GST Council's 57th meeting widens input tax credit scope, eases exporter refunds and small-business compliance, and introduces faceless central GST administration

Key facts

• The GST Council, chaired by Union Finance Minister Nirmala Sitharaman, at its 57th meeting on October 8 approved proposals to rationalise input tax credit (ITC) and refund reforms to support manufacturing, liquidity and exports.
• Pharmaceutical companies will be able to claim ITC on free samples and on goods destroyed or written off upon expiry of shelf life, where destruction is required by law, effective from the next fiscal year (FY'28).
• The Council recommended allowing exporters to claim refunds of GST paid on plant and machinery, spread over five years; about 13,100 of roughly 38,700 taxpayers claiming export refunds carry such tax on plant and machinery that could not be recovered until now.
• Under the streamlined refund mechanism, refund applications will be acknowledged within 10 days and 90 per cent of the refund released automatically after a risk-based check, with the balance paid after verification.
• The Council eased four conditions that had prevented certain transactions from qualifying as exports, covering transactions with overseas branch offices, job work on goods owned by foreign clients, goods delivered to Special Economic Zones at a foreign buyer's instruction, and alignment of export payment receipt rules with the Reserve Bank of India's framework.
• The Council recommended limited ITC in the same line of business for hotel accommodation priced up to ₹7,500 per unit per day, restaurant and outdoor catering services, and gym and fitness services, without reducing GST rates on these services.
• Finance Minister Nirmala Sitharaman announced a faceless, centralised tax administration for about 2 lakh central GST (CGST) taxpayers operating in multiple states, out of nearly 69.5 lakh CGST-registered taxpayers, with a unified window for scrutiny, audit, adjudication, appeal and taxpayer services; the framework will be put to public consultation before the next budget and implemented during the next financial year.
• After last year's rate cuts, the effective GST rate on all goods and services has come down from 11.8 per cent to 10.8 per cent, and rate changes will now be an annual feature implemented from April every year.
• More than 16 lakh small businesses with turnover up to ₹5 crore may file only one GST return annually while paying GST quarterly, with late fees waived, penalties rationalised, a ₹10,000 threshold set for show-cause notices with pending cases below it closed, and eligible small e-commerce sellers allowed to sell across states without multiple registrations.
• The Council recommended amending section 17(5) of the CGST Act, 2017 to allow employers to claim ITC on GST paid on health and life insurance policies taken for their employees, lowering the effective cost of employer-sponsored coverage.