Summary: Notification No. 03/2026-Central Tax, dated 26 October 2026, brings Sections 153, 154 and 155 of the Finance Act, 2026 into force from 1 November 2026. These amendments modify Sections 15, 34 and 54 of the CGST Act, 2017, affecting post-supply discounts, GST credit notes and refunds. The changes aim to simplify commercial transactions, reduce compliance difficulties and improve refund liquidity for eligible taxpayers. Under amended Section 15(3)(b), post-supply discounts may be excluded from taxable value without requiring a prior agreement or invoice-wise linkage, provided the supplier issues a credit note under Section 34 and the recipient reverses the corresponding input tax credit. Section 34(1) expressly recognises credit notes for such discounts, while the existing declaration deadline under Section 34(2) continues to apply. Section 54(6) extends the statutory provisional refund mechanism to eligible inverted duty structure claims, permitting provisional release of 90% of the claimed amount, subject to prescribed conditions and safeguards. Additionally, amended Section 54(14) removes the ₹1,000 minimum refund restriction for tax paid on goods exported out of India, benefiting small exporters. The relaxation does not extend to other refund categories. Businesses should review discount schemes, credit note procedures, ITC reversal controls and refund applications before implementation. The notification specifies prospective commencement and does not itself provide retrospective application to earlier transactions.
From 1 November 2026: Easier GST Rules for Discounts, Credit Notes and Refunds
The notification in one line
Notification No. 03/2026 Central Tax dated 26 October 2026 says that Sections 153, 154 and 155 of the Finance Act, 2026 will come into force on 1 November 2026.
The notification itself is just two lines long. But the sections it brings into force change three important provisions of the CGST Act: Section 15 on value of supply, Section 34 on credit notes, and Section 54 on refunds. These amendments were announced in the Union Budget for 2026 to 27 and passed as part of the Finance Act, 2026. They were waiting only for this date.
There are four changes in all. Each is explained below with a simple example.
1. Discount given after the sale (Section 15(3)(b))
Take a simple case. A paint company sells to a dealer all through the year. In March, the dealer has crossed his sales target, so the company gives him a discount of ₹50,000 on the year’s purchases.
Under the old Section 15(3)(b), such a discount could be reduced from the taxable value only if:
1. it was fixed in an agreement made at or before the time of supply;
2. it was specifically linked to the relevant invoices; and
3. the dealer reversed the input tax credit on it.
In real business, target discounts, year end rebates and schemes are mostly decided later, and they are seldom linked invoice by invoice. So the company could not reduce its GST. It usually issued a commercial credit note without GST, and the tax stayed paid on the full original value.
From 1 November 2026, the first two conditions go. A discount given after the supply will be kept out of the value of supply if:
1. the supplier issues a credit note for the discount under Section 34; and
2. the recipient reverses the input tax credit relating to that discount.
No prior agreement and no invoice by invoice linking are needed any more. The paint company in our example can now issue a GST credit note for ₹50,000 plus tax, reduce its output tax, and the dealer reverses the matching ITC.
2. Credit note for such discounts (Section 34(1))
Section 34(1) lists the cases in which a supplier can issue a credit note. Until now the list was: the value or tax shown in the invoice was more than it should be, the goods were returned, or the goods or services were found deficient. A discount given after the sale was not in the list.
From 1 November 2026, Section 34(1) also covers a discount referred to in Section 15(3)(b). So the law itself now says that a credit note can be issued for a post sale discount. Sections 15 and 34 now speak the same language.
Two things remain the same. First, the time limit under Section 34(2) still applies, so the credit note must be declared in the return by 30 November following the end of the financial year, or the date of filing the annual return, whichever is earlier. Second, a purely commercial credit note, without GST, is still possible. It simply will not reduce the supplier’s tax.
3. 90% provisional refund now for inverted duty cases also (Section 54(6))
An inverted duty structure is when you pay a higher rate of GST on what you buy and collect a lower rate on what you sell. For example, a manufacturer buys raw material at 18% and sells the finished product at 5%. Credit keeps piling up in his ledger every month, and he cannot use it. Section 54(3) allows a refund of this unused credit.
Until now, Section 54(6) allowed the officer to sanction 90% of the refund provisionally only for zero rated supplies, that is, exports and supplies to SEZ. Inverted duty refund claimants had to wait for the full scrutiny. The Board had given some relief through Instruction No. 06/2025 GST dated 3 October 2025, but that was only an administrative step.
From 1 November 2026, Section 54(6) itself covers inverted duty refunds under Section 54(3). An eligible claimant can get 90% of the claimed amount provisionally, and the balance after final verification.
Two cautions. This does not widen what can be refunded. The formula and the exclusions in the rules, such as the treatment of input services and capital goods, are governed by Rule 89, not by this change. And the usual safeguards and risk checks on refunds will continue.
4. Small exporters: refund below ₹1,000 now allowed (Section 54(14))
Section 54(14) says that no refund will be paid if the amount is less than ₹1,000. This hit very small exporters hard. A person who sends handicrafts or a few garments abroad by courier or post, paying IGST on each shipment, often has a refund of a few hundred rupees per consignment. Under the old rule he simply lost it.
From 1 November 2026, the ₹1,000 floor will not apply where the refund is of tax paid on goods exported out of India. So an exporter who paid IGST on export of goods can get his refund even if it is ₹300 or ₹700.
Please note that this relief is only for goods exported on payment of tax. For other refunds, such as excess cash in the ledger or inverted duty refunds, the ₹1,000 limit continues.
What you should do now
If you give target discounts or year end schemes to dealers, plan to issue GST credit notes for them from 1 November 2026, and tell your dealers that they will have to reverse the matching ITC. Keep the scheme circular or letter on file, even though it is no longer a legal condition, because an officer will still ask why the discount was given.
If you are a dealer receiving such credit notes, accept them and reverse the ITC promptly. If you do not reverse it, the supplier’s reduction in tax can be questioned.
If you are a manufacturer with inverted duty refunds, you can expect 90% of an eligible claim to be released provisionally from 1 November 2026, instead of waiting for the full scrutiny. If you are a small exporter, refunds below ₹1,000 on goods exported with payment of IGST are now payable.
One last point. The notification does not give these amendments any backward effect. Discounts, credit notes and refund claims of earlier periods will be judged under the law as it stood then.
