Key Proposed GST Changes in Returns, ITC, Refunds and Compliance

The proposed GST changes cover GST return reconciliation, Input Tax Credit (ITC), refund eligibility, export provisions, e-way bills, goods in transit and e-invoicing, subject to the applicable conditions, timelines and prescribed requirements.

1. GST Returns and ITC Reconciliation

Several changes have been proposed to facilitate the alignment of tax liabilities and Input Tax Credit (ITC) reported in GST returns.

• Alignment of GST Returns: New sub-rules under Rule 61 are proposed to facilitate the alignment of tax liabilities and ITC reported in GSTR-3B with GSTR-1/1A/IFF and GSTR-2B. These changes are proposed to be implemented from the April 2027 tax period, following public consultation.
• New Portal-Based Statements: New portal-based statements are proposed for tracking ITC reversals and reclaims, tax paid under the Reverse Charge Mechanism (RCM) and corresponding ITC claims.
• Invoice Management System (IMS): A mechanism is proposed under which recipients may accept, reject or keep invoices pending under IMS, subject to prescribed conditions.
• Clarification on ITC Reporting: A circular is proposed to clarify the reporting of ITC and reversals in GSTR-3B.

2. GST Refunds

The proposed GST refund changes cover processing timelines, provisional refund sanctions, export turnover and the eligibility of accumulated ITC.

• Reduction in Processing Timeline: The prescribed timeline for issuing an acknowledgement or deficiency memo is proposed to be reduced from 15 days to 10 days, with deemed acknowledgement if no action is taken within the prescribed period.
• Provisional Refund Sanction: System-based provisional sanction of 90% of eligible refund claims is proposed for zero-rated supplies and inverted duty structure, subject to risk assessment.
• Removal of Export Turnover Cap: The existing cap on export turnover of goods under the refund formula is proposed to be removed for exports made without payment of tax.

Expansion of Refund Eligibility for Accumulated ITC

3. Expansion of ITC Eligibility

Proposed amendments to Section 17(5) of the CGST Act seek to allow ITC on specified goods and services, including:

• Outdoor catering
• Health and life insurance
• Telecommunication towers
• Pipelines laid outside factory premises
• Free samples
• Goods destroyed or written off on expiry of shelf life, where required by law

4. Changes Relating to Exports

The proposed export-related changes cover the treatment of services provided to overseas branches, place-of-supply provisions, receipt of export proceeds and specified supplies of goods.

• Services to Overseas Branches: Proposed amendments seek to facilitate export-of-services treatment for services provided to overseas branches or offices of the same legal entity, subject to the applicable conditions.
• Place of Supply: Proposed changes relate to place-of-supply provisions for specified transactions.
• Receipt of Export Proceeds: A clarification is proposed regarding the receipt of export proceeds in foreign currency or Indian rupees, wherever permitted by the RBI.
• Supplies to SEZ or FTWZ: A proposed clarification covers specified supplies of goods delivered to a Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) on the instructions of an overseas buyer.

5. E-Way Bills, Goods in Transit and E-Invoicing

The proposed changes address restrictions on interception, inspection, detention and seizure of goods in transit, along with the extension of e-invoicing requirements to specified transactions.

• Restrictions on Interception: Proposed restrictions on the interception of goods in transit include requirements relating to specific intelligence and approval by an officer of the prescribed rank.
• Inspection, Detention and Seizure: Proposed limitations apply to inspection, detention and seizure by transit States, subject to specified exceptions.
• Goods and Vehicles in Transit: Under the proposed framework, goods and vehicles in transit should not be liable to confiscation.
• Extension of E-Invoicing: E-invoicing requirements are proposed to be extended to taxpayers having aggregate turnover of ₹5 crore or more for specified transactions involving purchases from unregistered persons under the Reverse Charge Mechanism and the import of services.

Conclusion

The proposed GST changes cover return reconciliation, ITC reporting and eligibility, refund processing, export-related provisions, goods in transit and GST e-invoicing. The proposals include specified applicability dates, conditions and procedural requirements as outlined above.