Government has proposed sweeping GST reforms to speed up registrations and refunds, while tightening checks to stop fake firms from claiming fraudulent input tax credit.
The Centre has announced plans for big changes in GST rules to make it easier for honest taxpayers. The new proposal will speed up GST registration, process refunds faster, and bring in pre-filled returns to reduce errors.
At the same time, it will use risk-based checks to stop fake firms from making false claims for input tax credit (ITC). The plan will be discussed at the next GST Council meeting, likely in September.
The government wants to give GST registration within three working days for almost 95% of small or new businesses, including startups. These businesses will not have to go through biometric Aadhaar checks or physical visits if they pass on little or no ITC.
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Refunds will also be quicker. Around 80% of refund claims could be cleared as soon as the application is filed. Exporters and businesses under the inverted duty structure will benefit the most. While there may still be a short delay in some cases, the waiting time will be much less than now.
In December 2024, the GST Council agreed in principle to divide businesses into three groups — New/Small Businesses, Deemed Trusted Businesses, and Emerging Businesses.
Public sector organizations and businesses that make large cash GST or income tax payments are considered trusted businesses. Now, without physical checks, they can transfer an unlimited amount of ITC, and registration will be easier.
Rising enterprises are those that surpass a specific ITC threshold but do not fit into the trusted category. Stricter rules will be applied, including application fees, security deposits, and in-person verification.
In three days, small or new firms that pass with little to no ITC will be swiftly registered without biometric checks or in-person visits.
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The changes come after prominent instances of tax theft. Between April and October 2024, officials found 17,818 bogus firms involved in ITC fraud totalling Rs 35,132 crore, leading to 69 arrests.
Till FY25, central GST officers found Rs 7.08 lakh crore in tax evasion, including Rs 1.79 lakh crore in ITC fraud, over the preceding five years. Rs 2.23 lakh crore in GST evasion was detected in FY25. More than half of these cases — 15,283 cases — were related to ITC fraud worth Rs 58,772 crore.
To fight this, biometric verification is already being utilized for dubious candidates, asking them to validate their identities at Aadhaar centres.
These proposals aim to make GST simpler for honest taxpayers, small businesses, startups, and exporters could see faster approvals and refunds, which would help with cash flow. At the same time, the government hopes to save thousands of crores by stopping fake registrations and false claims.
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