GST Outlook 2025: Tribunals, easing compliance, rate rationalisation expected in New Year

Experts expect GST reforms in 2025 to address inefficiencies and streamline processes through specific measures, including a simplified three-slab rate structure, operationalising robust tribunals for faster dispute resolution, and fostering trust with a responsible tax administration that focuses on merit-based notices instead of revenue-driven actions. Read here:

How will GST continue to evolve to meet the demands of a dynamic economy? Looking back at 2024, the year was marked by a series of reforms aimed at enhancing compliance, transparency, and ease of doing business.

From the introduction of the GST Amnesty Scheme under Section 128A, resolving legacy disputes, to the rollout of the Invoice Management System (IMS) for improved ITC reconciliation, GST ecosystem displayed a clear intent to embrace technology and foster trust between taxpayers and authorities.

ETCFO looks into the reforms shaping the future of GST, drawing insights from the progress made in 2024 to see what lies ahead.
Operationalising the GST Tribunal

The absence of the GST Appellate Tribunal has been a point of contention since GST was introduced in 2017. Despite being a promised feature of the GST system, the tribunal has not yet been operationalised, causing significant delays in dispute resolution.

Parag Mehta, Partner at N A Shah Associates LLP, said "The operationalisation of the GST Tribunal is long overdue. It's a critical mechanism for ensuring that disputes are resolved quickly and efficiently, which is crucial for maintaining cash flow and reducing business uncertainty," Mehta said. He added that the delay in setting up the tribunal has resulted in prolonged litigation periods, adversely affecting businesses’ ability to plan and manage their finances effectively.

Adding to the same, Prateek Bansal, Tax Partner at White and Brief – Advocates & Solicitors said, "Efficient dispute resolution through the GST Tribunal is vital. Delays lead to uncertainty and hinder businesses from focusing on growth. Operationalising the tribunal should be a priority for 2025 to ensure timely resolutions and better compliance."

Simplifying Compliance for Multi-State Operations

One challenge faced by businesses with a multi-state presence is dealing with GST audits, notices, and assessments in multiple states. Each state has its own tax authorities, procedures, and timelines, which can lead to inconsistent tax treatments.
Parag Mehta highlighted the need for a centralised assessment system for such companies. "Companies with multi-state operations often face considerable logistical and compliance challenges, as tax teams are usually located at the head office, not in each state," he said.

Rate Rationalisation

Rate rationalisation continues to be a major expectation from businesses, with many pushing for a reduction in the number of GST slabs. With the current system having four major slabs - 5 per cent, 12 per cent, 18 per cent, and 28 per cent, businesses often face challenges in correctly classifying products, leading to litigation and disputes.

Sandeep Sehgal, Partner-Tax at AKM Global, stated, “Businesses face unnecessary complexity with multiple tax slabs, which often results in disputes over classification. Simplifying the structure to fewer slabs, such as three, would reduce confusion and improve predictability,”

The need for rate rationalisation is particularly urgent in sectors such as hospitality and FMCG, where a wide variety of products are subject to varying rates. For example, food items like parathas and popcorn often fall under different rates based on their classification, leading to unnecessary litigation. Sehgal suggests that consolidating rates would reduce these issues, making compliance easier for businesses.

"Transitioning to a three-slab structure would simplify compliance, reduce litigation, and foster a more business-friendly environment,” stated Prateek Bansal of White and Brief – Advocates & Solicitors.

Expanding the GST Base

One of the major demands from the business community is the inclusion of petroleum products and aviation turbine fuel (ATF) under GST. Currently, these products are outside the GST regime, which means they are subject to state-level VAT and central taxes, leading to a cascading effect of taxes.

Sehgal brought attention to the fact that including petroleum and ATF under GST would ease the tax burden on businesses in the aviation and energy sectors. "Inclusion of ATF and petroleum under GST would reduce the cascading effect of taxes, which currently leads to higher costs for businesses in these sectors. It would also make these sectors more competitive and foster growth," he said.

Leveraging Technology for Better Administration

In 2025, tax experts also anticipate further technological advancements aimed at improving GST compliance and administration. This includes the operationalisation of multi-factor authentication for the GST portal and changes to the e-way bill procedures.

Sivakumar Ramjee, Executive Director-Indirect Tax at Nangia Andersen LLP, highlighted the potential benefits of enhancing GSTN’s security and functionality. "The introduction of multi-factor authentication for accessing the GST portal would add an additional layer of security, helping businesses protect sensitive information. Also, refining the e-way bill mechanism to improve transparency and reduce fraud is another area that requires urgent attention," he said.

"GST remains a work in progress. There is a pressing need for better training of officers to ensure notices are issued based on merit rather than revenue targets. This will foster trust and reduce unnecessary litigation,” said Prateek Bansal.

ITC Flexibility

Experts also vouch for greater flexibility in transferring input tax credit (ITC) between different units within the same organisation. Gyanendra Tripathi, Partner & Leader (West) at BDO India, pointed out that this could help businesses better manage their ITC balances and improve cash flow. "Allowing the transfer of ITC balances between units would be a significant relief for organisations with operations across multiple states," Tripathi said.

Source:- CFO Economic Times