57th GST council meeting as on 8 October 2026: Analysis

Summary: The 57th GST Council meeting held on 8 October 2026 recommended significant reforms to GST administration, enforcement and taxpayer compliance. The article examines proposals to omit Section 69 arrest powers, increase the prosecution threshold, reduce penalties and small-value notices, and cap pre-deposits in penalty-only appeals. It discusses widening input tax credit eligibility under Section 17(5), extending refunds for specified input services and capital goods, and moving towards faster automated refunds. Registration reforms include simpler documentation, automatic amendment and cancellation processes, and a proposed special mechanism for eligible e-commerce sellers. Return reforms involve mismatch correction, invoice management and ITC reconciliation, while further proposals address e-invoicing, goods-in-transit interception, export services, SEZ supplies and selected goods and services. The article includes practical illustrations and emphasises that the Council’s recommendations are not themselves enforceable law: taxpayers should await implementing legislation, rules, notifications and circulars.

Introduction

The 57th meeting of the GST Council was held on 8 October 2026 under the chairpersonship of the Union Finance Minister, Smt. Nirmala Sitharaman. Unlike the 56th meeting, which focused substantially on GST rate rationalisation, the 57th meeting concentrated on simplifying GST administration, reducing litigation, facilitating refunds, improving input tax credit (ITC) flow and making compliance easier for businesses.

The recommendations cover a wide range of matters, including registration, returns, refunds, penalties, prosecution, e-commerce, exports, movement of goods and classification of particular goods and services.

Principal recommendations

• Withdrawal of GST-related arrest powers through the proposed omission of Section 69 of the CGST Act.
• Increase in the monetary threshold for prosecution from Rs. 1 crore to Rs. 5 crore.
• Reduction in the maximum general penalty under Section 125 from Rs. 25,000 to Rs. 10,000.
• A proposed minimum threshold of Rs. 10,000 for issuing GST show-cause notices.
• A reduced penalty of 5% in specified non-fraud cases where tax and interest are paid within the prescribed period after adjudication.
• Faster processing of refunds, including automatic sanction of eligible provisional refunds.
• Wider eligibility for refunds of accumulated ITC on input services and capital goods.
• Proposed rationalisation of certain restrictions on blocked ITC.
• Simplified GST registration and cancellation procedures.
• A proposed alternative mechanism for correcting liability and ITC mismatches in returns from the April 2027 return period.
• Intelligence-based interception of goods in transit, subject to specified exceptions.
• Simplified GST registration for eligible small sellers operating through e-commerce platforms.
• An in-principle optional Annual Return Quarterly Payment (ARQP) scheme for eligible small B2C taxpayers.
• Certain clarifications, exemptions and changes concerning specific goods and services.
• These recommendations are discussed below in detail.

Official site: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2320934

Relief from GST litigation and penalties

Earlier legal position

Section 69 of the CGST Act, 2017 empowers the Commissioner to authorise the arrest of a person where the Commissioner has reasons to believe that the person has committed specified offences with respect to serious GST related offences under Section 132, dueto this the business owners and persons responsible for the business may face criminal proceedings, restrictions on their liberty and reputational consequences.

Hence the GST Council has recommended the complete withdrawal of arrest powers under GST by omitting Section 69 of the CGST Act seeking to remove the existing statutory mechanism for arrest under Section 69.

However, as per me, this may not be seen as the abolition of every criminal consequence under GST. The Council has separately recommended amendments to the prosecution provisions under Section 132. The final legislation will determine the remaining offences and consequences.

Increase in the prosecution threshold from Rs. 1 Crore to Rs. 5 Crore

Earlier, Section 132 of the CGST act specified various GST-related offences and the corresponding criminal consequences. currently, the monetary threshold for specified prosecution-related provisions is Rs. 1 crore, subject to the particular offence and statutory conditions, But the GST Council has recommended increasing the monetary threshold for prosecution to Rs. 5 crore, also council has changed the description of certain offences under Section 132 and rationalized the punishments for specified offences.

Reduction in the general penalty under Section 125

Currently, Section 125 of the CGST act provides for a general penalty of Rs 25,000 was provided where a person contravenes the act or rules and no separate penalty is specifically provided for that contravention, for which the GST Council has recommended reducing it to Rs. 10,000, providing relief in minor procedural cases, but businesses should continue to comply with invoice, return, registration and record-maintenance requirements.

