CII Welcomes GST Council’s Far-Reaching Reforms to Simplify Compliance, Improve Working Capital and Reduce Litigation

Decisions mark an important step towards a more efficient, predictable and business-friendly GST framework: CII
 

CII has welcomed the decisions taken at the 57th meeting of the GST Council, describing them as an important step towards further simplifying the GST framework, reducing compliance costs, improving working capital availability and providing greater certainty to businesses.

CII particularly welcomed the Council’s focus on input tax credit, faster refunds, simplified registration and returns, rationalisation of penal provisions, facilitation of exports and reduction of litigation.

Commenting on the announcements, Mr R Mukundan, President, CII, said “the decisions of the GST Council represent a significant advancement in India’s GST reform journey. Following the rationalisation of GST rates last year, the focus has now shifted to addressing the procedural and structural issues that businesses encounter in their day-to-day operations. The measures announced yesterday should substantially improve the ease of doing business, reduce compliance costs and release working capital for productive use. We compliment the Hon’ble Finance Minister, the GST Council and the Central and State Governments for taking forward this important reform agenda.”

CII welcomed the measures to facilitate faster GST refunds, including the reduction in the acknowledgement period from 15 days to 10 days, deemed acknowledgement where no communication is issued within the prescribed period, and system-based sanction of 90% of eligible refund claims within three working days of acknowledgement. The decision to automate refunds of excess balances in the electronic cash ledger is also a welcome step.

“Delays in refunds have an important bearing on the working capital requirements of businesses, particularly exporters and SMEs. Greater automation and faster processing should improve liquidity, reduce financing costs and allow businesses to deploy their resources more productively,” Mr Mukundan said.

The Council’s decisions on input tax credit are particularly important. CII welcomed the proposed extension of credit to employee health and life insurance, telecommunication towers, pipelines laid outside factories, free samples and certain goods required by law to be destroyed upon expiry. These measures should reduce the incidence of embedded taxes and address long-standing difficulties faced by several sectors.

The decision to extend refunds under the inverted duty structure to input services, and to permit refunds relating to plant and machinery, is another major reform. These changes should improve the economics of manufacturing investments, reduce the accumulation of unutilised credit and strengthen the competitiveness of Indian industry.

CII also welcomed the proposed removal of double taxation in specified services supplied through intermediaries, including hotel accommodation, restaurant and catering services, and passenger transport. The measure should provide greater consistency in tax treatment across different business models.

The Council’s decision to constitute a Committee of Officers to examine the protection of input tax credit for genuine purchasers is also encouraging. CII has consistently advocated that bona fide buyers who have received goods or services and made payment to their suppliers should not be penalised for defaults beyond their control.

On decriminalisation and litigation, CII welcomed the proposed removal of arrest provisions under GST, the increase in the prosecution threshold from Rs 1 crore to Rs 5 crore, the removal of minimum punishment and the reduction in the general penalty from Rs 25,000 to Rs 10,000.

“These are particularly progressive measures. They recognise the need to distinguish between deliberate tax evasion and genuine errors or differences in interpretation. A more proportionate approach to enforcement will strengthen business confidence while allowing the tax administration to concentrate on serious cases of non-compliance,” Mr Mukundan said.

CII also welcomed the proposed common standards for issuance of notices, pre-notice intimation, allegations of fraud, personal hearings and passing of orders. The decision not to issue notices involving amounts below Rs 10,000 should help reduce avoidable disputes and administrative costs.

The simplification of GST registration and amendments, including automated processing of routine changes, should reduce procedural difficulties for businesses. Similarly, the proposed improvements in return corrections and invoice reconciliation should help minimise disputes arising from inadvertent errors.

Simplified registration requirements for small sellers using e-commerce platforms should also enable greater participation in interstate markets, particularly by smaller enterprises.

The Council’s in-principle approval of an optional annual return scheme, with quarterly tax payments, for eligible small taxpayers supplying exclusively to consumers is a welcome development. The detailed framework, once finalised, should provide meaningful compliance relief to a large number of small enterprises.

CII also welcomed the proposed rationalisation of physical inspections of goods in transit. Restricting inspections to the originating and destination States, subject to prescribed safeguards, should reduce delays in transportation, improve supply-chain efficiency and facilitate interstate trade.

The announcements relating to exports of services are especially significant. The proposed changes concerning services supplied through overseas branches and services performed in India on goods belonging to foreign clients should remove important tax-related impediments for exporters. These measures would benefit engineering services, design, testing, research, contract manufacturing and other internationally traded services.

Mr Mukundan added “the GST Council’s decisions are closely aligned with several recommendations made by CII over the past two years. We are particularly encouraged by the emphasis on improving the flow of input tax credit, accelerating refunds, simplifying compliance and reducing avoidable litigation. These measures should support manufacturing, exports, services and SMEs, while further strengthening India’s attractiveness as an investment destination.”

CII also welcomed the indication that GST rates would be considered at a dedicated annual Council meeting, which should provide greater predictability for businesses.

“CII looks forward to the early implementation of these decisions and will continue to work closely with the Government and the GST Council on the next phase of reforms. The objective should be to make GST simpler, more predictable and more efficient, while preserving revenue buoyancy and strengthening the competitiveness of Indian industry,” Mr Mukundan said.

9 October 2026,
New Delhi