The 40th GST council meeting will be held on Friday under the chairmanship of Finance Minister Nirmala Sitharaman.
Sources told that downward revision of late fee for not filed old returns would be considered in the meeting.
They said the proposal to "revise down significantly the late fee for not filed old returns" would be considered.
At present, the fine is Rs 50 per day subject to Rs 10,000 if an entity does not file the GST return for six months.
The sources said there is huge pressure on the traders due to the penalty for not filing of GST returns.
GST Council is expected to consider revising late filing fee for returns from July 2017 to January 2020. Some other compliance-related relief measures are also expected to be taken up in the meeting.
The government has already waived late fee for filing GSTR-3B returns from February 2020 to May 2020.
Those who had not filed the GST returns need to deal with huge accumulated penalty and lockdown has made the situation worse.
Government sources told that the aim of the government is to collect tax, not the penalty.
Once the late fee is revised and reduced, the government will get its tax which has not been paid by these traders.
The impact of COVID-19 on states may also come up during the discussions in the meeting, sources said, adding that states are facing a paucity of funds.
GST council may discuss ways to garner funds for compensation to states.
The sources said that rate tweaks are unlikely to be discussed in this meeting.
( With inputs from ANI )