Minimum threshold of Rs. 10,000 for GST show cause notices

GST demand proceedings may be initiated under Sections 73, 74 and 74A, as applicable to the relevant tax period and nature of the case as currently there is no general statutory minimum tax amount for which a show-cause notice under these provisions is automatically prohibited. Consequently, even comparatively small tax discrepancies may result in notices, responses, hearings and administrative costs.

Dueto this reason, the GST Council has recommended introducing a minimum threshold of Rs. 10,000, calculated by aggregating CGST, SGST, IGST and cess, for issuance of show-cause notices.

As per my analysis of this recommendation, The proposed threshold is not a blanket waiver of every GST liability below Rs. 10,000, the businesses should not assume that they may ignore payment obligations or return discrepancies merely because the amount is small, let’s wait for final statutory wording for the treatment of pending matters.

Reduced penalty of 5% in specified non fraud cases

Currently, GST law distinguishes between cases involving non-fraudulent short payment or non-payment of tax and cases involving fraud, wilful misstatement or suppression, as defined under the applicable provisions.

Here, it’s recommended to reduce penalty to 5% in specified non-fraud cases where the taxpayer pays the tax and interest within the prescribed period after the adjudication order i.e. within 30 days under Section 73, and within 60 days under Section 74A.

Pre-deposit cap in appeals involving only penalty

Currently, Section 107 and Section 112 of the CGST Act prescribe pre-deposit requirements for appeals before the appellate authority and the appellate tribunal, respectively. A pre-deposit is the amount that must be paid before an appeal can be entertained. It is not the same as the final tax or penalty liability.

Here, The GST Council has recommended a maximum pre-deposit of Rs. 40 crore for the specified appeals where the order involves only a penalty and no demand of tax. The proposed cap comprises Rs. 20 crore under CGST and Rs. 20 crore under SGST/UTGST.

Input Tax Credit and Refunds

Rationalisation of Blocked Input Tax Credit under Section 17(5)

One of the most commercially significant recommendations concerns the categories of expenditure on which ITC is currently restricted. Earlier, Section 16 of the CGST act laid down the general eligibility conditions for ITC, among which Section 17(5) specified the categories of blocked credit. Even if an expense is incurred for business purposes and GST has been charged by the supplier, ITC may be unavailable where the expense falls within a blocked-credit category.

It is recommended to remove restrictions on ITC in relation to specified categories, including outdoor catering, Health and life insurance, Telecommunication towers, Pipelines laid outside factory premises, Free samples, and Goods destroyed or written off on expiry of shelf life, as required by law, hence the eligible businesses may be able to claim credit on qualifying catering expenditure, reducing the effective cost of business operations.

Refund of ITC on input services and capital goods

Currently. Section 54(3) of the CGST act provides for refunds of unutilised ITC in specified circumstances, including zero-rated supplies and inverted-duty-structure cases, subject to statutory conditions.

Under the existing framework, refund eligibility is restricted in relation to certain categories of credit. In particular, the refund formula for inverted duty structure does not generally provide for refunds of accumulated credit attributable to input services or capital goods in the same manner as input goods. This can result in the accumulation of credit that remains unavailable for immediate use or refund.

It is recommended to widen refund eligibility

Input services under inverted duty structure

Refund eligibility for accumulated ITC on input services is proposed for credit availed on or after 1 November 2026 and the capital goods under zero-rated supplies and inverted duty structure in that case the refund of accumulated ITC on capital goods is proposed for credit availed on or after 1 April 2027. The eligible capital-goods credit is proposed to be spread over 60 months.

Illustration: Suppose output of STS ventures is taxed at a lower rate say 5% than the GST paid on its inputs and input services say 18%. The business may accumulate ITC because the credit available exceeds the tax payable on outward supplies. Under the earlier framework, the availability of an inverted-duty refund is restricted by the statutory formula and eligibility provisions. If the proposed amendment is implemented, eligible credit on input services availed from 1 November 2026 could become refundable in qualifying inverted-duty cases. This may improve STS’s working capital position.

