It's Time To Take The GST Council's Bet On Trust Global

The recommendations made in the 57th meeting of the GST council are a welcome step towards making India an easier place to do business. They reduce paperwork and make compliance more predictable for businesses that follow the rules. E-commerce businesses have a lot to gain from such reforms. Small online sellers could register automatically in states where they have no office, using an e-commerce platform's warehouse there as their business address. Money that builds up in their GST accounts would be refunded automatically. GST is quickly moving towards a system built on trust, which is very good for business. The next phase of reform should carry this approach to services exports as well, using payment records from banks and regulated payment companies as proof of export, and giving foreign digital sellers that serve Indian consumers clear, proportionate GST rules.

Services are now the engine of India's export growth. In 2025-26, it reached $421.32 billion, up 8.71% and nearly half of India's total exports of $863.11 billion. Services trade is also flowing rapidly the other way. Indian businesses and consumers pay foreign companies for software, cloud computing, professional services etc. with such imports reaching $204.7 billion in the same year.

As this trade grows, three hurdles stand out.

The first is proving an export. Under GST, a service counts as an export, and is free of the tax, only if the payment arrives in foreign currency, or in rupees where the RBI allows it. To prove this, a small exporter must get a certificate from its bank or payment provider for each payment, match it to an invoice, and then match both to its refund claim. These records sit in separate systems. A firm that receives hundreds of small payments repeats this hundreds of times, costing time and holding up its working capital.

The second constraint runs in the opposite direction. Indians increasingly buy digital services from abroad. The rules on payments, tax, and paperwork for these purchases are spread across different laws, many written for trade in physical goods. When an Indian business buys a digital service, it pays the GST under what is called the reverse charge mechanism. Because the foreign seller sits outside India's tax system, the Indian business buyer pays the tax on its behalf.

When an individual buys the same service, nobody in India can pay on the seller's behalf, so the law requires the foreign seller to register in India, file monthly returns and appoint a representative. These are known as online information database access and retrieval (OIDAR) services. Enforcing this rule is quite difficult because these sellers have no office in India. Payment aggregators have no common checklist for what to ask a foreign digital seller before signing it up. Practice therefore varies, and a seller can pick the payment company with the lightest checks. Payment companies also cannot verify whether a foreign seller has paid the right tax and the rules do not say what they are responsible for. 

Also Read | GST: Missing Data Points, Lower Revenue Collection And Fiscal Worries

The third is the burden on small foreign sellers. An Indian business selling services can earn Rs. 20 lakh a year before it must register for GST, while a foreign OIDAR seller must register from its very first rupee of Indian sales. For an overseas startup with a handful of Indian customers, the cost of complying can exceed the revenue, so it may simply stay away from the Indian market.

Each of these hurdles has a practical fix.

For exporters, India should let payment records do the work. Banks and RBI-regulated payment companies already record who paid, from which country and in which currency. If this data flowed directly into the GST and foreign trade systems, proof of export could be created and matched automatically, and the automatic refunds would rest on verified data. This matters most for small firms and freelancers, for whom simpler compliance makes it easier to take on more overseas clients and add to India's export volumes.

For digital imports, a common checklist for payment companies, setting out what they must ask a foreign digital seller before signing it up, would make compliance consistent with whichever company a seller uses. The rules should also spell out who is responsible for what among the foreign seller, the Indian buyer, the payment company and the bank, so that the same checks are not repeated at every step.

Paying the tax should remain the foreign seller's responsibility, as the law already says. Payment companies are regulated and hold customers and transaction data that can help tax officials with lawful enquiries, which makes them natural partners for the tax department. They cannot, however, audit a foreign seller's tax affairs. Hence, a payment company that follows the prescribed checklist in good faith should therefore be protected from penalties if a seller later turns out to have broken the rules.

Small foreign sellers need a lighter path. Other countries like Australia require offshore digital sellers to register only once their Australian sales reach A$75,000, and Singapore only once they cross S$1 million in global sales and S$100,000 in Singapore sales. India could consider a similar minimum sales level, or a simpler registration process for early-stage sellers, with safeguards to stop larger firms from splitting themselves up to stay below it. 

These changes need the GST authorities, the Department of Revenue, the RBI, and the industry to work together, since cross-border digital trade falls under all their rules at once. The Council has shown willingness to make trust and automation the basis of GST reforms. Applying the same approach to trade that crosses India's borders would help Indian exporters sell more to the world and bring foreign digital sellers into the tax net on clear, fair terms.

Also Read | Net GST Mop-Up Surges Past Rs 2.03 Lakh Crore In Oct. There's A 42% Import Tax Revenue Link

Akash Sinha is the Co-founder & CEO of Cashfree. Shweta Rajpal Kohli is President & CEO of Startup Policy Forum.

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