Industry hails progressive GST reforms as major boost to ease of doing business

The process reforms announced by the GST Council on October 8 are progressive and forward-looking, ranging from unlocking working capital through input tax credit (ITC) rationalisation to improving the ease of doing business, industry executives and tax experts said. The deletion of arrest provisions from GST laws is a consequential decision, as tax officers will no longer have the power to arrest individuals under the provision, experts said. At its 57th meeting, the GST Council approved the removal of the power of arrest from GST laws through the omission of Section 69 of the Central Goods and Services Tax (CGST) Act, 2017. Section 69 of the CGST Act was the statutory provision that empowered tax authorities to arrest individuals for specified serious tax offences. Its omission marks a shift away from administrative arrest powers towards a judicial, complaint-based prosecution process, experts noted. The Council also raised the threshold for prosecution under GST laws for tax evasion and other offences to Rs 5 crore from Rs 1 crore. On refunds, the Council recommended reducing the time limit for acknowledging a refund claim to 10 days from 15 days. If neither an acknowledgement nor a deficiency memo is issued within that period, the claim will be treated as acknowledged. The system, rather than an officer, will sanction 90 per cent of the claim on the basis of risk assessment. "The decision to automate the provisional grant of 90 per cent will provide a significant boost to the industry that can put liquidated capital back into business, promoting Make in India," said Pratik Jain, Partner, Price Waterhouse & Co LLP. The Council also proposed further automation of GST registration. It recommended reducing rejections and queries on registration applications arising from missing or incorrect information, and expediting the processing of applications by tax officers. "The faster refund timelines announced alongside, cutting the provisional refund window from 7 days to 3 days, automating refunds of excess cash balances, and shortening the timelines for acknowledging refund applications, are welcome turnarounds that will make the relief real and immediate for taxpayers," said L Badri Narayanan, Chairman, National Council on Indirect Taxes, ASSOCHAM. Crucially, to support manufacturers and exporters, the Council approved an expansion of refunds under the inverted duty structure, which Narayanan described as a "tectonic modification". The Council approved cash refunds of accumulated ITC on input services, effective for credits availed on or after November 1, 2026. The decision addresses a long-standing demand from industries where raw materials and operational services attract higher GST rates than finished products. Under the revised framework, businesses will be able to claim refunds on service-related tax credits, including those on logistics, utilities and professional fees, helping unlock working capital tied up in accumulated ITC. Manufacturing and processing sectors are also expected to benefit from the expansion of inverted duty refunds to cover tax paid on plant and machinery. Under the earlier GST rules, refunds under inverted duty structures -- where tax rates on inputs exceed those on final products -- were restricted to raw materials, leaving credits on capital goods unutilised. "This is a significant milestone for businesses, liquidating unutilized credit which will improve working capital contributions. Small businesses will be highly benefited," Narayanan said. Ranjeet Mahtani, Partner at Dhruva Advisors, a tax and regulatory advisory firm, said the recommendations would unlock working capital and ease compliance and processes for taxpayers. "Overall, the recommendations will unlock working capital as also ease compliances and processes for taxpayers. Indubitably, the recommendations will have a positive impact on India Inc. even as it eases the doing business index. Government exchequer too will stand to benefit with enhanced revenues," Mahtani said.