Faster and automated GST refunds

Currently, Section 54 of the CGST Act governs GST refunds. Refund applicants must submit the prescribed application and supporting information, after which the claim is processed as per the procedure. This procedure may involve acknowledgement, deficiency memos, provisional refunds and verification by the proper officer, depending on the nature of the claim, leading to delays in processing refunds which may lock up working capital, particularly for exporters and businesses with accumulated ITC.

So, the council recommended a two phase approach to system based refund processing. The principal recommendations include automatic sanction of eligible refunds of excess balance in the electronic cash ledger, which helps in reduction in the time for issuing a refund acknowledgement or deficiency memo from 15 days to 10 days along with deemed acknowledgement by the system if the proper officer does not issue an acknowledgement or deficiency memo within the prescribed 10-day period. Automatic provisional sanction of 90% of eligible refund claims for zero-rated supplies and inverted duty structure, based on system risk assessment.

In the second phase, automated acknowledgement and full sanction of eligible zero-rated refunds after the required verification and adjustment of pending dues. The Council has also recommended changes to the refund application format to facilitate system-readable information and reduce the requirement for uploading scanned documents in specified cases.

GST Registration, Returns and E-Commerce

Simplification of GST Registration

Currently, Businesses applying for GST registration must submit the prescribed application and supporting documents under the CGST act. Incomplete information, documentation issues or verification requirements may lead to queries and delays. Amendments to registration particulars may also require interaction with the tax authorities, depending on the nature of the change.

It’s recommended a circular specifying the documents and information required for registration. Improvements to Form GST REG-01, including prescribed document-selection fields and a more user-friendly GST portal interface. Also, the automatic acceptance of amendments to most registration particulars, with exceptions relating to the principal place of business, is proposed to be introduced, with an automatic acceptance of principal-place-of-business amendments for taxpayers registered under the specified automatic registration route. The Council has also recommended measures to simplify cancellation and revocation procedures.

Simplified GST Registration for Small E-commerce Sellers

Currently, businesses supplying goods through e-commerce platforms may need GST registration in States where they make taxable supplies, This can create difficulties for small sellers who want to supply goods in other States but do not maintain a physical establishment in each State. Though GST act already provides certain special procedures and exemptions for eligible e-commerce suppliers, but these operate subject to their own conditions.

Hence it’s recommended inserting Rule 14B into the CGST Rules to provide a simplified registration for eligible small suppliers of goods through e-commerce operators. This covers suppliers operating in States or Union Territories where they do not have a physical presence, subject to conditions like the applicable ITC-passing threshold of Rs. 2.5 lakh per month and declaration of the e-commerce operator’s warehouse in that State or Union Territory as the principal place of business. Registration would be granted automatically through the system, subject to the prescribed conditions.

Illustration: Suppose a small manufacturer in Rajasthan wants to sell goods through an online marketplace to customers in Delhi. currently, the seller may face additional registration requirements depending on the nature and location of its supplies. Under the proposed mechanism, an eligible seller may be able to obtain registration through the prescribed process without establishing a conventional physical business premises in that State.

Proposed annual return quarterly payment scheme for small B2C businesses

Currently, GST taxpayers must follow the return-filing and tax-payment frequency applicable to their category and the relevant statutory or notified scheme. Small businesses making supplies directly to consumers may find frequent payment and compliance obligations administratively burdensome. So, The council has approved optional Annual Return Quarterly Payment (ARQP) scheme.

The GST Council has approved in principle a concept note for an optional ARQP scheme for eligible taxpayers having aggregate turnover of up to Rs.5 crore in the preceding financial year and engaged exclusively in B2C supplies. The detailed framework and implementation remain subject to further action.

Late fee relief for small taxpayers

Currently, late fees may apply when prescribed GST returns are filed after their due dates, subject to the applicable statutory limits, exemptions and notifications. Delayed filing can create additional compliance costs for small businesses even where the tax liability is relatively modest.

So, The Council has recommended waiving late fees for delayed returns under Section 39(1) for taxpayers whose turnover in the preceding financial year does not exceed Rs. 5 crore, provided the delayed return is filed by the end of the month in which it was due.

