In today's Finshots, we look at the reforms proposed at the 57th GST Council meeting and how they could make life easier for businesses.

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The Story

Imagine you run a small business that makes and sells packaged food. Business is doing well, you have a loyal customer base, and orders are coming in steadily. So, you decide to expand. You want to sell your products in more states, list them on e-commerce platforms and take your brand nationwide.

But there’s a catch. As your business grows, so does the paperwork. Every new state comes with registration requirements. Some of the GST you’ve paid on purchases is stuck in refunds you’re waiting to receive. And if a supplier collects GST from you but fails to deposit it with the government, you could lose the input tax credit (ITC) you were counting on.

Think of ITC as a way to avoid paying tax twice. If you’ve already paid GST on your purchases, you can usually deduct that amount from the GST you owe on your sales. But if something goes wrong with your supplier’s tax payments, recovering that credit can become a headache. You might even receive a notice asking you to explain a mismatch in your returns.

And just like that, instead of spending your time finding new customers and growing your business, you’re busy chasing refunds and responding to tax notices.

This is ironic because GST was introduced in 2017 partly to make it easier to do business across India. The government has since made several changes to simplify return filing and move compliance online. Yet, many of these everyday problems have persisted.

That’s why the 57th GST Council meeting last week focused not just on tax rates, but also on making the GST system itself easier to navigate.

And that does make sense because lower tax rates reduce how much tax a business pays on a transaction. But faster refunds or a simpler registration process reduces the time and money a business must spend simply to operate. For a small business, that could mean paying suppliers on time, investing in new equipment or expanding into another state more easily.

So, the first problem on the list was registration. Since GST was introduced, businesses have often struggled with delays when registering or updating their details. One reason was the lack of clear, standardised guidance on the documents required for these processes.

The Council has now proposed that most changes to GST registration details be approved automatically through the GST portal. This could spare businesses the wait for routine approvals and let them focus on running their operations.

There’s also a proposal that could help small sellers on e-commerce platforms. They may be allowed to use the platform operator’s warehouse as their registered business address in states where they don’t have their own premises. This could help an estimated 9.5 lakh small vendors sell across India without setting up a physical presence in every state.

But getting registered is only half the battle. Businesses also need access to their money.

That brings us to the second problem: delayed refunds. Imagine you’ve paid GST on your purchases, but the refund you’re entitled to is taking weeks or months to arrive. That’s money you could have used to pay suppliers or buy raw materials.

To address this, the Council has proposed automatically refunding excess money lying in a business’ GST account without requiring an officer’s approval. It has also proposed releasing 90% of eligible export-related refund claims and claims involving cases where the tax paid on inputs exceeds the tax charged on finished products, on a provisional basis. If implemented well, these measures could help businesses get access to their money sooner instead of leaving it tied up in the tax system.

The third issue is the one we mentioned earlier: ITC. Consider a business that buys raw materials from a supplier and pays the GST charged on them. It has invoices and other documents to prove this transaction. But the supplier fails to deposit the tax with the government.

Under such circumstances, the buyer may be asked to reverse the ITC it claimed, even though it has already paid the supplier. In other words, a business that has done its part could end up paying for someone else’s failure to comply.

To tackle this the Council has proposed having some kind of safeguards for such buyers. The aim is to protect genuine businesses that have done their due diligence, without creating loopholes that fraudulent folks could exploit. But how this will work will only be certain when a committee they've formed to sort this out will submit its report within three months.

There’s another interesting proposal here. The Council wants to examine allowing ITC on certain expenses that are currently restricted, including outdoor catering, free promotional samples and expired inventory that businesses destroy, subject to specified conditions.

This could help pharmaceutical companies that distribute product samples, consumer goods companies that run promotions, and businesses that incur significant catering expenses. If they can claim credit on eligible expenses, their overall costs could come down.

The Council also wants to make it easier for businesses to catch mistakes before they turn into tax disputes. That’s where a proposed invoice-management system comes in. The system would allow businesses to accept, reject or keep supplier invoices pending. This would help them check whether the purchases recorded by their suppliers match their own records and whether they’re claiming the correct amount of ITC.

For instance, if a supplier hasn’t reported an invoice correctly, the buyer could spot the problem early and follow up.

The Council has also proposed changes to enforcement. These include reducing penalties for non-fraudulent errors and raising the minimum threshold for issuing show-cause notices. The broader idea is to distinguish genuine mistakes from deliberate attempts to evade tax, rather than treating every compliance failure in the same way.

And it’s not just paperwork that the government wants to simplify. It also wants to reduce unnecessary checks on highways. Under the proposals, officials may need written authorisation from a senior officer to intercept a truck. Confiscation of goods and vehicles would also no longer apply while they’re in transit. In theory, this could reduce arbitrary interruptions and help goods move more smoothly across state borders.

Now, this isn’t an exhaustive list of all the reforms proposed at the meeting. But taken together, the changes may result in a GST system that’s easier for genuine businesses to navigate.

Faster refunds could free up cash. Simpler registration could help small sellers expand. And more proportionate enforcement could reduce the risk of severe consequences for minor mistakes.

But fixing GST is only one piece of the puzzle. Businesses in India must also navigate a maze of licences, labour regulations and approvals before they can set up shop, hire employees or expand their operations.

And for this the government has tried to have initiatives such as the National Single Window System, which aims to bring approvals from different departments onto one platform. The Department for Promotion of Industry and Internal Trade (DPIIT) also has a Know Your Approval module. It covers 698 approvals across 32 central ministries and departments, alongside more than 7,300 approvals across states and Union Territories.

The thinking is similar to that behind the GST proposals. Businesses shouldn’t have to navigate multiple disconnected systems to complete what is essentially one commercial activity.

But putting a common framework in place doesn’t automatically eliminate every compliance problem. States still need to align their rules and implementation processes. Businesses also need clarity on how requirements, such as wage definitions and other obligations, apply in practice.

And that brings us to the larger challenge facing India’s ease of doing business.

Simplifying rules on paper is only the first step. The real benefits come in when unnecessary delays go away, and businesses know what’s expected of them before making a compliance mistake.

So sure, the latest GST proposals are a step in that direction. And if implemented effectively, they could work wonders.

But it goes without saying that the success of these reforms won’t depend on how many rules the government changes. But on whether businesses actually spend less time and money complying with them.

Until then…

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