GST reforms from 1 November: automatic refunds, easier registration for small online sellers, fewer notices

The change with the widest reach is for small suppliers who sell through e-commerce platforms in several states without having a physical presence in each. About 9.5 lakh such sellers are expected to benefit. To qualify, a seller must pass on input tax credit of no more than Rs 2.5 lakh a month.

Such a seller will be able to declare a platform's warehouse in a state as the principal place of business there. A genuine physical presence is needed in only one state, where physical verification and Aadhaar authentication will be done. In the other states, registration will follow with the platform's consent, without a tax officer's involvement. Delivery services by unregistered riders through e-commerce platforms attract GST at 5 per cent.

Refunds of excess balances in the electronic cash ledger will be sanctioned automatically, without an officer's intervention. The time limit for issuing an acknowledgement or a deficiency memo falls from 15 days to 10. For refunds on zero-rated supplies and inverted duty structures, 90 per cent of the claimed amount will be provisionally sanctioned automatically once the system has assessed the risk.

An inverted duty structure is one where the tax paid on inputs is higher than the tax collected on output, which builds up unused credit. The refund is widened to cover input services from 1 November 2026, and capital goods such as plant and machinery from 1 April 2027, with refunds on those spread over 60 months. Sectors expected to benefit include FMCG, pharmaceuticals and food processing.

Registration, notices and penalties

The registration form, GST REG-01, will have drop-down lists for prescribed documents, and the portal will get clearer navigation and tooltips, to cut rejections and repeated queries. A circular will list the documents required. The government says 61 per cent of taxpayers already get automatic registration within three working days.

A minimum threshold of Rs 10,000 will apply to show-cause notices, to reduce the compliance burden and litigation. The Council's package also proposes changes aimed at separating tax disputes from crime: the arrest powers of GST officers would be removed, the threshold for prosecution would rise from Rs 1 crore to Rs 5 crore, and the maximum general penalty would fall from Rs 25,000 to Rs 10,000. For cases without fraud, a 5 per cent penalty would apply and the Rs 10,000 minimum penalty would be dropped.

Goods vehicles, returns and what is not decided

Only tax officers of the supplier's state or the recipient's state would be allowed to stop goods vehicles, not those of a state the goods merely pass through, and interception would need specific intelligence and approval from an officer at joint commissioner level. A faceless assessment system for central GST taxpayers registered in several states is planned for 2027-28, after a public consultation before the Budget. The government also plans to revamp the return forms to reduce mismatches between sales reported and tax paid, with draft forms open for comment on the MyGov portal from 1 to 30 November.

An optional annual return for businesses with turnover up to Rs 5 crore that supply directly to consumers has been approved in principle, with the final decision left to a later meeting. Finance Minister Nirmala Sitharaman has said most rate and process issues have been dealt with, though further reform is possible. Traders and tax practitioners should wait for the circulars, since the arrest, prosecution and penalty changes need the law to be amended.