GST Returns and ITC reconciliation

New Mechanism for correcting GSTR-1 and GSTR-3B mismatches

Currently, GSTR-1 contains details of outward supplies, while GSTR-3B is used for reporting summary tax liabilities and ITC. Similarly, GSTR-2B provides an important basis for reconciling ITC available to a recipient. Mismatches between these returns may arise because of incorrect invoice reporting, amendments, credit notes, timing differences, reverse-charge transactions or ITC reversals and reclaims. Such discrepancies can lead to system-generated intimations, notices and demands.

The Council has recommended an alternative mechanism for correcting liability and ITC mismatches.

The proposed changes include better reconciliation between GSTR-1, GSTR-1A, IFF and GSTR-3B, an electronic statement of tax paid under reverse charge and ITC claimed, a facility for recording ITC reversals and subsequent reclaims, and a mechanism to align liability reported in GSTR-3B with the outward-supply details reported in the relevant forms.

Changes to Form GST DRC-03 made to identify the underlying invoice for which payment has been made. Improvements to the Invoice Management System proposed for accepting, rejecting or keeping specified documents pending. The Council has recommended that the alternate mechanism for correction of liability and ITC be brought into force from the April 2027 return period, subject to the prescribed process.

Opportunity to object before Blocking ITC under Rule 86A

Currently, Rule 86A of the CGST Rules allows the proper officer to restrict the use of amounts available in the electronic credit ledger when the specified conditions concerning credit being fraudulently or ineligibly availed are satisfied. Such restrictions can affect a business’s ability to discharge its tax liabilities through ITC and may therefore create working-capital pressure.

The Council has recommended a mechanism allowing a taxpayer to file an objection against the blocking of an amount in the electronic credit ledger and to obtain a personal hearing before the proper officer decides the objection.

GST enforcement and movement of goods

Changes Proposed for E-way Bill Interception

Currently, Section 68 of the CGST Act and the relevant rules govern the carrying of prescribed documents and information during the movement of goods. Section 129 deals with detention, seizure and release of goods and conveyances in specified circumstances. Section 130 contains provisions relating to confiscation in the circumstances covered by that section. Interception and detention of goods can delay deliveries, disrupt supply chains and create additional costs for businesses.

The Council has recommended amendments intended to provide that a conveyance carrying goods may be intercepted only on specific intelligence and with authorisation from an officer not below the rank of Joint Commissioner. Inspection and further action may generally be taken where the supplier or recipient is located or registered in the State in which interception occurs. Interception in transit States would generally not be permitted. Exceptions would apply where no e-way bill has been generated or the prescribed documents showing the origin or destination of goods are not carried.

Confiscation under Section 130 would not apply to goods or conveyances in transit in the circumstances specified in the recommendation.

Extension of E-invoicing to specified reverse charge transactions

Currently, E-invoicing requirements apply to specified registered persons and transactions, subject to the applicable turnover thresholds, exclusions and notifications. Businesses may also be required to discharge GST under reverse charge on specified supplies received from unregistered persons or on imports of services.

The Council has recommended extending e-invoicing to specified domestic supplies received from unregistered persons where GST is payable under reverse charge, as well as imports of services, for taxpayers having aggregate annual turnover of Rs. 5 crore or more.

Exports and zero-rated supplies

Relief for Indian service providers working through foreign offices

Currently, The definition of export of services under Section 2(6) of the IGST Act includes several conditions. One of the conditions concerns the supplier and recipient not being establishments of a distinct person, subject to the statutory explanation and its application. This condition can create difficulties for Indian businesses supplying services through or to their own foreign offices or branches.

The Council has recommended omitting the relevant sub-clause concerning establishments of a distinct person for determining whether a supply qualifies as an export of services. The Council has also recommended clarification concerning receipt of consideration in foreign exchange or Indian rupees where permitted, and changes to the place-of-supply rules for certain services involving goods made physically available to the supplier.

Supplies to overseas buyers through SEZs and FTWZs

Currently, zero rate under Section 16 of the IGST act applies to specified supplies, including exports and supplies to SEZ developers or units for authorised operations. Businesses may face uncertainty where goods are supplied to an overseas buyer but delivered to the buyer in an SEZ or Free Trade Warehousing zone for warehousing or further processing.

