The 57th GST Council meeting has reportedly cleared several proposals aimed at reducing compliance pressure and tax disputes for businesses and taxpayers.
According to sources, the council has approved changes related to GST officials’ arrest powers, input tax credit (ITC), delivery services, retreaded tractor tyres and show-cause notices.
The proposed changes are expected to benefit sectors including FMCG, pharmaceuticals, telecom, infrastructure, delivery services and corporate businesses.
GST officials may no longer have direct arrest powers
One of the major decisions concerns the arrest powers of GST officers.
According to sources, the council has approved a proposal to withdraw the general power of direct arrest from GST officers. This would mean that officers could not directly arrest taxpayers in ordinary tax disputes.
Serious cases involving deliberate tax evasion or criminal offences would instead have to follow the prescribed legal and court procedures.
The meeting’s agenda had included changes to the arrest provisions under Section 69 of the CGST Act, with the aim of restricting criminal action to serious cases.
ITC allowed on employee health and life insurance
Companies could get another major relief through changes to ITC rules.
According to sources, eligible businesses will be allowed to claim ITC on GST paid for group health and life insurance policies taken for employees.
The move could reduce the effective cost of employee welfare benefits for companies.
ITC on telecom towers and external pipelines
The council has also reportedly approved ITC on telecom towers and pipelines installed outside factory premises.
The move could benefit capital-intensive sectors such as telecom, refining, petrochemicals, gas distribution and infrastructure, where companies make significant investments in such assets.
GST on delivery services cut to 5%
The delivery sector is also set to receive relief.
According to sources, the GST rate on services provided by riders in the unregistered delivery segment has been proposed to be reduced from 18% to 5%.
The lower rate could reduce the tax burden on small delivery service providers and businesses operating in the e-commerce sector.
ITC benefit for outdoor catering
Companies could also claim ITC on GST paid for eligible outdoor catering expenses.
The move is expected to benefit businesses that spend on catering for corporate events and other eligible activities by reducing their overall tax cost.
Retreaded tractor tyres to attract 5% GST
The GST rate on retreaded tractor tyres has reportedly been reduced from 18% to 5%.
Retreading involves reusing old tyres by replacing their worn-out tread. The lower tax rate could reduce costs for the agricultural sector and farmers using such tyres.
FMCG and pharma companies to get ITC relief
Another important change concerns free samples and goods that have to be destroyed under legal requirements.
According to sources, companies will be allowed to claim ITC on GST-paid goods distributed as free samples, as well as eligible expired goods that must be destroyed under the law.
The move could particularly benefit FMCG and pharmaceutical companies, where product samples and the disposal of expired products are common business expenses.
No show-cause notice for tax demand below ₹10,000
The council has also reportedly proposed a ₹10,000 minimum threshold for issuing show-cause notices.
Under the proposed rule, taxpayers would not receive a show-cause notice for tax demands below ₹10,000.
The aim is to reduce disputes over small amounts and save time and administrative resources for both taxpayers and the tax department.
Key takeaways
The reported GST Council decisions could provide relief through:
- Restrictions on direct arrest powers of GST officers
- ITC on eligible employee health and life insurance
- ITC on certain telecom towers and external pipelines
- GST reduction on eligible delivery services from 18% to 5%
- ITC on eligible outdoor catering expenses
- GST reduction on retreaded tractor tyres from 18% to 5%
- ITC relief for eligible free samples and goods destroyed as required by law
- No show-cause notice for tax demands below ₹10,000
Overall, the proposed changes could reduce compliance pressure, lower business costs and limit disputes over minor tax demands.