October 12, 2026 | Taxation, Direct and IndirectThe recommendations of the 57th GST Council Meeting propose significant changes to India’s GST framework, with potential benefits for businesses through improved access to input tax credit and refunds, simplified registration and compliance procedures, reduced penal exposure, and greater certainty in GST administration. If implemented, these measures could ease working capital pressures, reduce compliance burdens and improve the ease of doing business.
The 57th meeting of the GST Council was held on 8 October 2026 in New Delhi under the chairmanship of the Union Finance and Corporate Affairs Minister, Smt. Nirmala Sitharaman.
The Chief Ministers of Delhi, Goa, Haryana, Jammu & Kashmir, Karnataka, Kerala, Maharashtra and Meghalaya; the Deputy Chief Ministers of Manipur and Telangana; Finance Ministers and senior representatives of States and Union Territories with legislatures; the Secretary, Department of Revenue; the Chairman and Members of the Central Board of Indirect Taxes and Customs; and other senior officials of the Ministry of Finance attended the meeting.
The Council made recommendations on procedural reforms relating to registration, returns, refunds and adjudication. It also recommended clarifications on the applicability of GST to certain goods and services, along with measures to facilitate trade and simplify compliance.
The key recommendations include:
Removal of arrest provisions under GST.
Increase in the monetary threshold for prosecution from INR 1 crore to INR 5 crore.
Reduction of the maximum general penalty from INR 25,000 to INR 10,000.
Expansion of eligibility for specified input tax credits and refunds.
Simplification of registration and compliance procedures.
Faster processing of eligible refund claims.
Common standards for GST notices and proceedings.
Measures to facilitate the movement of goods across States.
Simplified GST registration for small suppliers operating through e-commerce platforms.
Measures to facilitate exports of services.
In-principle approval of a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with aggregate turnover of up to INR 5 crore in the preceding financial year who exclusively supply to unregistered persons (B2C supplies).
The Council recommended amendments to Section 54(3) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) and the Central Goods and Services Tax Rules, 2017 (“CGST Rules”) to allow refunds of accumulated input tax credit (“ITC”) on:
Capital goods in cases involving zero-rated supplies.
Input services and capital goods in cases involving an inverted duty structure.
The Council recommended that refunds of accumulated ITC on input services under the inverted duty structure be available for ITC availed on or after 1 November 2026.
For capital goods, the Council recommended that refunds relating to zero-rated supplies and the inverted duty structure be spread over 60 months, in respect of ITC availed on capital goods on or after 1 April 2027.
The Council recommended amendments to Section 17(5) of the CGST Act to remove restrictions on ITC relating to specified supplies, including:
Outdoor catering.
Health and life insurance.
Telecommunication towers.
Pipelines laid outside factory premises.
Free samples.
Goods destroyed or written off upon expiry of their shelf life, as required by law.
The Council recommended the omission of sub-clause (v) of Section 2(6) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”). This would remove the condition that the supplier and recipient must not merely be establishments of a distinct person, as contemplated under Explanation 1 to Section 8 of the IGST Act, for a supply to qualify as an export of services.
The proposed amendment would enable Indian service providers to supply services to their foreign branches or offices and claim export benefits, subject to satisfaction of the other applicable conditions.
The Council recommended issuing a circular to clarify issues concerning the receipt of payment for exports of goods and services in foreign exchange or in Indian rupees, wherever permitted.
The Council recommended inserting an explanation in Section 16(1) of the IGST Act to address supplies of goods to overseas buyers where delivery takes place in a Special Economic Zone (“SEZ”) or Free Trade Warehousing Zone (“FTWZ”).
Under the proposal, where payment is received in convertible foreign exchange or in Indian rupees, wherever permitted by the Reserve Bank of India, such supplies would be deemed to be supplies of goods to an SEZ or FTWZ.
The proposed clarification is intended to provide certainty regarding zero-rating benefits for Indian manufacturers supplying goods to overseas buyers and delivering them to an SEZ or FTWZ for warehousing or further processing.
The Council recommended the complete withdrawal of arrest powers under GST through the omission of Section 69 of the CGST Act.
To strengthen a progressive and trust-based tax regime while retaining effective deterrence against fraud and evasion, the Council also recommended:
The Council also recommended amending Rule 86A of the CGST Rules to allow taxpayers to object to the blocking of an amount in their electronic credit ledger and obtain a personal hearing before the proper officer decides the objection.
Pursuant to the recommendations made at the 56th GST Council meeting, automatic registration without officer intervention is being granted through the GST portal under Rule 14A of the CGST Rules where the applicant does not intend to pass on ITC exceeding INR 2.5 lakh per month.
To streamline the processing of registration applications in other cases, the Council recommended:
Issuing a comprehensive circular specifying the documents and information required for GST registration.
Amending FORM GST REG-01 to include drop-down lists for selecting prescribed documents and information, providing clarity to both applicants and tax officers.
