57th GST Council Meeting: What 39 Recommendation Really Means for Taxpayers

Summary: The 57th GST Council meeting held on 8 October 2026 recommended wide-ranging reforms concerning GST arrest powers, prosecution, notices, penalties, registration, return reconciliation, refunds, input tax credit, exports, goods interception and rate clarifications. Its proposals include removal of Section 69 arrest powers, a higher prosecution threshold, relief for small-value notices, reduced penalties, system-based registration and refunds, expanded ITC eligibility, revised rules for export services, and limits on roadside detention. An optional Annual Return Quarterly Payment scheme for eligible B2C taxpayers received in-principle approval. The article examines 39 recommendations, including concerns over retrospective validation of notices issued for multiple years and the pending issue of credit denial to genuine buyers when suppliers default. Council recommendations do not themselves amend the law; taxpayers must await the relevant statutory amendments, rules, notifications and circulars before changing compliance positions.

Introduction

The 57th meeting of the GST Council was held on 8 October 2026 at Bharat Mandapam, New Delhi, under the chairpersonship of the Union Finance Minister. Last year’s 56th meeting was about rates, when the four slab structure was collapsed into the present two main rates. This meeting is about something many practitioners would call more important: the way the law is administered every day. Registration, returns, refunds, notices, adjudication, arrest, prosecution and interception of goods on the road have all been touched.

One caution before we begin. A recommendation of the GST Council is not law. Most of these changes need amendments to the CGST Act, the IGST Act, the State GST Acts and the CGST Rules, and some need notifications and circulars. Until those are issued, the existing provisions continue to apply. The Finance Minister indicated at the media briefing that most process reforms are targeted for implementation from 1 April 2027.

With that in mind, let us go through each recommendation and understand what it means.

Part One: Arrest and Prosecution

1. Complete removal of arrest powers: omission of Section 69

This is the headline of the meeting, and rightly so.

Section 69 of the CGST Act empowers the Commissioner to authorise the arrest of a person where he has reasons to believe that the person has committed certain specified offences. These are supplying goods or services without an invoice, issuing invoices without actual supply, availing input tax credit on such fake invoices, and collecting tax but not paying it to the Government beyond three months, where the amount involved crosses the prescribed limits. In practice, this power was used mostly in fake invoicing and bogus ITC cases. For the trade it was a source of real fear, because a person could be taken into custody at the investigation stage itself, often before any adjudication had determined whether tax was actually payable.

Courts repeatedly stepped in. In 2025 the Supreme Court upheld the arrest provisions but insisted on strict safeguards: reasons to believe must be recorded in writing, grounds of arrest must be furnished, and arrest cannot be used as a tool to coerce payment. Even after that, complaints of pressure during searches continued.

The Council has now recommended omitting Section 69 altogether. The effect is simple. Once the amendment comes into force, no GST officer, of whatever rank, will have the power to arrest a person under the GST law. As the Finance Minister put it, arrest is being taken out of the tax officer’s hands.

It is important to understand what this does not mean. It does not mean that tax fraud goes unpunished. Prosecution under Section 132 remains, and a person who commits a serious offence can still be prosecuted before a criminal court. Where criminal law requires custody, it will have to come through the regular criminal process under judicial oversight, not through the signature of a tax officer. The department will rely on recovery of tax, interest and penalty, attachment of property under Section 83, and prosecution in deserving cases.

For honest businesses, particularly small and medium traders, this removes a heavy psychological burden. A dispute about classification, eligibility of credit or valuation should be fought on paper before the adjudicating authority, and now it will be.

How existing arrests and pending matters will be dealt with will depend on the transitional provisions in the amending law, which should be watched carefully when the Bill is introduced.

2. Prosecution threshold raised to ₹5 crore

Section 132 of the CGST Act lists the offences for which a person can be prosecuted and the punishment for each, depending on the amount of tax evaded, ITC wrongly availed or refund wrongly obtained. Under the present structure, where the amount exceeds ₹5 crore the punishment is imprisonment up to five years with fine; between ₹2 crore and ₹5 crore it is up to three years with fine; and between ₹1 crore and ₹2 crore it is up to one year with fine.

