Measures for Facilitation of trade by 56th GST Council Meeting

What are the measure provided by the 56th GST Council meeting for facilitation of trade?

Significant trade facilitation measures provided by the 56th GST Council Meeting.

1. Sanction of risk-based provisional refund to facilitate refund claims on account of zero-rated supply of goods or services or both (i.e. export of goods or services or both or supply to aSpecial Economic Zone developer/unit for authorised operations.):

• Risk-based provisional refund mechanism will be rolled out for refund claims filed on account of zero-rated supply of goods or services or both.
• This means exporters and suppliers making zero-rated supplies (exports, supplies to SEZ, etc.) can get faster refunds, without waiting for a detailed scrutiny of all claims.
• The system will identify low-risk taxpayers based on data analytics, past compliance history, and risk parameters. These taxpayers will receive refunds provisionally, while high-risk cases will undergo stricter verification before release.
• The aim is to address exporters’ long-standing concern about working capital blockages and to promote India’s global competitiveness.

2.  Proposal for Risk-Based Provisional Sanction of Refunds under IDS

• Inverted Duty Structure (IDS) occurs when input tax rates are higher than output tax rates, leading to accumulation of unutilised ITC.

• Under current practice, refund of such accumulated ITC is allowed, but processing takes time due to verification.

• The new proposal is to allow provisional sanction of refunds for low-risk taxpayers, determined through data analytics and compliance history.

• This will ensure quicker release of refunds, reducing working capital blockage, while simultaneously filtering out high-risk taxpayers for detailed scrutiny.
  3. Amendment in CGST Act to provide for GST Refunds in respect of low value export consignments:

• At present, refund processing for small-value export consignments involves the same level of compliance and scrutiny as for large consignments.

• This creates working capital stress for small exporters, particularly in handicrafts, textiles, gems & jewellery, and MSME-dominated export sectors.

• The Council recognised that facilitating quick refunds for such consignments will:

  • Encourage participation of small exporters in global trade.

  • Improve liquidity and competitiveness.

  • Align India’s GST framework with ease of doing business goals.

4. Simplified GST Registration Scheme for Small and Low-Risk Businesses:

• Currently, GST registration involves submission of extensive documents, physical verification (in select cases), Aadhaar authentication, and risk-based scrutiny.

• For small taxpayers and low-risk categories, this often results in delays, higher compliance costs, and procedural difficulties.

• The new proposal seeks to create a separate streamlined pathway for GST registration with minimum documentation and faster approval, based on a risk-assessment framework.

5. Introduction of Simplified Registration Scheme for small suppliers supplying through electronic commerce operators

• Current Position: Under the GST law, suppliers making supplies through ECOs are required to mandatorily obtain GST registration, irrespective of turnover (i.e., no exemption threshold applies).

• This has created difficulties for small businesses, artisans, home-based sellers, and micro-entrepreneurs who wish to participate in online marketplaces like Amazon, Flipkart, Meesho, Zomato, Swiggy, etc.

• The Council recognised that this requirement acts as a barrier to entry for small suppliers, discouraging them from using e-commerce platforms.

• Therefore, it has been proposed to introduce a simplified registration and compliance scheme exclusively for low-risk, small-value suppliers operating through ECOs.

6. Amendment in place of supply provisions for intermediary services under section 13(8)of the IGST Act

• Current Law:

  • Section 13(8)(b) of the IGST Act deems the place of supply of intermediary services to be the location of the supplier of services (in India), even if the recipient is outside India.

  • This means that export of intermediary services is taxed in India, unlike most other services which are treated as exports if the recipient is outside India.

• Issues with Current Position:

  • Makes Indian service providers uncompetitive globally.

  • Leads to double taxation: foreign recipient may not get credit for GST paid in India.

  • Multiple High Courts (Bombay, Gujarat, Delhi, Calcutta) have upheld its constitutionality, but it remains a matter of trade dissatisfaction.

• Council’s Proposal:

  • Amend Section 13(8) to align intermediary services with the general principle of export of services – i.e., place of supply should be location of recipient (outside India), not location of supplier.

  • This would effectively zero-rate intermediary services when supplied to foreign recipients.

7. Amendment of section 15 and section 34 of CGST Act, 2017 in respect of Post Sale Discount

• Current position: Post-sale discounts offered by suppliers to buyers often face litigation and compliance hurdles because:

  1. Not all discounts qualify for deduction from transaction value under Section 15(3).

  2. Credit notes under Section 34 can be issued only when tax incidence has not been passed on to the buyer, leading to complications.

• Issues for businesses:

  • Genuine trade discounts (e.g., year-end rebates, turnover discounts, target-based incentives) are often disallowed in GST valuation.

  • Leads to higher tax outgo for suppliers and unnecessary disputes.

• Council’s proposal:

  • Amend Section 15 to explicitly recognise post-sale commercial discounts as deductible from transaction value, subject to prescribed conditions.

  • Amend Section 34 to allow issuance of credit notes without mandatory GST reversal by recipient, thereby simplifying adjustment mechanisms.

  • This aims to bring clarity, reduce disputes, and facilitate trade.

8. Issuance of circular on certain issues pertaining to Post Sale Discount

• The aim is to ensure uniformity in tax treatment across the country and to provide certainty to trade and industry.

• The circular will supplement the amendments in Section 15 (Valuation of Supply) and Section 34 (Credit Notes).

• Types of Post-Sale Discounts Eligible for GST Deduction

  • Clarify treatment of turnover-based discounts, volume rebates, target-based incentives, and year-end rebates.

  • Distinguish between commercial discounts (eligible) vs. incentives linked to services (may be taxable as supply).

• Conditions for Credit Note Adjustment

  • Specify when suppliers can issue credit notes without requiring ITC reversal by recipients.

  • Introduce possible documentation standards (self-declaration, agreement copy, or ledger reconciliation).

• Accounting & Reporting Guidelines

  • How to report such discounts in GSTR-1 and GSTR-3B.

  • Clarification on treatment under annual returns and audit reconciliation.

• Transitional Relief for Past Cases

  • Circular may provide relaxation/clarity for pending disputes relating to past post-sale discounts.

The above compilation is made for educational purpose only.  Please refer to the original press release before relying on any information.  Click here for original press release content.