3-day registration for GST, 90% provisional refunds from November 1

The Goods and Services Tax (GST) Council has cleared the way for two major compliance relief measures — a simplified registration scheme for small and low-risk businesses, and a risk-based framework for faster refunds. From November 1 this year, eligible applicants will get GST registration within three working days through an automated process while exporters and firms facing inverted duty structure will be able to access 90 per cent of their refund claims provisionally.

 

Explaining the intent in an interaction with Business Standard, Central Board of Indirect Taxes and Customs (CBIC) Chairman Sanjay Kumar Agarwal said the scheme will cover both central and state jurisdictions, and apply in cases where applicants are assessed to be low-risk. “Certain cases like public sector undertakings (PSUs) and government departments, which already have a strong tax footprint, will be granted automatic GST registration. Another category is businesses that primarily make Business-to-Consumer (B2C) supplies — such as retailers, beauty parlours, and fitness centres," said Agarwal. In other cases, he added, those whose GST liability on Business-to-Business (B2B) supplies does not exceed ~2.5 lakh a month, they can opt for simplified registration. "If in future they cross this threshold, they can transition to normal registration after due checks,” he said.

 

According to the government, the registration shall be granted on an automated basis within three working days from the date of submission of application in case of low-risk applicants and applicants who "based on their own assessments, determine that their output tax liability on supplies to registered persons will not exceed ~2.5 lakh per month (inclusive of CGST, SGST/UTGST and IGST)”. The scheme, expected to benefit nearly 96 per cent of new applicants, will be optional and will allow voluntary withdrawal, the government had said earlier in a release.

 

According to Manoj Mishra, partner and tax controversy management leader, Grant Thornton Bharat LLP, this move will address one of the most pressing pain-points for small entrepreneurs, which is procedural delays. "This move not only reduces compliance burden but also sends a strong signal of trust towards honest taxpayers. The optional nature of the scheme, along with flexibility to opt in and out, makes it even more practical. For micro, small, and medium enterprises (MSMEs), especially those testing waters in formal markets, this framework will provide faster market access and liquidity without getting entangled in complex compliance from day one," Mishra added.

 

The Council has also given in-principle approval to a simplified GST registration mechanism for small suppliers selling through e-commerce platforms across multiple states. These suppliers are facing challenges in maintaining “principal place of business” in each state as currently required under the GST framework. The detailed modalities for operationalising the said scheme will be placed before the Council, the government had said in the release.

 

Faster refunds

 

According to the release, 90 per cent of refund claims on account of zero-rated supplies, such as exports or supplies to special economic zones (SEZs), will be sanctioned provisionally by the tax officer based on system-driven risk evaluation. Only in exceptional cases, where risks are flagged, will claims undergo detailed scrutiny. A notification will also be issued to exclude certain categories from this facility.

 

Extending the same relief to cases of inverted duty structure — where input taxes paid are higher than GST on outward supplies — the Council has recommended amending Section 54(6) of the CGST Act to allow provisional sanction of 90 per cent refunds. Till the legal changes are carried out, the CBIC will issue instructions to field formations to grant such provisional refunds.

 

“By extending provisional refunds to inverted duty cases, the Council has addressed one of the long-pending demands of the industry. The system-based risk evaluation framework is likely to make refunds faster without compromising on checks, thereby easing working capital pressure for businesses, and streamlining the GST refund mechanism," said Pratik Jain, partner, PricewaterhouseCoopers (PwC).