Industry representatives praised reforms from the 57th GST Council, including removing arrest powers and raising the prosecution threshold, saying they will ease compliance. Experts, however, warned benefits depend on effective implementation.
Industry representatives on Thursday welcomed the reforms recommended by the 57th GST Council, saying the measures would ease compliance, improve cash flows and boost business confidence. However, tax experts cautioned that the benefits would depend on how effectively the decisions are implemented, particularly through legislative amendments that could determine whether the reforms reduce disputes or lead to fresh litigation.
The Council, chaired by Union Finance Minister Nirmala Sitharaman, recommended removing arrest powers from GST officers, raising the prosecution threshold from Rs 1 crore to Rs 5 crore and reducing the general penalty from Rs 25,000 to Rs 10,000.
Reforms to Rebuild Trust and Ease Compliance
Reacting to the decisions, Onkar Sharma, Partner at Khaitan & Co, said the meeting marked a shift in how GST is administered, with greater emphasis on building trust among taxpayers. “The 57th GST Council meeting is a clear move from rate-setting to rebuilding trust in how GST is administered,” Sharma said. He added that the enforcement reforms should ease concerns among compliant businesses, particularly micro, small and medium enterprises (MSMEs).
Welcoming the relief for smaller businesses, Praveen Khandelwal, Member of Parliament and Secretary General of the Confederation of All India Traders (CAIT), said the measures would reduce compliance burdens on traders and retailers. He particularly welcomed the in-principle approval of an optional annual return filing scheme with quarterly tax payments for businesses with turnover up to Rs 5 crore that supply only to consumers. Khandelwal said the proposed facility would save time and resources, allowing small businesses to focus on expanding their operations.
The Council also recommended automated processing of refunds and expanding refund eligibility to input services and capital goods under specified conditions. Saurabh Agarwal, Tax Partner at EY India, said the changes could help businesses unlock funds currently tied up in unutilised tax credits. “Including input services and, progressively, capital goods within the refund formula could unlock significant working capital for businesses facing inversion, allowing them to redeploy stranded credits towards investment, technology, employment and growth,” Agarwal said.
Implementation and Potential Litigation a Key Concern
However, experts cautioned that the benefits would depend on how the recommendations are translated into law. Mayank Jain, Partner at Khaitan & Co, said, “Many of the key decisions will require legislative amendments, the language of which is key and should ideally reflect the spirit of the decision to avoid litigation.” He also pointed to the lack of a final decision on protecting genuine buyers from losing input tax credit due to defaults by suppliers elsewhere in the supply chain. The Council has referred the matter to a committee for further examination.
Separately, Sudipta Bhattacharjee, Partner, Indirect Taxes at Khaitan & Co, cautioned against extending faceless assessment to GST without adequate safeguards. “GST is considerably more complex. Before the model is extended to indirect tax, it would be prudent to address these issues and build in strong procedural safeguards, so that the reform reduces litigation instead of adding to it,” he said.
The Council’s recommendations will require relevant legal amendments, notifications or circulars before taking effect. (ANI)
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