GST Return Reforms: GSTR-3B, IMS, RCM and the Proposed ARQP Scheme

Summary: The 57th GST Council meeting held on 8 October 2026 recommended changes concerning proposed liability and credit reconciliation framework, arqp concept and related compliance proposals, late-fee relief and related clarifications. The Ministry of Finance press release records recommendations and, in some cases, proposals for future circulars, consultation or in-principle approval. It is not itself an amending Act, rule or rate notification. This analysis explains the precise measures described in the release, their relationship with the statutory provisions identified there, and the practical questions that remain unresolved until the implementing instruments are published. Taxpayers should continue to apply the law currently in force and should not change return positions, claim additional credits, discontinue documentation or alter rates merely on the basis of the Council announcement.

Background and legal status

The Council’s 57th meeting concentrated on process reform following earlier rate rationalisation. The press release distinguishes existing portal measures from new statutory or procedural proposals. Council recommendations require the appropriate amendment, notification, rule, circular or portal implementation, as applicable. A suggested implementation date in the release is not proof of commencement.

Proposed liability and credit reconciliation framework

Return related reforms Alternate mechanism for making amendment of liabilities and input tax credit in returns to minimize mismatches and reduction of notices/intimations on account thereof

5.1 The GST Council recommended the following measures to streamline return filing process, so as to minimize mismatches in liability and input tax credit (ITC) in returns Enhancements in FORM GSTR-1/1A/IFF to enable better reconciliation of the details furnished in these forms with the details reported in the return in FORM GSTR-3B. Insertion of a rule 86D in the CGST Rules, 2017, to provide for a facility namely, “Electronic Statement of tax paid on Reverse charge basis and input tax credit claimed” on the portal, to facilitate the taxpayers in correct reporting of tax liability and ITC on supplies liable to RCM in returns.

Press-release recommendation. Insertion of sub-rule (1A) in rule 61 of the CGST Rules, 2017 to provide a mechanism of correct reporting and correction/rectification of liability in the return, so that liability in the return in FORM GSTR-3B aligns with the details of liability furnished in FORM GSTR-1/1A/IFF. Amendment in FORM GST DRC-03, to declare the details of the underlying invoice for which payment has been made. Insertion of sub-rule (6A) in the rule 60 of the CGST Rules, 2017, in respect of the facility namely, Invoice Management System (IMS), to allow a recipient to accept, reject or keep pending a document pertaining to inward supply received on the portal, for the purpose of generation of statement of ITC in FORM GSTR-2B, subject to certain conditions, including the period for which a credit note can be kept pending on IMS.

Press-release recommendation. Insertion of rule 86C in the CGST Rules, 2017 to provide for a facility namely, “Electronic Credit Reversal and Reclaim Statement” on the portal, to facilitate the taxpayers in correct reporting of ITC reversed and reclaimed in FORM GSTR-3B. Insertion of sub-rule (1B) in the rule 61 of the CGST Rules, 2017, to provide a mechanism of correct reporting and correction/rectification of ITC in the return, so that ITC availed in the return in FORM GSTR-3B aligns with the details of ITC made available in FORM GSTR-2B.

Issuance of a circular to clarify the manner of furnishing correct and proper information of ITC and reversal thereof in return in FORM GSTR-3B, in the context of IMS, Electronic Credit Reversal and Reclaim Statement and Electronic Statement of tax paid on Reverse charge basis and input tax credit.

5.2 The Council recommended that the provisions regarding alternate mechanism for amendment of liability and ITC in the GST return, may be brought into force from the return of April, 2027. These measures will considerably reduce mismatches in liability and ITC in returns, thus not only reducing demand notices and system generated intimations on account of such mismatches, but also improving the integrity of ITC across the supply chain, thereby facilitating taxpayers.

5.3 Further, the Council recommended placing the proposed revised mechanism in the public domain for a time-bound consultation. Union Finance Minister was authorized to approve requisite changes/modifications, as may be necessary, based on feedback received from the stakeholders.

Legal reading and implementation questions

The recommendation must be tested against the final statutory or delegated instrument: the operative wording, class of eligible persons or supplies, procedural conditions, effective date, and treatment of past periods. Until those elements are notified, this section describes a proposal rather than a presently enforceable entitlement or restriction.

ARQP concept and related compliance proposals

Clarification in respect of various issues through circulars: The GST Council recommended issuance of circulars to provide clarity and to remove ambiguities arising due to varied interpretations by the field formations, in respect of the following issues: Issues relating to Input Service Distributor (ISD) mechanism for distribution of input service credit. Availment of input tax credit by banking companies and financial institutions including NBFCs who opt for section 17(4) of the CGST Act, 2017.

Various issues relating to payment of pre-deposits. Admissibility of input tax credit in respect of demonstration vehicles in certain situations. Omission of rule 96 (10) of the CGST Rules, 2017 to be effective from 23.10.2017, in accordance with the Hon’ble Supreme Court decision. Concept note for an optional scheme for Annual Return Quarterly Payment (ARQP): The GST Council approved in-principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers having an aggregate turnover equal to or less than Rs. 5 Crore in the preceding financial year and engaged exclusively in supplies to unregistered persons (B2C supplies).

