The 56th GST Council Meeting has been hailed as a turning point, shaping what many are calling Next-Gen GST. While rate cuts on goods and services grabbed headlines, several significant recommendations aimed at easing compliance and boosting trade went under the radar. From restrictions on Input Tax Credit (ITC) and faster refunds for exporters, to simplified GST registration for small businesses and e-commerce sellers, the reforms place the common man and small taxpayers at the core. The Council also pushed for changes in valuation rules, intermediary services, and discount treatment, while confirming the long-awaited launch of the GST Appellate Tribunal (GSTAT). Collectively, these reforms aim to simplify compliance, strengthen businesses, and pass benefits to consumers, provided companies genuinely reduce prices instead of increasing margins.
Arjuna (Fictional Character): Krishna, recently, the GST Council held its 56th meeting. There's been a lot of discussion that GST has become simpler and more beneficial for the common man. What exactly has changed?
Krishna (Fictional Character): Arjuna, the first GST Council Meeting this year has been revolutionary and would be remembered for a long period of time as Next-Gen GST. Common-man, Labour intensive Industries, Farmers and Agriculture, Health were at the centre of the discussion. The biggest talks have been around the changes in rate of taxes for a range of goods and services but key recommendations have also been made to facilitate trade and simplify GST Compliances for the Small taxpayers.
Arjuna (Fictional Character): Krishna, what measures are recommended in the council meeting other than the rate changes?
Krishna (Fictional Character): Arjuna, the following are 10 key recommendations made in GST Council Meeting that might have gone under the radar:
1. ITC Limitation in case of certain goods or services: Some goods and services will now be reclassified under 5 percent slabs (without ITC) from 18%/12%. This appears consumer-friendly at first instance, but the benefit is limited. Under the 5% rate, Input Tax Credit (ITC) is blocked, meaning service providers providing services such as hotels accommodation and salons cannot claim credit for GST paid on their inputs. These ITC becomes the costs and gets added to the base price, and then 5% GST on outward side is applied on this higher cost.
For Example: Earlier, a salon service worth ₹1,000 + ₹180 GST (18% with ITC). The salon could set off GST paid on inputs, so tax incidence was neutral. Now, under 5% without ITC, suppose input tax credit worth ₹100 gets blocked. The base price rises to ₹1,100. GST at 5% = ₹55. Total = ₹1,155. Net effect: Instead of a straight fall from ₹1,180 to ₹1,050, the consumer ends up paying around ₹1,155. Thus, the effective saving is marginal.
2. Faster Refunds: Council has proposed amendment so as to allow faster refunds. 90% of provisional refunds under Zero Rated Supply (Exports) and Inverted Duty Structure should be issued through a risk-based assessment system which will improve cash flow for taxpayers. This will impact the exporters and taxpayers falling under ISD mechanism for better cash flow management.
3. Refund Availability for Small Exporters: The Council recommended removing the threshold limit under section 54(14) of the CGST Act, allowing GST refunds on all export consignments, benefiting small exporters using courier or post. So now the small exporters can export goods easily.
4. Swift Registrations: Recommendation have been made to roll out an optional new automated registration facility for small taxpayers who determine that their output tax liability during the period would not exceed Rs. 2.5 Lakhs to a registered person. This registration would be provided in three working days and is expected to benefit 96% of new applicants. This will impact small businesses.
5. Simplified Registration for Small E-Commerce Sellers : The Council suggested a simplified GST registration scheme for small suppliers selling through e-commerce operators across States presently required to maintain Principal Place of Business in every state. This will impact E-commerce industry.
6. Post Sales-Discount Amendment- The Council has recommended to simplify post-sale discounts by removing requirement of pre-signed agreements or invoice-wise linking. Post Amendment discounts can be given through a GST credit note and the recipient must reverse their input tax credit accordingly. A new circular will clarify when commercial credit notes don't need ITC reversal, when manufacturer-to-dealer discounts count in the dealer's sale price to customers, and when such discounts are actually payments for promotions.
7. Valuation Rules: GST on pan masala, cigarettes, gutkha, chewing tobacco (incl. zarda/scented), and unmanufactured tobacco will shift to retail sale price (RSP)-based valuation (replacing transaction value). All these industries will get affected by this change.
8. Restaurant Services(Specified Premises): The Council recommended to issue a clarification that a stand-alone restaurant cannot call itself a 'specified premises' and therefore cannot opt to pay GST at 18% with ITC. This will impact restaurant industry.
9. Intermediary Services-Place of Supply: The Council recommended amending Section 13 for determination of place of supply for intermediary services which will be now the recipient's location (as per section 13(2)), enabling Indian exporters to claim export benefits.
10. GSTAT (Appellate Tribunal): GSTAT will begin accepting appeals by the end of September 2025 and would start hearing on the matters from December 2025. The Principal Bench of GSTAT would also act as the National Appellate Authority for Advance Ruling. This is expected to bring resolution to long pending disputes and uniformity of the Advance Rulings. This will have an impact on the taxpayers or business whose litigation are pending.
Arjuna (Fictional Character): Krishna, what should we learn from this?
Krishna (Fictional Character): Arjuna, The biggest takeaway from this GST Council Meeting was the conclusion that common man was at the centre of both direct and indirect tax reforms for the year. The year started with extension of the maximum limit of Income not liable to Income tax and the second half of the year has brought indirect tax savings for the common man. This saving when turned into investment could bring even more prosperity to the common man as well as the nation itself. Further companies should genuinely pass on the tax reduction to consumers instead of raising their margins, otherwise the final prices will remain unchanged. We shall also remember that these are just recommendation at this moment and we should wait for the official notification for its implementation.
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