After the Finance Act 2023, the ₹1 crore entry point survived only for fake invoicing cases, and for most other offences the entry point became ₹2 crore. Prosecution also requires the prior sanction of the Commissioner under Section 132(6).

The Council has now recommended that the monetary threshold for prosecution be raised to ₹5 crore. In plain terms, if the tax or credit involved is below ₹5 crore, the matter will not go to a criminal court. It will be dealt with through demand, interest and penalty under the civil provisions. Criminal prosecution is being reserved for large frauds, which is how a modern tax law should work.

The Council has also recommended rationalising the punishment prescribed for different offences under Section 132. The details will be known only when the amendment is drafted, but given the new threshold, the lower slabs will either go or be restructured.

3. Narrowing the list of offences under Section 132(1)

Along with the threshold, the Council has recommended trimming the offences themselves.

Clause (i) of Section 132(1) is to be omitted. This clause punishes a person who receives, or is in any way concerned with, any supply of services which he knows or has reason to believe is in contravention of the Act. It is vague and wide, and in theory it could reach almost anyone in a transaction chain.

The words “evades tax” are to be deleted from clause (e). Clause (e) presently covers a person who evades tax, fraudulently obtains refund or fraudulently avails ITC where the offence is not covered by the earlier clauses. “Evades tax” is a loose expression, and every short payment could be dressed up as evasion. Removing it keeps the clause focused on fraudulent refund and fraudulent credit.

The words “or in any other manner deals with” are to be deleted from clause (h). Clause (h) relates to acquiring possession of, or dealing with, goods liable to confiscation. Without these words, a transporter, warehouse keeper or casual handler is less likely to be roped in.

Clause (c) is to be amended so that it covers only the offence of fraudulently availing ITC without actually receiving goods or services, or without an invoice or bill. This is the real mischief the law wants to punish: credit taken on paper with no actual supply behind it.

Taken together with the higher threshold, these changes make the criminal side of GST narrower, sharper and fairer.

Part Two: Dispute Resolution, Notices and Penalties

4. Common standards for notices and orders

The Council has recommended a comprehensive circular to guide officers on issuing show cause notices, adjudication orders and appellate orders. It will deal with the quality of notices and orders, their timely issue, and the invocation of fraud, wilful misstatement or suppression of facts only where the merits of each case justify it. It will also deal with natural justice, including the grant of personal hearings.

Anyone who handles GST litigation knows how common it is to find Section 74 invoked mechanically, sometimes in a simple mismatch case where nothing was suppressed, only to secure the longer limitation period and higher penalty. Orders passed without considering replies, or without a hearing, are another familiar ground on which High Courts set aside orders every week. A circular cannot by itself cure all of this, but it gives the taxpayer a document to cite before the officer and the appellate authority.

5. No show cause notice below ₹10,000

Sections 73, 74 and 74A are to be amended so that no show cause notice will be issued where the tax involved is less than ₹10,000. The figure is the total of CGST, SGST, IGST and cess taken together.

The Council has gone a step further. Any notice or appeal involving less than ₹10,000 that is pending on the date this provision comes into force will be decided as if the threshold had already been in force when the notice was issued. In effect, small pending disputes will fall away.

This is a practical measure. Thousands of notices are issued for a few hundred or a few thousand rupees, arising out of minor mismatches. The cost of replying, attending hearings and filing appeals far exceeds the amount in dispute, for both the taxpayer and the department.

6. Penalty treated as a charge on voluntary payment

The Council has recommended that where the full tax is voluntarily paid along with interest and penalty within the specified time, the penalty amount will be deemed a “charge”. The exact wording will come with the amendment. The apparent intention is that a taxpayer who comes forward and settles the matter voluntarily should not carry the label of a penalised person, which matters for tenders, credit ratings and repeat offender provisions in other laws.

7. Reduced penalty of 5% in non fraud cases

Where the case does not involve fraud, a reduced penalty of 5% will apply if the tax with interest is paid within 30 days of the adjudication order in a Section 73 case, or within 60 days in a Section 74A case. This encourages early closure. A taxpayer who accepts the order and pays promptly avoids the full penalty and the cost of appeal.

8. No minimum penalty of ₹10,000 in non fraud cases

At present, even in non fraud cases, a minimum penalty of ₹10,000 applies irrespective of how small the tax is. The Council has recommended removing this minimum, so penalty will be proportionate to the tax involved.

