Real Test Of GST 3.0? Easy Processes That Help Business

The 57th GST Council session comes after the September 2025 meeting that overhauled the rate structure. With no major rate changes expected this time, attention is shifting to refunds, input tax credit (ITC), registration, return filing, and the balance between tax administration and criminal enforcement.

The meeting, already being described by industry as the beginning of “GST 3.0”, comes against the backdrop of GST collections consistently crossing ₹2 lakh crore a month. Gross collections during April-September 2026 were about ₹12.46 lakh crore, up 11.6% from a year earlier, while September collections rose 14.7% to about ₹2.04 lakh crore.

The stronger revenue base has shifted industry expectations. Rather than another rate overhaul, businesses want the Council to make the system faster, more predictable, and less costly to comply with.

“After an interlude of more than a year and, post GST 2.0, the GST Council shall now reconvene in an environment where India Inc has expectations concerning a tax-friendlier ecosystem,” said Ranjeet Mahtani, partner at Dhruva Advisors.

Mahtani said the next milestone should be deeper process reforms covering registration, return filing, and the matching of data between the GST portal and taxpayer returns.

Refunds Biggest Demand

The most closely watched issue is likely to be accumulated ITC under inverted duty structures, particularly after the 2025 rate rationalisation.

Businesses whose output tax rates were reduced while their inputs continue to attract higher GST can accumulate credits that cannot be readily monetised. Industry wants the refund mechanism expanded to cover input services and, potentially, capital goods.

“Industry is keenly awaiting GST Council announcements on 7 October, already being called GST 3.0,” said Abhishek Jain, indirect tax head and partner at KPMG.

“The one everyone is watching is refund of input services under the inverted duty structure,” Jain said, adding that allowing it would help credit monetisation and improve liquidity in sectors such as FMCG, food, and pharmaceuticals.

Industry is also seeking refunds on capital goods, even if they are spread over a period of time, he said.

Formal refund pendency is no longer the central problem. As of 31 March 2026, only 64 claims worth about ₹164 crore had been pending for more than 60-90 days, while 110 claims worth about ₹64 crore were pending for more than 90 days.

The larger concern is accumulated or unutilised credit that remains locked under existing rules, particularly credits relating to input services and capital goods.

Jain said faster processing was equally important. “While enabling provisions exist, stricter timelines for processing refunds, at least to the extent of a provisional amount, would be a great step for all refunds,” he said.

ITC Protection, Simpler Compliance

Another major demand is protection for genuine buyers when suppliers default on tax payments or return filing.

Mahtani has called for a legislative safe harbour or relaxation of credit-reversal rules so that compliant buyers do not automatically lose legitimate ITC because of a supplier's failure.

The issue is important because invoice and return mismatches have become a recurring source of notices and litigation. Industry is seeking better integration between e-invoicing, returns, and the GST portal, including easier correction of genuine errors.

Mahtani also expects the Council to revisit registration processes, including the three-day fast-track mechanism for low-risk applicants outlined at the previous meeting. A more dynamic return infrastructure could allow mid-month amendments and corrections to be populated from integrated e-invoicing data.

M.S. Mani, partner at Deloitte India, said the meeting was expected to focus on measures that make doing business easier, including easier ITC, registration, and amendments.

“The last meeting in September 2025 focused on rate rationalisation, which had led to stability in the monthly GST collections,” Mani said. “This meeting is not expected to focus on rate changes but ease GST processes to help businesses.”

Arrest Powers Put Enforcement Under Scrutiny

The proposed review of GST arrest powers could become one of the more consequential changes before the Council because it goes beyond compliance mechanics and touches the architecture of tax enforcement.

Manoj Mishra, partner and tax controversy management leader at Grant Thornton Bharat, said the proposal to revisit arrest powers represented an effort to recalibrate the enforcement framework.

Under the existing framework, Section 69 of the CGST Act permits the Commissioner to authorise arrest, subject to prescribed conditions, for specified offences, including fake invoicing and fraudulent availment or utilisation of ITC.

“The proposal to revisit arrest powers under GST is a significant step in recalibrating the enforcement architecture of the regime,” Mishra said.

He said the arrest provision had an important deterrent role against organised tax fraud but also placed substantial coercive powers in the hands of the tax administration.

The proposed change, he said, should not be viewed simply as removing an arrest provision. Instead, it could establish a clearer institutional boundary between determining tax liability and pursuing criminal enforcement.

“For businesses, the immediate benefit would be greater certainty during investigations and reduced apprehension where the underlying issue is interpretational or a bona fide tax dispute,” Mishra said.

But he cautioned against weakening the response to deliberate fraud.

The objective, he said, should be “more proportionate enforcement where tax disputes should be resolved through the tax framework, while deliberate economic fraud should face appropriate criminal consequences.”

The Council is also expected to examine prosecution thresholds, low-value show-cause notices, and penalties for non-fraudulent defaults.

Revenue Protection, Ease Of Doing Business

The enforcement debate is part of a broader transition in the GST administration.

Mahtani said rationalising penalties for non-fraud cases and standardising show-cause notice procedures could reduce the compliance costs of genuine lapses and prevent some disputes from turning into litigation.

The wider agenda includes faster and more predictable refunds, protection of genuine ITC, simpler registration, easier return corrections, and technology-driven risk assessment.

The Council therefore faces a different task from the one before it in September 2025. Having used rate rationalisation to reshape GST 2.0, it must now address the operational friction that remains inside the system.

For industry, the measure of GST 3.0 will not simply be how much revenue the tax generates. It will be whether legitimate businesses can claim their credits, recover refunds, correct mistakes, and resolve disputes without excessive delay or coercive enforcement.

As collections have stabilised around the ₹2 lakh crore monthly mark, the expectation is increasingly for a GST regime that is not only revenue-secure but also working capital efficient, predictable, and proportionate in dealing with taxpayers.