GST Council cuts refund time to 10 days, ends arbitrary arrest power, raises prosecution limit to Rs 5 crore

The GST Council, at its 57th meeting chaired by Union Finance Minister Nirmala Sitharaman, took several decisions in the interest of traders and taxpayers. The meeting focused not on changing tax rates but on simplifying procedures and promoting ease of doing business. Moving towards "GST 2.0", the system has been placed on data and automation by doing away with paperwork and inspector raj.

Registration: Low-risk traders now get registration automatically from the system in just 3 days, with no involvement of any official. About 61 per cent of registrations are being done this way. Applications such as a change of name, address or director will also be approved automatically.

Returns: Earlier, mismatches in returns led to thousands of notices being issued automatically. Now, if a seller makes an error in an invoice, the seller can correct it directly in the sales statement and the buyer will get the benefit automatically. A major relaxation has also been given for correcting old errors and wrong registration numbers.

Refunds: The period for accepting refund claims has been cut from 15 days to 10 days. In 90 per cent of cases, the system itself, and not an official, will sanction the refund within 3 days. Excess money lying in the cash ledger will also be credited directly to the account.

Disputes and notices: No notice will be sent in cases involving less than Rs 10,000. The process of issuing notices, holding hearings and passing orders has been made more transparent and uniform.

Input tax credit (ITC): A special committee of officials will be formed to protect honest buyers, and it will report in 3 months. ITC will also be available on employees' health and life insurance, telecom towers, pipelines outside factories and expired free samples that must be destroyed. Services in the same chain will not be taxed twice.

Ease of business: Cancellation of registration has been made automatic for small taxpayers. Small traders with a turnover of up to Rs 5 crore who sell directly to consumers will be able to file returns once a year, while tax will have to be paid quarterly. Stopping vehicles on roads without reason has been prohibited.

Arrests, prosecution and penalties: The power to make arbitrary arrests under GST has been removed entirely. The threshold for prosecution has been raised from Rs 1 crore to Rs 5 crore. The general penalty has been reduced from Rs 25,000 to Rs 10,000.

Exporters: If an Indian company serves a client abroad through its own branch there, it will get the benefit of export. Similarly, if a foreign client sends goods to India for testing or repair, that will also be treated as export of services.

E-commerce: Small e-commerce sellers can now show a warehouse of a platform such as Amazon or Flipkart in another state as their principal place of business. This will let them sell across the country while based in their own state.

The meeting made no change to the tax rate on any goods or services. Rate-related issues will now be taken up only once a year, in a separate meeting.