New Delhi, Oct 27: The first phase of the Centre’s Goods and Services Tax (GST) reforms will take effect on November 1, introducing faster provisional refunds for businesses facing inverted duty structures, removing the minimum threshold for tax-paid export refunds and clarifying tax treatment for intermediary services. The changes aim to ease compliance and improve cash flow for eligible businesses, while wider legal reforms remain scheduled for April 2027.
The Central Board of Indirect Taxes and Customs (CBIC) issued the required notifications on October 26, bringing the initial measures into effect. The reforms also introduce simplified rules and credit note provisions for post-sale discounts, making it easier for distributors and retailers to account for such discounts.
Under the revised refund mechanism, businesses operating under an inverted duty structure, where GST paid on inputs exceeds the tax charged on outputs, can receive 90 per cent of their provisional refunds upfront, subject to risk checks.
Small exporters will also benefit from the removal of the existing minimum refund limit of ₹1,000 on tax-paid exports. The change allows eligible exporters using courier and postal channels to claim refunds without meeting the earlier minimum threshold.
For intermediary services, the place of supply will shift to the location of the service recipient instead of the intermediary. The revised provision is intended to provide Indian service exporters with greater clarity over the applicable tax treatment.
The changes follow decisions taken at the 57th GST Council meeting in New Delhi on October 8, chaired by Union Finance and Corporate Affairs Minister Nirmala Sitharaman. The Council focused on reducing compliance burdens, improving the flow of input tax credit and accelerating refunds.
Automated refund sanctioning is expected to begin after November 1, wherever applicable, but the mechanism will cover only future claims and will not extend to applications already pending. Its rollout will depend on the readiness of the required systems.
A second phase, targeted for April 1, 2027, will cover measures requiring formal amendments to Central and state GST laws. These include changes to arrest provisions, revised prosecution thresholds, modifications to e-way bill rules and a proposed minimum threshold of ₹10,000 for issuing show-cause notices.
A senior official clarified that the proposed changes to arrest provisions will not affect arrests already made. The department is examining whether interim instructions can provide guidance before the legislative changes take effect, but it has not reached a final decision.
The phased implementation reflects the system upgrades and legislative procedures required to operationalise the wider GST reforms.