9. General penalty under Section 125 reduced from ₹25,000 to ₹10,000

Section 125 is the residuary penalty provision. It applies to any contravention for which no separate penalty is prescribed elsewhere, and presently the penalty may extend to ₹25,000. The Council has recommended reducing this maximum to ₹10,000. Procedural lapses such as a minor defect in a document or a technical breach of a rule often attract this provision, and the reduction brings the penalty in line with the gravity of such lapses.

10. Cap of ₹40 crore on pre deposit in penalty only appeals

Where an order demands only penalty and no tax, a pre deposit is required to file an appeal before the Appellate Authority under Section 107(6) and before the Appellate Tribunal under Section 112(8). In large cases, especially those under Section 122 involving fake invoice allegations, the penalty can run into hundreds of crores, and even a percentage of it can be beyond the reach of the appellant.

The Council has recommended an upper limit of ₹40 crore, that is ₹20 crore under CGST and ₹20 crore under SGST or UTGST, on such pre deposit. This keeps the appeal remedy meaningful even in high value penalty matters.

11. Interest on refund of pre deposit

Section 115 deals with interest on refund of the amount paid as pre deposit when the appeal succeeds. There has been confusion about which rate applies and from when. The Council has recommended making Section 115 a standalone provision on the rate of interest, and issuing a circular to clarify the related issues.

12. Hearing before blocking of credit under Rule 86A

Rule 86A allows an officer to block credit in the electronic credit ledger where he has reasons to believe the credit was fraudulently availed. At present there is no formal mechanism for the taxpayer to be heard before or after the blocking, and High Courts have repeatedly had to read principles of natural justice into the rule. The Council has recommended amending Rule 86A to allow a taxpayer to file an objection against the blocking and to get a personal hearing before the officer decides on it. This is a welcome codification of what courts have been saying for years.

13. Validation of notices issued for multiple financial years

Practitioners must note this recommendation carefully, because it is not in the taxpayer’s favour. Several High Courts have held that a single show cause notice covering several financial years is invalid, since limitation under Sections 73 and 74 is to be computed year wise. The Council has recommended a validation clause in the CGST Act to validate notices held invalid by courts on this ground.

A retrospective validation of this kind would affect pending litigation, and its constitutional validity may itself be questioned once enacted. Those with matters pending on this ground should watch the drafting closely.

Part Three: Registration

14. Clear guidelines for registration applications

Following the 56th meeting, automatic registration without officer intervention is already granted under Rule 14A where the applicant does not intend to pass on ITC of more than ₹2.5 lakh per month. For all other applications, the Council has recommended a comprehensive circular listing the documents and information required for registration, along with FAQs. FORM GST REG 01 is to be amended to provide drop boxes for selecting the prescribed documents, so that both the applicant and the officer know exactly what is to be furnished. The portal is to get a more user friendly interface with clear navigation, drop down lists, tool tips and contextual guidance.

Every practitioner has seen a REG 03 notice asking for documents already uploaded, or demanding something the law nowhere requires. A clear and uniform list should reduce rejections and avoidable queries.

15. Automatic acceptance of amendments to registration

Rule 19 is to be amended so that amendments to all registration particulars are accepted automatically on the portal, except those relating to the principal place of business. For taxpayers registered under Rule 14A, even a change of principal place of business will be accepted automatically. Updating details will become almost real time, without approaching an officer.

16. Simplified cancellation of registration

The cancellation process is to be simplified in two phases.

In Phase 1, applications for cancellation in FORM GST REG 16 will be accepted automatically by the system, once all pending returns are filed and dues are paid, in two situations: where the taxpayer has never passed on ITC exceeding ₹2.5 lakh in any month since registration, or where he has exceeded that limit but has filed the final return in FORM GSTR 10 within the specified time.

In Phase 2, all cancellation applications will be accepted automatically once returns are filed and dues are paid. FORM REG 16 will be amended so that the details of GSTR 10 can be given in the cancellation application itself.

For suo motu cancellation, Rule 21 is to be amended to omit certain grounds on which officers can presently cancel registration. Rules 21A and 22 are to be amended, and a new Rule 23A inserted, to provide a system based mechanism for cancellation, and for revocation, linked to non filing of returns or non furnishing of bank account details and subsequent compliance within the specified time. Cancellation and revocation for such defaults will become automatic and transparent, with less discretion and less interface with officers.