Improving the GST portal interface through clear navigation, drop-down lists, tooltips and contextual guidance to facilitate the correct filing of registration applications.
The Council recommended amending Rule 19 of the CGST Rules to provide for automatic acceptance of amendments to registration particulars, except changes to the Principal Place of Business (“PPoB”).
For taxpayers registered under Rule 14A, the Council recommended automatic acceptance of amendments to all registration particulars, including the PPoB.
The Council recommended a phased mechanism for the automatic acceptance of registration cancellation applications, subject to the filing of all pending returns and payment of outstanding dues.
In Phase 1, automatic acceptance would apply where:
The taxpayer has not passed on ITC exceeding INR 2.5 lakh in any month since registration; or
The taxpayer has passed on ITC exceeding INR 2.5 lakh in a month but has filed the final return in FORM GSTR-10 within the specified period.
In Phase 2, automatic acceptance would be extended to all cancellation applications, subject to the filing of pending returns and payment of outstanding dues.
The Council recommended inserting Rule 14B in the CGST Rules to introduce a simplified registration mechanism for small suppliers of goods operating through electronic commerce operators in States or Union Territories where they have no physical presence.
The proposal would allow such suppliers to declare an e-commerce operator’s warehouse in the relevant State or Union Territory as their PPoB where they intend to pass on ITC not exceeding INR 2.5 lakh per month, excluding stock transfers between distinct persons. Registration would be granted automatically by the system, subject to prescribed conditions.
The Council recommended amendments to Section 54 of the CGST Act to provide for system-based processing and sanctioning of refund claims relating to excess balances in the electronic cash ledger, zero-rated supplies and the inverted duty structure.
The proposed reforms would be implemented in two phases.
Phase 1
Refund claims for excess balances in the electronic cash ledger would be sanctioned in full automatically by the system, without officer intervention.
The time limit for issuing an acknowledgement or deficiency memo would be reduced from 15 days to 10 days. If neither is issued by the proper officer within 10 days of the application, the system would issue a deemed acknowledgement.
For refund claims relating to zero-rated supplies and the inverted duty structure, 90% of the amount claimed would be sanctioned provisionally and automatically, without officer intervention, based on system-based risk identification and evaluation.
Phase 2
Acknowledgements would be generated automatically following system-based verification of refund applications.
Eligible refund claims relating to zero-rated supplies would be sanctioned in full automatically, after adjustment of pending dues, if any, based on system-based risk evaluation.
The Council recommended comprehensive guidelines for issuing demand notices, adjudication orders and appeal orders.
The guidelines would address the quality and timely issuance of notices and orders, the invocation of fraud-related grounds based on the merits of each case, and compliance with the principles of natural justice, including personal hearings.
The Council further recommended:
A minimum aggregate tax threshold of INR 10,000 for issuing show-cause notices, together with a proposed statutory mechanism for specified pending matters below that threshold.
Deeming the penalty amount to be a “charge” where the full tax amount, together with interest and penalty, is voluntarily paid within the specified period.
A reduced penalty of 5% in non-fraud cases where tax and interest are paid within 30 days of the adjudication order under Section 73 or within 60 days of the adjudication order under Section 74A, as applicable.
Removal of the minimum penalty of INR 10,000 in non-fraud cases.
Reduction of the maximum general penalty under Section 125 from INR 25,000 to INR 10,000.
An upper limit of INR 40 crore on the appeal pre-deposit in cases involving only a penalty and no tax demand, comprising INR 20 crore under CGST and INR 20 crore under SGST or UTGST, as applicable.
The Council recommended the following rates and exemptions:
An option to pay GST at 5%, with restricted ITC, on passenger transport services and rental services of motor vehicles with operators supplied using electric vehicles, where the cost of battery charging is included in the consideration.
Bringing delivery services, other than courier and postal services, supplied through an e-commerce operator under Section 9(5) of the CGST Act where the service provider is not liable for registration under Section 22(1), and prescribing GST at 5% without ITC for such services.
Prescribing GST at 5% without ITC for delivery services relating to goods supplied or ordered through an e-commerce operator.
Exemption for passenger transportation by helicopter on a seat-sharing basis to or from specified airports or helipads in the northeastern States, Sikkim and Bagdogra in West Bengal.
Exemption for storage or warehousing services relating to seeds meant for sowing.
Exemption for agricultural support services involving the curing of coffee, provided by coffee curers to cultivators.
Exemption for services provided by the Seamen’s Provident Fund Organisation to persons governed by the Seamen’s Provident Fund Act, 1966.
The proposed changes aim to make GST processes simpler and allow greater access to input tax credit and refunds. Enforcement and dispute resolution processes are also expected to be simplified. The proposed changes seek to reduce procedural complexities and provide greater certainty to businesses with respect to issues such as registration, refunds and exports of goods.
The implementation of these recommendations would, however, require the relevant statutory amendments, notifications and circulars, as applicable. Businesses should therefore wait for the applicable conditions and effective dates to be specified before making changes to their GST compliance procedures.
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