1. Measures pertaining to law and procedure
a. Amendment in Section 15 and Section 34 of the CGST Act 2017 in respect of post-sale discount
- Recognising the persisting challenges, the GST Council has introduced a significant reform. It has been recommended to amend Section 15(3)(b) and Section 34 of the CGST Act to streamline the law with respect to post-sale discounts. The requirement of having a pre-supply agreement and linking discounts to specific supply invoices will be omitted, i.e., Section 15(3)(b)(i). Instead, it is proposed that a post-sale discount must be granted through a credit note under Section 34, for which a corresponding ITC reversal by the recipient will be required. Further, Circular No. 212/6/2024-GST will be rescinded, removing the need for CA/CMA certificates to establish ITC reversal by the recipient. It may be relevant to note that a Section 34 credit note can be issued under certain specified circumstances such as (a) the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, (b) where the goods supplied are returned by the recipient, or (c) where goods or services or both supplied are found to be deficient
- A fresh circular/clarification will be issued pertaining to
post sale discount to address three long-standing disputes:
- Whether ITC reversal is needed when discounts are given via financial/commercial credit notes without issuing GST credit notes.
- Whether manufacturer-to-dealer discounts should be treated as additional consideration in dealer-tocustomer transactions.
- Whether discounts instead of promotional activities by dealers amount to consideration for services.
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Aurtus Comments: The treatment of post-sale discounts under GST has been a matter of recurrent disputes. Under Section 15(3)(b) of the CGST Act, post-supply discounts could be excluded from the taxable value only if:
Establishing the pre-existence of a discount policy in form of a written contractual form between manufacturers and dealers was a challenge, especially in case of seasonal or market driven discounts. Further, since there was no mechanism for suppliers to verify ITC reversal by recipients, field officers often disallowed such discounts, leading to litigation. Circular No. 92/11/2019 – GST, dated 07 March 2019 elucidated the provisions contained under section 15(3)(b) of the Act. The Circular simply went on the premise that secondary discounts comprise of discounts, where the supplier reduces the value of the goods, initially supplied to the buyer, at a later stage [i.e. post supply]. It went on to state that such discounts, since are typically unknown to the buyers would not warrant deductions under the law. This view created a challenge for the suppliers in claiming value deductions for all post-sale discounts. Further, the issue of substantiating reversal of ITC by buyers, compelled many industry players to completely forego the GST adjustment, in spite of providing the value adjustment to buyers. The CBIC, vide Circular No. 212/6/2024-GST dated 26.06.2024, in order to provide a stop gap mechanism clarified the mechanism for proving ITC reversal. It required suppliers to obtain a CA/CMA certificate (for ITC above ₹5 lakh) or an undertaking (for ITC below ₹5 lakh) from recipients as proof. Although this clarification provided a temporary compliance mechanism, it created practical difficulties as suppliers had to depend on the cooperation of recipients, and in many cases, disputes continued because notices were being issued to both suppliers (disallowing GST adjustment on credit notes) and on recipients (for non-reversal of ITC), leading to dual exposure and further litigation. The trajectory of post-sale discounting clarifications shows a shift from a compliance-heavy, certificatedriven mechanism to a simplified, statutory amendment-based framework. By linking post sale discounting strictly to credit notes under Section 34 and issuing clarifications on common disputes, the Council aims to reduce litigation, bring uniformity, and align commercial practices with GST compliance. Also, once the new clarification is issued, hopefully, it will also settle current controversies relating to GST demands on discounts offered either by treating them as additional consideration or a separate consideration towards promotion / marketing. |
b. Amendment in place of supply provision for intermediary services under Section 13(8) of the IGST Act
GST Council has recommended to omit clause (b) of Section 13(8) of the IGST Act, 2017, which presently deems the place of supply ('POS') for intermediary services to be the location of the supplier in India, even if the recipient is located overseas. With its omission, the place of supply for intermediary services will instead fall under the default rule in Section 13(2) of the IGST Act, i.e., the location of the recipient.
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Aurtus Comments: Intermediary services have been the subject of many disputes. The exception created by POS provisions led the department to allege and recategorise all subcontracting transactions as 'intermediary services'. In Dharmendra M. Jani v. Union of India, the Bombay High Court recognised that services provided by intermediaries to foreign principals are essentially export of services, since the consumption and beneficiary lie outside India. The Court emphasised that deeming such services as intra-state supply through Section 13(8)(b) creates absurd results, double taxation, and contradicts the destination-based nature of GST. Although the provision was upheld as constitutionally valid only within the IGST framework, the ruling acknowledged its inequitable consequences for exporters. Against this backdrop, the Council's recommendation to omit Section 13(8)(b) and revert to the general rule under Section 13(2) (place of supply = recipient's location) is not just a policy reform but a corrective measure aligning GST with judicial reasoning. It brings Indian GST in line with the destination-based taxation principle, removes ambiguity for IT/ITES, BPO, marketing support, and consultancy sectors, and prevents dual taxation. However, on the flip side, all imports of intermediary services which was outside the GST net will now become liable to GST on a reverse charge basis in the hands of the importer of services. This will create challenges for the exempt sectors [like financial services], where tax so paid would become a cost in the supply chain. |
2. Measures for streamlining compliances in GST
a. GST refund in respect of low value export consignment
The GST Council has recommended to remove the threshold limit of Rs 1,000 prescribed under Section 54(14) of the CGST Act in case of refunds arising out of export with payment of tax to help the small exporters making export through courier, postal mode etc.
