57th GST Council Meeting reforms: From enforcement to enablement

By Divyesh LapsiwalaA decisive push towards a more trust-based framework, with simpler processes, faster refunds and proportionate enforcementGST Next Gen Reforms, unveiled through the reforms of the 56th GST Council meeting in September 2025, find further expression in the 57th Council meeting. The GST Council has moved the reform conversation beyond rates and towards what businesses experience every day: credits, refunds, compliance, disputes and enforcement. Many of the proposed changes are expected to take effect on or before April 2027, fittingly just ahead of GST’s 10-year milestone.Widening of the ITC and refund poolOne of the bolder and more consequential reforms is the proposed widening of the input tax credit base by unlocking credits on goods and services that have historically remained restricted. Allowing ITC on outdoor catering, health and life insurance, pipelines laid outside factory premises, free samples, and goods destroyed or written off upon expiry of shelf life as required by law recognises that many of these represent genuine business costs and employee-related expenditure. Equally significant is the proposed availability of ITC on telecommunication towers, which could unlock credits and provide a meaningful boost to the telecom infra sector.The proposed expansion of the refund pool is another important development. Refund eligibility under the inverted duty structure would extend to ITC on input services availed from 1 November 2026. Further, refunds of ITC on capital goods would also be permitted for zero-rated supplies and inverted duty structure claims where the credit is availed from 1 April 2027, with credit of capital goods available in a phased manner.Leveraging technology and taxpayer information over the last 9 years, the Council has decided to move towards system-driven processing of export refunds of up to 90%, without officer intervention. In phase two, full automation of acknowledgement and sanction of eligible zero-rated refund claims based on a risk evaluation matrix. Taxpayers would be keen to understand (and align) with this matrix to boost working capital and reduce refund friction.Export reformsExports continue to remain a key focus of the reform agenda. From extending zero-rating benefits to supplies made to overseas buyers with delivery in an SEZ or FTWZ, to facilitating export benefits for certain services in relation to goods physically made available in India, the recommendations seek to recognize the need to neutralize burden of tax on export transactions. Coupled with the proposed clarity on realization of export proceeds in Indian Rupees for multiple scenarios, these measures reinforce the principle that genuine export transactions are not denied benefits because of technical distinctions or interpretational challenges.Attention on simplification, automation and reduced enforcementThe meeting is noteworthy for the breadth of process reforms proposed across the GST lifecycle. Simplified registration processes, automated acceptance of registration amendments, system-driven cancellations and clearer registration guidance are all aimed at reducing routine taxpayer-officer interaction and making compliance more predictable. The Finance Minister's announcement regarding faceless and centralised tax administration for taxpayers under the Centre's jurisdiction, though outside the GST Council agenda and press release, reflects the same broader direction of travel towards greater transparency, consistency and reduced physical interface with tax authorities.The focus on automation is equally evident in the proposed redesign of the return architecture. Electronic statements, corrective mechanisms, enhanced invoice management controls and system-driven validations are intended to minimise liability and ITC mismatches while reducing disputes arising from reporting inconsistencies.A similar shift is also visible in the area of dispute management and enforcement. The Council has recommended withdrawal of arrest powers under GST, an increase in the prosecution threshold from ₹1 crore to ₹5 crore, standardised principles for notices and adjudication, reduction of the maximum general penalty to ₹10,000 and intelligence-led interception of goods. These measures reflects a more regulated approach that seeks to simplify compliance for genuine taxpayers while reserving stronger enforcement for higher-risk cases.Several clarifications are expected to be issued. Businesses will need to evaluate the changes carefully, and determine the frameworks to be adopted to align as well as benefit from the changes proposed.As GST enters its second decade, the true strength of a mature tax regime remains an ongoing process of listening, adapting and refining the law to ensure that policy intent translates into practical outcomes. The GST Council must be commended for this exceptional feat. Kudos!(The author is Tax Partner, EY India. Vaishali Morzaria, senior tax professional, EY India also contributed to the article.)You use AI every day. Now get your AI Quotient. Take the AIQ test.