Summary: The 56th GST Council meeting made several key recommendations to streamline tax procedures and address long-standing issues. A significant proposal involves rate rationalization for various goods and services. The council also proposed important amendments to how post-sale discounts are handled. Under the new rules, the requirement for a pre-existing agreement for such discounts will be removed. A new circular will clarify that Input Tax Credit (ITC) reversal is not required for post-sale discounts given via commercial credit notes, and it will address the treatment of such discounts in transactions between manufacturers, dealers, and end-customers. Additionally, the council recommended a simplified scheme for provisional refunds for zero-rated supplies and inverted duty structures, based on identified risk parameters. Another major change is the proposed omission of Section 13(8)(b) of the IGST Act, which previously determined the place of supply for intermediary services as the supplier’s location. In a move to resolve pending disputes, the Goods & Service Tax Appellate Tribunal (GSTAT) is set to become operational by the end of September 2025, with a deadline of June 30, 2026, for filing backlog appeals. Finally, a simplified GST registration scheme will be introduced on November 1, 2025, offering automatic registration within three days for low-risk businesses with monthly tax liabilities under ₹2.5 lakh, and a new operational model will be developed for small suppliers using e-commerce platforms.
Following key recommendations were made:
- Rate rationalisation for certain goods and services:
GST council has proposed to rationalise existing GST rate structure for various categories of goods and services.
- Post sale discount: Amendment proposed in section 15 and section 34 of the CGST Act:
- Condition with respect to incorporation of post-sale discount terms in the agreement has been proposed to be omitted
- Post-sale discount can be passed through credit note in terms of Section 34 of CGST Act
- Withdraw the clarification provided vide Circular no. 212/6/2024-GST dated 26 June 2024 which dealt with the ITC reversal mechanism in the hands of the recipient
- New circular would be issued clarifying the following:
- non-reversal of ITC on account of post-sale discount through commercial/financial credit note,
- Treatment of post-sale discount provided by manufacturer to dealer as additional consideration, in transaction between dealer and end-customer
- Treatment of post-sale discount as consideration in lieu of promotional activities performed by dealer
- Granting of Provisional refund:
- In case of zero-rated supply of goods or services including supply to SEZ unit for authorised operations, it is proposed to grant provisional refund based on certain identified risk parameters. A similar mechanism to be introduced for refund in case of inverted duty structure
- Omission of place of supply provision in case of intermediary:
- Section 13(8)(b) of IGST Act, which provides for place of supply in case of intermediary service i.e. the location of supplier, has been proposed to be omitted
- Operationalisation of Goods & Service tax Appellate Tribunal (GSTAT)
- GSTAT would be made operational for accepting appeals before end of September 2025 and will commence hearing before end of December 2025. Also, for filling of backlog Appeals, the date of limitation would be 30 June 2026
- Principal Bench of the GSTAT will also serve as the National Appellate Authority for Advance Ruling.
- Simplified GST registration Scheme:
Small and low Risk businesses- Under this proposed scheme which would get operationalised from 1 November 2025, low risk applicants and applications whose output tax liability does not exceed 2.5 Lakh per month (including CGST, SGST/UTGST and IGST), shall be granted registration automatically within 3 days from the date of submission of application
- Opting in and withdrawal under said scheme would be voluntarily
Small suppliers supplying through e-commerce operator (ECO)
In order to simplify registration scheme for small suppliers supplying through ECO across multiple States, an operational model would be decided.
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