17. Registration for small sellers on e commerce platforms

At present, a seller who wishes to sell through an e commerce platform into another State must obtain registration in that State, which in turn requires a principal place of business there. For a small seller this is a serious hurdle.

The Council has recommended a new Rule 14B. A small supplier selling goods through an e commerce operator into a State where he has no physical presence will be able to declare the e commerce operator’s warehouse in that State as his principal place of business. The facility applies where he does not intend to pass on ITC of more than ₹2.5 lakh per month, excluding stock transfers between distinct persons. Registration in such cases will be granted automatically by the system, subject to conditions.

This allows a small manufacturer or trader to reach customers across the country through online platforms without opening an office in each State.

Part Four: Returns

18. A new mechanism to reduce mismatches between returns

A large share of GST notices arises from mismatches: between GSTR 1 and GSTR 3B on the liability side, and between GSTR 2B and GSTR 3B on the credit side. The Council has recommended a set of measures, mostly through new and amended rules.

GSTR 1, GSTR 1A and IFF will be enhanced for better reconciliation with GSTR 3B. A new Rule 86D will provide an Electronic Statement of tax paid on reverse charge basis and input tax credit claimed, to help correct reporting of RCM liability and the credit on it. A new sub rule (1A) in Rule 61 will provide a mechanism to correct liability in GSTR 3B so that it aligns with GSTR 1, GSTR 1A or IFF. FORM DRC 03 will be amended to require details of the underlying invoice for which payment is made.

On the credit side, a new sub rule (6A) in Rule 60 will formalise the Invoice Management System, allowing a recipient to accept, reject or keep pending a document for generating GSTR 2B, subject to conditions including how long a credit note can be kept pending. A new Rule 86C will provide an Electronic Credit Reversal and Reclaim Statement, so that reversal and reclaim of ITC are tracked and reported correctly. A new sub rule (1B) in Rule 61 will provide a mechanism to correct ITC in GSTR 3B so that it aligns with GSTR 2B. A circular will explain how ITC and its reversal are to be correctly reported in GSTR 3B in the context of IMS and the new statements.

The Council has recommended that this alternate mechanism apply from the return for April 2027. It will be placed in the public domain for a time bound consultation, and the Finance Minister has been authorised to approve changes based on stakeholder feedback.

The idea is that errors get corrected within the return system itself, through a recorded and traceable route, instead of becoming the subject of an ASMT 10, a DRC 01 or a system generated intimation months or years later. If implemented well, this could reduce a substantial portion of routine litigation.

19. Aligning time limits for GSTR 1 and GSTR 3B with Section 16(4)

Sections 16, 37 and 39 are to be amended to align the time limits for furnishing GSTR 1 and GSTR 3B with the time limit for availing ITC under Section 16(4). The various cut off dates should then work together rather than catching the taxpayer between them.

20. Late fee waiver for small taxpayers

The Council has recommended waiving the late fee for delayed filing of the return under Section 39(1) for taxpayers whose turnover in the preceding financial year is up to ₹5 crore, provided the return is filed by the end of the month in which it was due. A small trader who misses the due date by a few days, but files within the same month, will not pay late fee.

21. Annual Return Quarterly Payment scheme: in principle approval

The Council approved in principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme. It is meant for taxpayers with aggregate turnover up to ₹5 crore in the preceding financial year who make supplies only to unregistered persons, that is, purely B2C businesses. Such taxpayers would pay tax quarterly and file only an annual return. Since their customers do not claim ITC, there is no need for them to file detailed returns every month or quarter. Retailers, small restaurants and local service providers selling only to consumers stand to benefit. This is only an in principle approval, and the detailed scheme will follow.

22. E invoicing extended to certain inward supplies

E invoicing is to be extended to domestic supplies received from unregistered persons where tax is payable under reverse charge, and to import of services, for taxpayers with aggregate annual turnover of ₹5 crore and above. Taxpayers in this category will need to prepare their systems.

