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India's 57th GST Council has approved several changes to make tax registration, refunds and compliance easier for businesses, while also announcing changes to arrest and prosecution provisions.
The deets: businesses will now be able to receive 90% of their eligible GST refunds within 13 days, under the new process.
Here's how it will work:
Currently, tax authorities have 15 days to acknowledge a refund application. That will be reduced to 10 days.
If officials don't acknowledge the application or flag missing information within that period, it will automatically be considered acknowledged.
For eligible claims, the system will then release 90% of the refund within three working days, based on a risk assessment.
The government is also making refunds of excess money sitting in a business's GST cash account fully automatic.
The Council has also expanded the types of business expenses eligible for refunds under the inverted duty structure.
Imagine a company pays 18% GST on materials used to manufacture a product, but the finished product attracts only 5% GST. The company has paid more tax on its purchases than it collects on sales. This creates unused tax credit, which it may be eligible to claim back.
Until now, certain expenses, such as services used by the business, were excluded from these refunds.
Refunds will also be available on eligible plant and machinery purchases.
Arrests under GST: the Council has agreed to remove arrest powers under GST laws and raise the threshold for criminal prosecution.
Under existing GST provisions, tax officials can authorise arrests in certain cases involving serious violations, such as fake invoices, fraudulent tax credit claims and tax evasion.
But not everyone agrees.
Jharkhand Finance Minister R K Kishore argued that financial offences should not be treated differently from other criminal offences.
Proposals still under discussion:
- Allowing businesses to claim Input Tax Credit (ITC) even if their suppliers fail to deposit GST.
- Reducing GST on Merchant Discount Rate (MDR) from 18% to 5% or removing it entirely.
- Allowing wider tax credits on vehicles purchased for business use.