The Council has recommended an explanation to Section 16(1) of the IGST Act to address qualifying supplies where goods are supplied to an overseas buyer, delivery is made to the buyer in an SEZ or FTWZ, consideration is received in convertible foreign exchange or Indian rupees wherever permitted by the RBI, and the recommendation is intended to provide certainty regarding the treatment of such transactions as supplies to an SEZ or FTWZ for zero-rating purposes.

Selected goods and services

Specified waste and scrap transactions

Currently, The GST treatment of scrap transactions depends on the applicable classification, rate notification and reverse-charge provisions, it’s recommended that specified waste and scrap of plastics, electrical and electronic goods, tyres and used cooking oil supplied by unregistered persons to registered persons are proposed to be brought under reverse charge. The recommendation also provides for 2% GST TDS for specified B2B supplies of such waste and scrap by registered persons.

Second-hand vehicle dealers

The Council has recommended clarifying that dealers operating under the GST margin scheme may claim ITC on qualifying inputs and input services, such as repairs, maintenance, technology services, rent and advertising.

The restriction on ITC under the scheme would continue to apply to tax paid on the procurement of the second-hand vehicles themselves. Dealers should therefore separately account for vehicle purchases and other eligible business expenses.

Psyllium seeds (Isabgol)

The Council has recommended prescribing a nil GST rate for psyllium seeds, whether fresh, chilled, frozen or dried.

Seaweed-extract-based bio-stimulants

The Council has recommended clarifying that specified seaweed extract based bio stimulants registered under the prescribed fertiliser control framework are classifiable under heading 3101 as fertilisers.

Electric-vehicle passenger transport and rentals

The Council has recommended an option to pay GST at 5%, with restricted ITC, for specified passenger transport and rental services of motor vehicles with operators where an electric vehicle is used and the cost of battery charging is included in the consideration.

Delivery services through e-commerce platforms

The Council has recommended a 5% GST rate without ITC for specified delivery services supplied through e-commerce operators and for specified delivery services relating to goods ordered or supplied through such platforms.

Other proposed exemptions and clarifications

The Council has also recommended measures concerning storage or warehousing of seeds meant for sowing, curing of coffee by coffee curers for cultivators, Specified services of the Seamen’s Provident Fund Organisation, Passenger transport by helicopters on a seat-sharing basis on specified routes, Specified imports of services by Indian establishments of foreign shipping lines without consideration, specified upfront payments and concession arrangements under the Toll Operate Transfer model for highway projects, Certain fund-transfer-pricing arrangements between bank branches, Businesses operating in these sectors should examine the final notifications and any conditions attached to the proposed exemptions or clarifications.

Intellectual property and other compliance matters

Transfer of Intellectual property rights

Currently, The GST treatment of IP transactions depends on the nature of the rights transferred, the contractual terms and the applicable classification and applicable law. Different interpretations of temporary and permanent transfers may create uncertainty in particular transactions.

The Council has recommended amending Schedule II of the CGST Act to provide for uniform treatment of transfers of title in intellectual property rights, whether temporary or permanent, as a supply of services.

Clarifications for Banks and Financial Institutions

The Council has recommended clarifications concerning distribution of input service credit under the Input Service Distributor mechanism. ITC for banking companies, financial institutions and NBFCs opting for the specified method under Section 17(4). Pre-deposit requirements and related matters.

demonstration vehicles in certain situations. The treatment of specified fund-transfer-pricing transactions between bank branches. Banks, NBFCs and other financial institutions should review the relevant circulars when issued. The proposed clarifications may reduce interpretational disputes, but the final guidance will determine the precise scope of relief.

Conclusion

The 57th GST Council meeting represents an important proposed shift from a system focused heavily on rate rationalisation to one that places greater emphasis on ease of compliance, reduced litigation, working-capital efficiency and procedural fairness, hence for businesses, the most significant proposals are the expansion of ITC and refund eligibility, faster refund processing, rationalisation of penalties, changes to prosecution provisions, simplified registration and improved return reconciliation.

Note: Recommendations are not automatically a law, the 57th GST Council meeting has proposed substantial changes, but businesses must distinguish between an announcement, a recommendation and an enforceable legal provision, also some views are personal.

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Author can be contacted at [email protected]