The council, apex decision-making body for GST, also decided to rationalise provisions governing e-way bills, increase thresholds for prosecution to ₹5 crore, from ₹1 crore now, and convert several criminal offences to civil ones, with an emphasis on decriminalisation of the GST law, now in its 10th year.
"The focus is on simpler registration and returns, faster refunds, fewer disputes and smoother movement of goods," said finance minister Nirmala Sitharaman in a discussion after the meeting.
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Data-driven & risk-based
The country needs a "simpler, stressless and transparent tax system. I don't think there are many outstanding issues fundamental to ease of doing business or... to anomalies and rates, that remain. So, yes, you can say that in GST 2.0, 99% issues have been addressed, rate or process," said Sitharaman, adding that every process reform discussed on Thursday will be implemented from April 1 next year.The inverted structure refunds, extended to cover accumulated tax credit on input services, will be implemented prospectively on credit accumulated from this November 1, clarified revenue secretary Arvind Shrivastava.
The council deferred two key proposals related to input tax credit (ITC), including changing Section 16(2) that concerns tax payment by suppliers and allowing ITC on motor vehicles under Section 17(5). Both matters will be discussed by a committee of officers within three months and then be placed before the next council meeting.
Going forward, the council will make rate changes only once in a year, Sitharaman said. The provisions that have been approved mark a shift toward automated, data-driven and risk-based administration, making all procedures - registration, returns, refunds and ITC - easier for taxpayers with a focus on reducing litigation. A showcause notice can be issued for amounts above ₹10,000, with relief to be extended to past cases as well. "These reforms will significantly improve the ease of doing business and make the GST administration simpler, faster and more transparent," said the finance minister, adding that the government is already working on the next phase of reforms, involving faceless GST and a central tax administration.
India announced wide-ranging cuts in GST in September last year, making scores of daily use goods cheaper, providing a boost to consumer demand. In a significant move aimed at rationalising the levy, GST moved to a two-slab structure - 5% and 18% - with the 12% and 28% rates abolished.
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Experts said the latest measures remove key pain points for businesses and industry, recognising their role in the country's growth story. "Collectively, the reforms seek to unlock working capital, facilitate exports and create a simpler, predictable, business-friendly and globally aligned GST regime," said Mahesh Jaising, tax partner, Deloitte India. The decriminalisation will further improve taxpayer trust. "Business has to be trusted, taxpayers have to be trusted... we shouldn't be too intrusive," Sitharaman said.
"The proposed decriminalisation of certain offences, rationalisation of penal provisions, raising of the prosecution threshold to Rs 5 crore and withdrawal of GST officers' arrest powers under Section 69, collectively seek to draw a clearer line between genuine non-compliance, interpretational disputes and deliberate fraud," said Manoj Mishra, partner and tax controversy management leader, Grant Thornton Bharat.