GST Council meets today; decriminalisation, faster refunds and MSME relief on cards

Faster refunds, easier registration, simplified processes for claiming Input Tax Credit (ITC), decriminalised offences and a revised definition of exports top the agenda of the GST Council which meets in New Delhi on October 8. The 57th GST council meeting has an extensive agenda covering issues affecting businesses across sectors, including agriculture, MSMEs, exports and manufacturing, sources said. These proposed changes aim to use technology to make GST administration simpler and more predictable. One of the main proposals is to decriminalise offences under the GST regime, with the council, which takes decisions through consensus to debate stripping tax authorities of their arrest powers, they added. The current framework gives the commissioner the power to authorise arrest where there are reasons to believe that a person has committed offences such as fake invoicing, ITC claims and refunds or tax evasion. The proposal aims to scrap standalone GST arrest provisions, stripping tax officers of their authority to execute arrests under Section 69 during an investigation. Wider definition of service exports The council is likely to consider a wider definition of exports of services. It will include allowing Indian firms to retain export status when they bill foreign clients through overseas branches and treating services performed in India for overseas clients as exports. The changes seek to address some of the tax issues faced by India's services exporters, including global capability centres (GCCs), sources said. GCCs, the India units of multinational firms, undertake engineering, product development and testing for their overseas group companies and are paid in foreign exchange. But such services attract 18 percent GST because of rules determining where a service is considered to have been delivered. If such services are termed "exports", there will be not GST. Faster refunds, quicker registration The other aspect is the processing of GST refunds, which affects the working capital of businesses. Under the CGST Act, the government is required to release tax refunds within 60 days. The proposal under review is to acknowledge refund claims in 10 days, with ninety percent released on a risk check. Necessary details would be drawn from customs and banking systems in an automated mode, sources said. The council will also consider granting registration to 61 percent of taxpayers, in three working days without an officer. For the remaining taxpayers, the proposal is to streamline the process to avoid unnecessary queries and avoid rejections. Annual returns for some small taxpayers To ease compliance, the council is also expected to consider allowing small taxpayers who supply only to consumers to file GST returns once a year instead of every month. For e-commerce companies, the council is expected to consider a proposal for a uniform tax incidence across platforms. Platforms would then no longer be able to apply different tax treatment to identical services based on their individual commercial models. Rationalising taxes in agri sector The council may take up measures to lower the tax burden on the agriculture sector, including exempting seed storage and coffee-curing services from GST and placing psyllium (isabgol) seeds in the nil-rate category, sources said. Storage and warehousing of seeds meant for sowing may be exempt from GST. At present, seeds meant for sowing are excluded from GST exemptions on storage and warehousing because they undergo processing before reaching farmers. The council may also create a separate entry for psyllium seeds at the nil rate, whether the seeds are fresh, chilled, frozen or dried, so that a crop grown largely by smallholders is not taxed differently.