GST Council Recommends Major Compliance Reforms: IPR Taxation, Late Fee Relief and E-Invoicing Changes

The GST Council has recommended a fresh set of changes to the GST framework aimed at simplifying compliance, providing procedural safeguards to taxpayers and reducing interpretational disputes. The recommendations cover the GST treatment of intellectual property rights (IPR), blocking of Input Tax Credit (ITC), late fee relief for small taxpayers, e-invoicing, annual return payment options and the functioning of the GST Appellate Tribunal.

The proposed measures also include clarifications on ITC claims, reverse charge mechanism (RCM), GST notices and the distribution of input service credit. If implemented, these changes could affect small businesses, service providers, banks, NBFCs, e-commerce operators and other registered taxpayers.

Treatment of transfer of title in Intellectual Property Rights (IPR)

The Council recommended amendment in Schedule-II of CGST Act, 2017 to provide that transfer of title in IPRs, whether temporary or permanent, will be uniformly treated as supply of services. This will ease GST compliances and will facilitate smoother cross border transactions involving IPR.

Amendment in Rule 86A of the CGST Rules, 2017 to provide for opportunity of being heard to the taxpayer

The GST Council recommended amendment in rule 86A of the CGST Rules, 2017 to provide a mechanism for enabling a taxpayer to file an objection against blocking of any amount in electronic credit ledger and to avail a personal hearing before the proper officer takes a decision on such objection.

Extending relief for small taxpayers on late fees

The GST Council recommended waiver of late fee on delayed filing of return under section 39(1) of the CGST Act, 2017, for taxpayers with an annual turnover up to Rs. 5 crore in the preceding financial year, if the said delayed return is filed by the end of the month in which it was due.

Clarification in respect of various issues through circulars

The GST Council recommended issuance of circulars to provide clarity and to remove ambiguities arising due to varied interpretations by the field formations, in respect of the following issues:

1. Issues relating to Input Service Distributor (ISD) mechanism for distribution of input service credit.
2. Availment of input tax credit by banking companies and financial institutions including NBFCs who opt for section 17(4) of the CGST Act, 2017.
3. Various issues relating to payment of pre-deposits.
4. Admissibility of input tax credit in respect of demonstration vehicles in certain situations.
5. Omission of rule 96 (10) of the CGST Rules, 2017 to be effective from 23.10.2017, in accordance with the Hon’ble Supreme Court decision.

Concept note for an optional scheme for Annual Return Quarterly Payment (ARQP)

The GST Council approved in-principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers having an aggregate turnover equal to or less than Rs. 5 Crore in the preceding financial year and engaged exclusively in supplies to unregistered persons (B2C supplies).

The Council also made the following recommendations to streamline compliances in GST: 

1. Amendment in section 16, section 37 and section 39 of the CGST Act, 2017, to align provisions relating to furnishing of statement of outward supply under section 37 and the return under section 39 of the CGST Act, 2017 with the provisions relating to time limit for availment of input tax credit under section 16(4) of the CGST Act, 2017.
2. Amendment in section 9(5) of the CGST Act, 2017, to provide clarity regarding liability of the ECO to pay tax for the notified services, irrespective of the business models being followed by him.
3. Introduction of a validation clause in CGST Act, 2017, for validation of notices which have been held invalid by various courts on the ground of having been issued for multiple financial years.
4. Extending e-invoicing to domestic supplies received from an unregistered person where the tax is payable under reverse charge mechanism, as well as to the import of services, for taxpayers having aggregate annual turnover of Rs. 5 crore and above.

The Council approved various amendments to the CGST Act, 2017 and the GSTAT (Appointment and Conditions of Service of President and Members) Rules, 2023 to align the provisions in respect of the GST Appellate Tribunal with the relevant provisions of the Tribunals Reforms Act, 2026 and the National Tribunals Commission and Qualification, Selection and Conditions of Service of Chairpersons and Members of Tribunals Rules, 2026.