India’s GST Council recommends refund, export and compliance reforms

Refund and input-tax-credit proposals

The Council recommended amending section 54 of the Central Goods and Services Tax Act 2017 and the associated rules to automate cash-ledger refunds, reduce the acknowledgement or deficiency-notice period from 15 to ten days and provisionally pay 90% of qualifying zero-rated and inverted-duty refund claims. It also proposed removing the 1.5-times domestic-value cap in rule 89(4)(C).^[1]

For inverted-duty claims, accumulated input-service credit would become refundable where availed from 1 November 2026. Eligible capital-goods credit for zero-rated and inverted-duty refunds would be spread over 60 months for credit arising from 1 April 2027. These are recommended implementation dates, not current entitlements.^[1]

Cross-border supplies and group structures

Proposed amendments to the Integrated Goods and Services Tax Act 2017 would remove the distinct-establishment condition in section 2(6) for export-of-services treatment, move services involving goods physically supplied to the provider from section 13(3)(a) to the default recipient-location rule in section 13(2), and treat qualifying supplies to an overseas buyer delivered into an Indian special economic zone or free-trade warehousing zone as zero-rated. If enacted, these changes could expand export treatment and refund access for Indian businesses dealing with overseas offices and customers.^[1]

Enforcement, e-invoicing and other business changes

The Council recommended omitting the arrest power in CGST Act section 69, raising the prosecution threshold from INR10 million to INR50 million, introducing an INR10,000 threshold for show-cause notices, lowering the maximum general penalty in section 125 and capping pre-deposits for penalty-only appeals. Separate proposals address interception of goods in transit, blocked input credit, intellectual-property transfers and registration cancellation.^[1]

E-invoicing would extend to domestic reverse-charge supplies received from unregistered suppliers and imports of services for taxpayers with annual turnover of at least INR50 million. The Council also recommended clarifications and sector measures, including treatment of related-party services for foreign shipping lines and funds-transfer-pricing entries in banks. Businesses should treat the entire package as proposed: the official release states that only the subsequent circulars, notifications and legislative amendments will have force of law.^[1][2]