Part Five: Refunds

23. Faster, system based refunds

Section 54 and the related rules are to be amended to provide for system based processing of refunds relating to excess cash ledger balance, zero rated supplies and inverted duty structure. This will happen in two phases.

In Phase 1, refund of the full excess balance in the electronic cash ledger will be sanctioned automatically by the system, without any officer. The time limit for issuing an acknowledgement or deficiency memo will be reduced from 15 days to 10 days, and if neither is issued within 10 days, the application will be deemed acknowledged. For zero rated supplies and inverted duty structure, 90% of the claim will be sanctioned provisionally and automatically by the system, based on its risk evaluation.

In Phase 2, the system itself will verify and acknowledge applications. In such acknowledged cases, the full refund on zero rated supplies will be sanctioned automatically after adjusting pending dues, again based on risk evaluation.

Exporters with substantial funds blocked in refunds will see a direct improvement in working capital. The deemed acknowledgement provision also matters legally, because the time limit for sanctioning refund and the liability for interest run from the date of acknowledgement.

24. Other refund related changes

FORM RFD 01 is to be amended to capture details in a system readable format, so that scanned documents need not be uploaded for zero rated and inverted duty refunds.

Rule 89(4)(C) is to be amended to remove the restriction that the turnover of zero rated supply of goods cannot exceed 1.5 times the value of like goods supplied domestically. This cap has caused considerable litigation and has unfairly reduced the refunds of genuine exporters.

An explanation is to be added to Section 54(14) clarifying that the minimum refund threshold of ₹1,000 applies to the total refund across CGST, SGST or UTGST and IGST taken together, not to each head separately.

25. Refund of accumulated ITC on input services and capital goods

Under the present proviso to Section 54(3), in inverted duty structure cases, refund of accumulated ITC is restricted to credit on inputs only. Credit on input services and capital goods remains blocked. The Supreme Court upheld this restriction in VKC Footsteps, though it urged the Council to reconsider the anomalies.

The Council has now recommended refund of accumulated ITC on capital goods in refunds relating to zero rated supplies, and refund of accumulated ITC on input services and capital goods in refunds relating to inverted duty structure.

The refund of ITC on input services in inverted duty cases will apply to credit availed on input services on or after 1 November 2026. The refund of ITC on capital goods, in both zero rated and inverted duty cases, will be spread over 60 months and will apply to credit on capital goods availed on or after 1 April 2027.

For manufacturers in sectors with inverted duty structures, this is a significant relief that removes a long standing blockage of funds.

Part Six: Input Tax Credit

26. Rationalisation of blocked credits under Section 17(5)

Section 17(5) lists items on which ITC is not available even when they are used in business. The Council has recommended removing the restriction on, among others, outdoor catering, health insurance and life insurance, telecommunication towers, pipelines laid outside factory premises, free samples, and goods destroyed or written off on expiry of their shelf life as required by law.

Each of these has been a sore point. Employers who provide group health and life insurance to employees could not take credit, which simply added to the cost of a welfare measure. Telecom companies have litigated for years over credit on towers. Pipelines outside factory premises were treated as immovable property and denied credit. Pharmaceutical and FMCG companies had to reverse credit on free samples and on expired goods destroyed under law, even though both are unavoidable incidents of business.

Removing these restrictions reduces the cascading of tax and brings the law closer to the original promise of seamless credit.

27. Limited ITC in the same line of business for certain services

The Council has recommended allowing limited ITC in the same line of business for restaurant and outdoor catering services, hotel accommodation with value up to ₹7,500 per unit per day, and gym and fitness services. This will work the same way as the facility already available for passenger transportation, tour operator services and renting of motor vehicles. For example, a hotel that procures accommodation services from another hotel to serve its own guests will be able to take credit on such procurement, subject to conditions.

28. A note on Section 16(2)(c)

Many readers will look for news on the most litigated credit issue of all: denial of ITC to a genuine buyer because the supplier did not deposit the tax. The press release is silent on it. At the media briefing, the Finance Minister acknowledged the hardship faced by an honest buyer who holds a valid invoice, has received the goods and has paid the supplier. She stated that, on concerns raised by some States, the matter has been referred to a committee of officers. The committee is to report within three months, after which the matter will return to the Council, with implementation targeted from 1 April 2027. Until then, buyers will have to continue relying on the judicial protection that various High Courts have extended to genuine purchasers.

