GST Council May Ease Compliance, ITC Rules for Businesses and E-Commerce Sellers

The GST Council is likely to consider a wide-ranging package of GST 2.0 process reforms at its meeting on October 7, aimed at simplifying tax compliance, reducing litigation and easing the burden on businesses, especially small firms and MSMEs.

One key proposal could benefit around 9.5 lakh small e-commerce sellers by allowing them to use an e-commerce platform’s warehouse as their registered place of business in states where they do not maintain their own premises. Sellers would need a genuine physical presence in one state, where Aadhaar authentication and verification would be completed. Registrations in other states could then be obtained with the platform’s consent without further intervention by tax officers.

The Council may also consider protecting input tax credit (ITC) for genuine buyers holding valid invoices even when an upstream supplier fails to pay GST. Recovery in such cases would be directed at the defaulting supplier, potentially reducing uncertainty and litigation for businesses dealing with small or new vendors.

To reduce low-value disputes, the government may propose not issuing GST notices for demands below ₹10,000. Such cases reportedly account for around 20 per cent of cases by number but involve negligible tax revenue. For larger demands, officers may first have to intimate taxpayers and provide an opportunity to respond before issuing formal notices.

Other proposals include common standards for tax notices and orders, simpler GST registration and annual returns, and a quarterly tax-payment option for MSMEs supplying only consumers. The registration system could provide customised guidance, document lists and allow businesses seeking registrations in multiple states to complete applications together.

The Council may also consider intelligence-led logistics checks, aimed at reducing repeated vehicle stoppages and cutting freight delays. A uniform 5 per cent GST rate without ITC for delivery of goods ordered through e-commerce platforms is another proposal under consideration.

Separately, the Council is expected to consider allowing employers to claim ITC on GST paid for employee life and health insurance. Group insurance currently attracts 18 per cent GST, without such credit being available to businesses. The proposed change could lower the cost of employee coverage and encourage wider insurance adoption.

Other measures include clarifying export treatment for services supplied through overseas branches and withdrawing certain IGST exemptions on precious-metal imports.

Experts say the proposals indicate a shift toward taxpayer certainty, seamless credit, working-capital efficiency and technology-led enforcement.