Reforms, relief and resolutions: Key takeaways from the 56th GST Council – The Times of India

By Anshul Aggarwal and Kunal KohliOptically, the 56th GST Council Meeting is nothing less than a full-fledged Budget announcement from a GST perspective. Convened at a time when global indicators point to a broader economic slowdown — alongside rising trade pressures— the Finance Minister’s address to India’s 140 billion economy reaffirms the strength and credibility of a ‘Resilient India’.The Finance Minister flexed a multi-thematic approach aimed at enhancing the quality of life for all citizens and promoting ease of doing business, particularly for small traders and entrepreneurs. With a clear vision toward building a USD 5 trillion economy, the emphasis appears to be on boosting overall consumption and empowering the average individual with greater spending capacity.That said, the rate cuts bring substantial relief and optimism to the middle class, touching a wide spectrum of goods and services. Everyday essentials such as paneer, namkeens, chocolates, and ice creams become more affordable, easing household budgets. Beyond the kitchen, personal care items like shampoos, soaps, and other like goods also see reductions, making self-care more accessible. In the realm of home products, big-ticket purchases like air conditioners, dishwashers and small cars benefit from lower rates, encouraging upgrades and first-time buyers alike. The rate cuts extend to lifestyle and entertainment sectors as well: apparel, footwear and accessories would be more wallet-friendly.Beyond the mere revamp of the existing slab structure, a series of far-reaching structural reforms are poised to address long-standing complexities within the GST framework.These reforms include targeted amendments to intermediary-related provisions, which have long been a source of interpretational challenges and litigation. Under the revised framework, Indian intermediaries will now be eligible for export status. This reclassification unlocks significant tax relief, including zero-rated benefits under GST, thereby improving cash flow and competitiveness for service exporters operating in sectors such as IT, consulting and business process outsourcing.Another significant amendment pertains to the treatment of post-sale discounts, where the government has introduced a much-needed relaxation in procedural requirements to link credit notes directly to original sale invoices. This change eases compliance and reflects commercial realities, especially for volume-based or performance-linked discounts often negotiated post the sale. The amendment is expected to reduce compliance burdens and minimize litigation around input tax credit reversals.The announcements also introduce a suite of progressive reforms aimed at fostering growth, enhancing transparency, and improve overall taxpayer experience. Notable among these are faster and more efficient refund processing, the deployment of tech-enabled intelligent audit systems, and the establishment of the GST Appellate Tribunal (GSTAT), a pivotal step toward timely and consistent resolution of tax disputes. Collectively, these measures are expected to ease compliance and reduce disputes.Last but not least, the Government’s decision to entrust the industry with the responsibility of passing on the benefits of reduced taxes reflects a significant shift toward a trust-based compliance framework. Nonetheless, the onus remains firmly on taxpayers to ensure that these benefits are duly transferred to consumers.For businesses, the upcoming two weeks will be crucial as they assess the cost implications, if any on account of inverted duty structure, as the input services largely remain under the standard rate of 18 percent and the output supply is taxed under a lower rate of 5%. Companies will need to conduct a thorough impact analysis to quantify this cost burden and determine how it affects pricing strategies, margins and their ability to pass on the benefits of reduced tax rates to end consumers.To conclude, the outcome of the 56th GST Council Meeting aligns well with the expectations of both industry stakeholders and the public at large. Announced at an opportune moment, these measures serve as a timely Diwali gift for the common man, rekindling market enthusiasm and consumer sentiment. A well-deserved thumbs up to this forward-looking move.(Anshul Aggarwal is Partner, Indirect Tax at KPMG in India. Kunal Kohli is Director, Indirect Tax, KPMG in India)