Finance Bill to Ease GST Compliance with Key Amendments on Discounts, Intermediary Services and Refunds

The Finance Bill is expected to introduce at least five significant amendments to the Goods and Services Tax (GST) laws, aimed at easing compliance, improving cash flows, and reducing litigation. These proposed changes are based on recommendations of the GST Council and are intended to further enhance the ease of doing business.

Post-sale discounts: Major relief for businesses

One of the most important amendments relates to post-sale discounts. The GST Council has recommended changes to Section 15 and Section 34 of the CGST Act, 2017, proposing to remove the requirement that discounts must be established through an agreement entered into before or at the time of supply and specifically linked to individual invoices.

This change is expected to address long-standing practical difficulties faced by taxpayers—particularly those operating under distributor–retailer and dealer-based models—where commercial discounts are often finalised after the supply. The existing requirement of a pre-existing agreement has led to frequent disputes and denial of tax benefits.

Intermediary services: Boost for service exports

Another key amendment concerns place of supply rules for intermediary services under the IGST Act. The Council has recommended deletion of Section 13(8)(b) of the IGST Act, 2017, which currently treats the location of the supplier as the place of supply.

Once amended, the place of supply for intermediary services will be determined under the default rule in Section 13(2)—that is, the location of the recipient of services. This change will allow Indian intermediary service providers to qualify as exporters of services, enabling them to claim export-related GST benefits.

The move is expected to resolve pending litigation worth approximately ₹3,300 crore and bring parity for Indian service exporters. However, businesses receiving intermediary services from overseas suppliers—who were earlier outside the GST net—may now become liable to pay tax under the Reverse Charge Mechanism (RCM).

Refunds for low-value exports

The third proposed amendment seeks to support small exporters by removing the minimum threshold for GST refunds on export consignments. The Council has recommended amending Section 54(14) of the CGST Act to eliminate the existing ₹1,000 limit for refunds arising from exports made with payment of tax.

This change will particularly benefit exporters using courier and postal modes, where shipment values are often low but frequent.

Provisional refunds for inverted duty structure

The fourth amendment relates to inverted duty structure (IDS) refunds. The Council has recommended changes to Section 54(6) of the CGST Act to allow provisional sanction of 90 per cent of the refund amount, similar to the mechanism available for zero-rated supplies.

Pending legislative amendments, the Central Board of Indirect Taxes and Customs (CBIC) had already operationalised this relief through administrative instructions, effective from November 1. The Finance Bill amendment will provide statutory backing to this measure.

Expanding IDS refunds to input services and capital goods

The fifth amendment aims to extend IDS refunds to include input services and capital goods, which are currently excluded. Following GST rate rationalisation—particularly where output supplies attract tax at 5 per cent—many businesses have faced significant accumulation of input tax credit (ITC) due to heavy capital expenditure and service procurement.

Allowing refunds on these components is expected to significantly ease working capital stress for affected industries.

Industry expectations from the Budget

Industry experts expect the upcoming Budget to focus on reducing litigation and simplifying GST and Customs compliance.

“The upcoming Budget is expected to focus on easing compliance and reducing litigation under GST and Customs. Industry is hopeful for an amnesty scheme under Customs to settle long-pending disputes, along with key amendments in GST laws, such as rationalising place of supply rules for intermediary services, simplifying refund processes, and relaxing restrictions on claiming input GST credit. These measures can significantly improve cash flows and create a more business-friendly environment,” said Harpreet Singh, Partner – Indirect Tax, Deloitte.