Part Seven: Exports

29. Services to one’s own foreign branches to qualify as export

Under Section 2(6) of the IGST Act, one condition for a supply of services to qualify as export is that the supplier and the recipient should not be merely establishments of a distinct person, as explained in Explanation 1 to Section 8. As a result, an Indian company providing services to its own branch or office abroad could not treat the supply as an export and was denied refund. The Council has recommended omitting sub clause (v) of Section 2(6). Services supplied to or through foreign branches can then qualify as export, which helps IT companies, consultancies and other service exporters that operate through overseas offices.

30. Clarification on receipt of export proceeds

A circular is to be issued to clarify issues relating to receipt of payment in foreign exchange, or in Indian rupees where permitted, for export of goods and services. This is relevant now that the RBI permits settlement in rupees in certain cases.

31. Services on goods supplied by foreign clients

Section 13(3)(a) of the IGST Act presently provides that where services are performed on goods made physically available by the recipient to the supplier, the place of supply is the place where the services are performed. So repair, testing, processing or other work done in India on goods sent by a foreign client is treated as a supply within India and taxed, even though the client is abroad and pays in foreign exchange.

The Council has recommended omitting clause (a) of Section 13(3). The place of supply will then follow the default rule in Section 13(2), which is the location of the recipient. Such services to foreign clients can then qualify as export, which will help Indian repair, refurbishment and job work service providers compete internationally.

32. Delivery to overseas buyers in SEZ or FTWZ

An explanation is to be inserted in Section 16(1) of the IGST Act. Where goods are sold to an overseas buyer but delivered to that buyer in an SEZ or Free Trade Warehousing Zone, and payment is received in convertible foreign exchange or in rupees where permitted by the RBI, the supply will be deemed to be a supply to the SEZ or FTWZ. This settles a long standing doubt about zero rating in such triangular arrangements.

Part Eight: Movement of Goods and E way Bills

33. Interception only on intelligence, and only in the State of the supplier or recipient

Detention of goods and vehicles under Section 129, often on technical grounds, has been one of the most frequent complaints of the trade. A minor error in the e way bill, an expired validity by a few hours, or a clerical mistake in the vehicle number has led to detention and heavy penalties, often in a transit State that has no connection with the transaction.

The Council has recommended amending Sections 68, 129 and 130 so that a conveyance can be intercepted only on specific intelligence and with the authorisation of an officer not below the rank of Joint Commissioner. Inspection, detention or seizure can be done only where the supplier or the recipient is located or registered in the State where the interception is made, and there will be no interception in transit States. Where no e way bill has been generated, or the conveyance carries no document showing the origin or destination of the goods, the goods can still be inspected, detained or seized irrespective of jurisdiction. Confiscation under Section 130 will not apply to goods or conveyances in transit.

The random roadside checking that has troubled transporters for years should largely come to an end. At the same time, the department keeps full power in the clearly suspicious case where goods move without any document at all.

Part Nine: Other Legal Changes

34. Transfer of title in intellectual property rights

Schedule II to the CGST Act is to be amended so that transfer of title in intellectual property rights, whether temporary or permanent, is uniformly treated as a supply of services. At present there has been uncertainty about whether a permanent transfer of certain IPRs is a supply of goods or of services, with consequences for rate, place of supply and cross border treatment.

35. Liability of e commerce operators under Section 9(5)

Section 9(5) is to be amended to clarify that an e commerce operator is liable to pay tax on notified services irrespective of the business model it follows. This addresses arguments that certain platform structures fall outside Section 9(5).

36. Clarificatory circulars

Circulars are to be issued on the Input Service Distributor mechanism for distribution of input service credit; on availment of ITC by banking companies and financial institutions, including NBFCs, that opt for Section 17(4); on various issues relating to payment of pre deposit; on admissibility of ITC on demonstration vehicles in certain situations; and on the omission of Rule 96(10) with effect from 23 October 2017, in line with the Supreme Court’s decision. The last is significant for exporters whose IGST refunds were denied under Rule 96(10).

37. GST Appellate Tribunal

The Council approved amendments to the CGST Act and the GSTAT (Appointment and Conditions of Service of President and Members) Rules, 2023, to align the Tribunal provisions with the Tribunals Reforms Act, 2026 and the related rules of 2026 governing tribunal members.