b. Risk based provisional refund arising out of zero-rated supplies and inverted duty structure w.e.f. 01.11.2025
The GST Council has recommended to amend Rule 91(2) to provide for sanction of 90% of the refund claimed as provisional refund on the basis of identification and evaluation of risk by the system. However, in exceptional cases, the proper officer may for reasons to be recorded in writing proceed ahead with detailed scrutiny instead of granting the provisional refund. The Council has also recommended to notify the category of registered persons who may not be granted refund on provisional basis.
Furthermore, the GST council has also recommended providing for sanction of 90% refund on provisional basis arising out of inverted duty rate structure on similar lines as is presently available to refund in respect of zero- rated supply. In this regard, the Central Government has decided to issue necessary instructions to the Central Tax field formations for granting refund on provisional basis post identification and evaluation of risk by the system.
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Aurtus Comments: Earlier, the grant of provisional refund was subjected to detailed scrutiny of the claim and evidence submitted in support of the claim by the proper officer. The proper officer had discretion not to grant provisional refund unless he was satisfied with the amount of refund claimed by the applicant. Given this, provisional refund was denied to the applicant in most of the cases, without providing any suitable reasons for the denial. The recommendation of the GST council to grant provisional refund on the basis of identification and evaluation of risk by the system is a more practical and fair approach, as it lessens the discretionary powers of the authorities to deny the provisional refund. Further, the grant of provisional refund to the applicants applying for refund under inverted duty structure is a welcome recommendation as it ensures similar benefits which are granted to applicants applying for refund under zero rated supplies. |
c. Simplified GST registration for small and low risk business w.e.f. 01.11.2025
The GST Council has recommended to introduce an optional simplified GST registration scheme wherein registration shall be granted on an automated basis within three working days from the date of submission of application in case of low-risk applicants and applicants who based on their own assessment, determine that their output tax liability on supplies to registered persons will not exceed Rs. 2.5 lakh per month (inclusive of CGST, SGST/UTGST and IGST). The scheme will provide for voluntary opting into and withdrawal from the scheme.
| Aurtus Comments: The GST law currently requires all businesses to undergo a detailed and often timeconsuming registration procedure. From furnishing extensive documentation to complying with strict verification protocols, applicants must navigate multiple steps to obtain a valid GST number. While aimed at ensuring transparency and curbing misuse of the law, the complexity of the process has often posed challenges for small businesses and first-time registrant. Given this, the recommendation of the GST council to introduce a simplified GST registration process for small and low risk business would lessen the hardships faced by small taxpayer to obtain GST registration and encourage them to comply with the law in a timely manner. |
d. Simplified GST registration scheme for small suppliers supplying through e-commerce operator
The GST Council has approved in-principle, the concept of a simplified GST registration mechanism for small suppliers making supplies through e-commerce operators (ECOs). The detailed modalities for operationalizing the said scheme would be placed before the GST Council.
| Aurtus Comments: The GST law has prescribed categories of persons who are mandatorily required to be registered under the Act, irrespective of any turnover limit which inter alia includes persons supplying goods o services through e-commerce operator('ECO'). The introduction of simplified GST registration scheme would fasten the registration process. However, the compliance requirements would remain the same which would still pose challenges for small businesses. |
3. Other legislative measures
- The GSTAT will be operationalised to accept appeals before the end of September 2025 and commence hearings before the end of December 2025, with a special limitation window provided for filing backlog appeals up to 30th June 2026.
- The Principal Bench of GSTAT will also function as the National Appellate Authority for Advance Ruling (NAAAR), ensuring consistency and uniformity in advance rulings.
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Aurtus Comments: The definitive timelines set for the operationalisation of the GSTAT, if adhered to, will help create a fully functional second level of appellate authority, the absence of which has led to a burden on the High Courts in India and delays in resolving everyday disputes. Furthermore, the dual role (as the NAAAR) is expected to ensure uniformity and consistency in advance rulings nationwide, which has so far been a significant source of conflicting interpretations. By establishing GSTAT as a fully functional appellate body, the GST Council seeks to create a robust dispute resolution mechanism within the GST framework. A key concern remains the current backlog of cases that are yet to be filed, and how long it will take to achieve closure of issues once an appeal is filed before the GSTAT. |
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