Press-release recommendation. The Council also made the following recommendations to streamline compliances in GST: amendment in section 16, section 37 and section 39 of the CGST Act, 2017, to align provisions relating to furnishing of statement of outward supply under section 37 and the return under section 39 of the CGST Act, 2017 with the provisions relating to time limit for availment of input tax credit under section 16(4) of the CGST Act, 2017. amendment in section 9(5) of the CGST Act, 2017, to provide clarity regarding liability of the ECO to pay tax for the notified services, irrespective of the business models being followed by him.

introduction of a validation clause in CGST Act, 2017, for validation of notices which have been held invalid by various courts on the ground of having been issued for multiple financial years. extending e-invoicing to domestic supplies received from an unregistered person where the tax is payable under reverse charge mechanism, as well as to the import of services, for taxpayers having aggregate annual turnover of Rs. 5 crore and above.

Legal reading and implementation questions

The recommendation must be tested against the final statutory or delegated instrument: the operative wording, class of eligible persons or supplies, procedural conditions, effective date, and treatment of past periods. Until those elements are notified, this section describes a proposal rather than a presently enforceable entitlement or restriction.

Late-fee relief and related clarifications

Amendment in rule 86A of the CGST Rules, 2017 to provide for opportunity of being heard to the taxpayer : The GST Council recommended amendment in rule 86A of the CGST Rules, 2017 to provide a mechanism for enabling a taxpayer to file an objection against blocking of any amount in electronic credit ledger and to avail a personal hearing before the proper officer takes a decision on such objection. Extending relief for small taxpayers on late fees

: The GST Council recommended waiver of late fee on delayed filing of return under section 39(1) of the CGST Act, 2017, for taxpayers with an annual turnover up to Rs. 5 crore in the preceding financial year, if the said delayed return is filed by the end of the month in which it was due.

Legal reading and implementation questions

The recommendation must be tested against the final statutory or delegated instrument: the operative wording, class of eligible persons or supplies, procedural conditions, effective date, and treatment of past periods. Until those elements are notified, this section describes a proposal rather than a presently enforceable entitlement or restriction.

Analysis

The alternate correction and reconciliation mechanism is proposed for the return of April 2027 and was also proposed for public consultation. Rule 86C and proposed rule 86D serve different reporting functions: credit reversal and reclaim on the one hand, and reverse-charge tax paid and corresponding credit on the other. ARQP is only an in-principle concept note, not an immediately available return option.

Way forward

First, identify the relevant Act amendment, rule amendment, rate notification or circular when issued. Second, compare its wording with the Council announcement; the final text may narrow, qualify or stage the measure. Third, confirm the commencement clause and any retrospective or transitional provision. Fourth, update compliance procedures only after checking whether portal changes, prescribed forms and administrative instructions are available.

Key takeaways

• The 8 October 2026 press release is the primary source for the proposals discussed here.
• A recommendation, in-principle approval or proposed circular does not itself change the operative law.
• Where the release identifies thresholds, dates or exceptions, the final legal text must be checked before applying them.
• Existing statutory filing, payment, record-keeping and appeal obligations continue until lawfully changed.

Frequently Asked Questions

Have these Council recommendations come into force?

Not merely by publication of the press release. The applicable amendments, notifications, rules or circulars and their commencement provisions must be examined.

Can a taxpayer rely on the proposed relief in a current return or proceeding?

Only if the relevant legal instrument is effective and the taxpayer satisfies its conditions. The announcement alone is insufficient.

Will every measure commence on the same date?

The release refers to different proposed implementation arrangements. Each measure must be checked separately against its eventual legal instrument.

Does the release settle all procedural and documentary conditions?

No. Several recommendations expressly contemplate further rule changes, circulars, portal modifications or consultation.

What should advisers do before acting on the announcement?

Maintain the current-law position, identify the specific recommendation, and track the final text, commencement and any transitional provision.

TaxGuru source and related reading

Principal press release: 57th GST Council Meeting – TaxGuru

Provision-by-provision legal verification and qualifications

April 2027 is a target, not commencement

The alternate liability and ITC correction mechanism is proposed from the return for April 2027, subject to consultation, modifications and legal commencement.

Distinct proposed mechanisms

Rule 86C concerns credit reversal/reclaim, rule 86D concerns reverse-charge tax and related ITC, rule 61(1A) concerns liability correction, rule 61(1B) concerns ITC correction and rule 60(6A) concerns IMS treatment of inward documents.

ARQP not approved for immediate use

The Council gave in-principle approval to a concept note for an optional Annual Return Quarterly Payment scheme restricted to preceding-year turnover up to ₹5 crore and exclusively B2C supplies. It is not a presently operative alternative to regular returns.

Other compliance changes

The release also proposes aligning sections 16, 37 and 39 with the section 16(4) time limit, and extending e-invoicing for specified RCM supplies/import of services for taxpayers at ₹5 crore annual turnover and above. The final system design is not supplied.

Verified TaxGuru internal references

• Primary source: 57th GST Council recommendations as published on TaxGuru
• Related analysis: IMS and return-filing advisory
• Related analysis: GSTR-1/3B mismatch and Rule 88C judgment
• Related analysis: GSTR-1 / GSTR-3B mismatch notices

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Disclaimer: This article is an editorial explanation of the recommendations recorded in the Ministry of Finance press release dated 8 October 2026. It is not a statement that any proposed amendment has commenced. Readers must verify the relevant enacted law, notifications, rules, circulars and judicial developments before acting. TaxGuru accepts no responsibility for decisions taken solely on the basis of this article.