changes, the October 8 meeting is not expected to bring another broad-based GST rate rationalisation exercise.

Officials are looking at greater stability in the rate structure, with rate reviews potentially being limited to once a year and changes taking effect from April 1 rather than in the middle of a financial year.

The issue of GST on merchant discount rates (MDR) for UPI transactions could be raised for discussion, although it is not part of the formal agenda at present.

Some states may also raise concerns over GST revenue growth and the financial impact of the rate rationalisation exercise carried out last year.

The larger objective appears to be making GST easier to comply with while reducing disputes and improving the flow of ITC and refunds.

Rather than introducing all the changes at once, the reforms are expected to be rolled out in stages through 2027.

For businesses, therefore, the October 8 meeting could be less about a dramatic change in GST rates and more about fixing some of the everyday problems that have made compliance difficult.- Ends