57th GST Council Meeting: Major Tax Reforms and Ease of Doing Business

57th GST Council Meeting: Major Tax Reforms and Ease of Doing Business

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Key takeaways

  • The 57th GST Council meeting recommended completely ending tax authorities' arrest powers under GST by deleting Section 69 of the CGST Act.
  • The monetary threshold for launching criminal prosecution under GST will rise sharply from ₹1 crore to ₹5 crore.
  • Tax authorities will issue provisional refunds of 90% within 3 working days through an automated risk-assessment system.
  • Under Article 279A, GST Council decisions require a 75% weighted majority, with the Centre holding a 33.3% vote share and states holding 66.7%.
  • A minimum tax dispute threshold of ₹10,000 has been established, ending all pending notices and legal appeals below this value.

Why in News

  • The Goods and Services Tax (GST) Council held its 57th meeting in New Delhi under the leadership of the Union Finance Minister.
  • The Council announced major administrative and procedural reforms that will take effect from April 1, 2027.

About The GST Council

  • The Council acts as a joint constitutional body representing both the Centre and the States.
  • It recommends key GST policies, serving as a core pillar of cooperative federalism in India.

Constitutional Basis

  • The 101st Constitutional Amendment Act, 2016 created the Council by inserting Article 279A into the Constitution.
  • This amendment required the President of India to set up the Council within 60 days, leading to its notification on September 12, 2016.

Composition of the Council

  • The Union Finance Minister heads the Council as its Chairperson.
  • The Union Minister of State for Finance or Revenue serves as the central government member.
  • Each state and union territory nominates its Finance Minister, Taxation Minister, or another designated minister as a member.
  • The Revenue Secretary serves as the Ex-officio Secretary, while the CBIC Chairperson joins meetings as a permanent non-voting invitee.

Voting Structure

  • The central government holds one-third (33.3%) of the total voting power in the Council.
  • All state governments together hold the remaining two-thirds (66.7%) voting weightage.
  • Any Council decision needs a three-fourths (75%) weighted majority of members present and voting to pass.

Key Functions of the GST Council

  • The Council recommends tax rate slabs, cess rates, exempt items, turnover thresholds, and special disaster relief levies.
  • It drafts model laws for CGST, SGST, and IGST, while harmonizing administrative rules for business registrations and tax filings.
  • It establishes place of supply rules to decide whether a transaction counts as inter-state or intra-state trade.
  • It creates dispute resolution mechanisms to settle disagreements between the Centre and states or among different states.
  • It recommends special tax exemptions and procedural rules for 11 Special Category States in the North-East and Himalayan regions.

Decriminalisation and Curbing Inspector Raj

  • The Council recommended removing arrest powers completely under GST by deleting Section 69 of the CGST Act.
  • It raised the threshold for starting criminal prosecution from ₹1 crore to ₹5 crore.
  • It cut the maximum general penalty under Section 125 from ₹25,000 down to ₹10,000.

Transit Check Protections

  • The Council banned routine transit checks, allowing only officials from the dispatch or destination states to inspect goods.
  • Officials now need written approval from an officer ranked Joint Commissioner or above based on actionable intelligence before stopping consignments.

Accelerated and Automated Refunds

  • The Council reduced the refund acknowledgment window from 15 days down to 10 days, after which the system treats claims as acknowledged.
  • An automated risk engine will release 90% of provisional refunds within 3 working days, while making excess cash ledger refunds completely automatic.

Expanded Input Tax Credit Coverage

  • The Council removed restrictions under Section 17(5), allowing input tax credit on employee health and life insurance, telecom towers, pipelines, and destroyed stock.
  • It set up an officers' committee that must submit a plan within 3 months to protect honest buyers when suppliers fail to file returns.

Streamlined Registration and Cancellation

  • The Council introduced an automated system that approves low-risk business tax registrations within 3 days.
  • It simplified registration for small e-commerce sellers by requiring registration only in their home state instead of every sales destination.

Litigation De-Minimis Threshold

  • The Council set a minimum limit of ₹10,000 for issuing tax notices, dropping all pending notices and appeals below this amount.

Service Export Clarifications

  • The Council granted export benefits to services delivered to foreign clients through offshore branch offices.
  • It confirmed that testing, repair, or research services on foreign goods within India qualify as exports, even if the goods remain in India.