Part Ten: Rate Clarifications and Changes

The Finance Minister made it clear that no rates were changed at this meeting, and that rate matters will hereafter be taken up only once a year, with changes effective from 1 April. What follows are clarifications, exemptions and a few corrections of anomalies.

38. Goods

Sublimation paper is classified under heading 4809, and past cases are regularised on an “as is where is” basis.

The toy entries in the rate schedules cover all toys under heading 9503, including dolls and puzzles, and are not restricted to tricycles, scooters and pedal cars.

Seaweed extract based bio stimulants registered under Schedule VI of the Fertiliser Control Order, 1985 are classifiable as fertilisers under heading 3101, with past cases regularised.

Second hand vehicle dealers under the margin scheme can take ITC on inputs and input services such as spares, repairs, technology, rent and advertising. The restriction applies only to tax paid on the second hand vehicles themselves.

Plastic waste and scrap, electrical and electronic waste and scrap, tyre waste and scrap, and used cooking oil are brought under reverse charge when supplied by an unregistered person to a registered person. The recipient must pay tax even if the supplier is below the threshold, and the supplier must register once he crosses the threshold. TDS at 2% is introduced on supplies of these items between registered persons.

Psyllium seeds (isabgol) attract nil rate whether fresh, chilled, frozen or dried.

Retreaded tractor tyres are aligned with the rate on new tractor tyres.

Compensation cess not levied by the Canteen Stores Department on two and four wheelers for 1 July 2017 to 30 September 2022, and by CSD and unit run canteens on aerated drinks for 1 July 2017 to 31 March 2022, is exempted.

39. Services

Passenger transport and rental of motor vehicles with operators using electric vehicles get an option of 5% with restricted ITC, where the cost of battery charging is included in the consideration.

Delivery services, other than courier and postal, supplied through e commerce operators by persons not liable to register are brought under Section 9(5) at 5% without ITC. Delivery services in relation to goods ordered through e commerce operators also attract 5% without ITC. The GTA exemption under Entry 21A for transport to unregistered persons will not apply where the goods are supplied or ordered through an e commerce operator.

The GST treatment of registration charges, road tax, insurance and FASTag charges recovered by lessors from lessees in motor vehicle leasing is to be clarified.

Passenger transport by helicopter on seat sharing basis to or from the north eastern States, Sikkim and Bagdogra is exempted. Storage or warehousing of seeds meant for sowing is exempted. Curing of coffee by coffee curers for cultivators is exempted. Services of the Seamen’s Provident Fund Organisation to its members are exempted.

For the research and development exemption under Entry 44A, the head of the institution can self certify that the activity is research and not consultancy.

Import of services without consideration by the Indian establishment of a foreign shipping company from a related person or its overseas establishment is exempted, with past periods regularised.

The upfront amount for the grant of toll collection rights to concessionaires in highway projects under the Toll Operate Transfer model is exempted, and a special procedure is provided for valuation and time of payment on operation and maintenance services under that model.

The notional interest under the Funds Transfer Pricing mechanism between bank branches falls within the definition of “interest”.

Conclusion

The 57th meeting marks a clear change in the attitude of the law. The Council has consciously moved from an enforcement first approach to a trust based approach. Arrest is gone. Prosecution is limited to frauds above ₹5 crore. Petty notices below ₹10,000 are out. Penalties are moderated. Officers must stick to fraud allegations that the facts support. Goods cannot be stopped on the road without intelligence and senior authorisation. On the facilitation side, registration, cancellation and refunds are being handed to the system, so the scope for delay and discretion shrinks. Blocked credits on several genuine business expenses are released.

There are two notes of caution. The validation clause for multi year notices will cut into relief that taxpayers have won in courts. The genuine buyer issue under Section 16(2)(c), which affects thousands of small businesses, still awaits a decision.

Above all, these are recommendations. Their real value will depend on how the amendments are worded, how the rules are framed, and most importantly how officers in the field apply them. Taxpayers and professionals should keep track of the amending Bill, the notifications and the FAQs promised by the Council, and should not act on any of these changes until the law is actually in force.

Suneel Kumar Kota, Advocate, Kota Associates, Gudur