The GST Council’s October 7 meeting will focus on process reforms and nothing on rate proposal is expected to be taken up, government sources has said.

The Council is meeting after a gap of more than a year.

“No rate proposal likely and the entire deliberation will be on process,” a highly placed source said. However, the GST Council may also review the 18 per cent GST levied on Merchant Discount Rate (MDR), though the issue is not part of the agenda at present. The possible review comes amid concerns over the impact of MDR on merchants and the overall cost of UPI transactions.

Key proposals

One of the key proposals expected to receive attention is the protection of genuine buyers from the consequences of tax defaults by their suppliers. There have been lot of litigations and industry has repeatedly raised concerns over the denial of input tax credit (ITC) to recipients when suppliers fail to deposit the tax collected from them. The Council is expected examine the mechanisms to protect eligible taxpayers who have fulfilled their compliance obligations, while ensuring that fraudulent claims are prevented, another source said.

One such likely proposal is finalising the guidelines to bring uniformity in documents that are to be submitted for faster processing of GST registration applications of businesses who pass on tax credit of over ₹2.5 lakh a month. The guidelines are also expected to prescribe norms for cancellation.

This will be another big reform after the simplified registration process was initiated last year based on a recommendation by the GST Council on September 3 last year and rolled out from November 1. It was mainly for small and low-risk businesses. Small and low-risk business applicants whom the GST system identifies based on data analysis, or those applicants who self-assess that their output tax liability does not exceed ₹2.5 lakh per month (inclusive of CGST, SGST/UTGST and IGST), can opt for the scheme. Nearly 65 per cent of the GST registrations are happening through this route. Now the effort is to bring a simplified mechanism for the remaining 35 per cent, who are basically big businesses.

Compensation cess

There is a big issue about accumulated compensation cess. The matter is now pending in the Supreme Court. A petition filed by the Federation of Automobile Dealers Associations (FADA) challenged the Centre’s notifications on transition or refund of accumulated GST compensation cess credit that industry associations have repeatedly estimated to be around ₹2,500 crore in value. Since the announcement of GST 2.0, auto retailers requested the government to hold significant, validly availed compensation cess balances in their electronic credit ledgers before the new GST regime kicked off on September 22, 2025.

Another proposal is likely to be about easing restrictions on input tax credit (ITC) for specified goods and services on which credit is currently not available. If recommended, it will benefit motor vehicles and certain other conveyances, food and beverages, outdoor catering, beauty treatment, health services, club memberships and certain travel-related benefits. ITC is also restricted on goods and services used for construction of immovable property, subject to the conditions prescribed under the law. This can also be removed.

Source: The Hindu Business Line