57th GST Council Meeting: Key Reforms to Registration, ITC, Refunds and Enforcement

Summary: The 57th GST Council meeting held on 8 October 2026 in New Delhi recommended a broad shift towards simpler GST administration, automated processes and reduced enforcement burdens. The proposals cover registration, return reconciliation, refunds, input tax credit (ITC), adjudication, exports, movement of goods, prosecution and selected tax rates. On registration, the Council proposed wider automatic acceptance of amendments and cancellations, clearer application requirements and a route for eligible small sellers using e-commerce warehouses. Return reforms would introduce new electronic statements and mechanisms to reconcile liability and ITC across GSTR-1, GSTR-2B and GSTR-3B, with an April 2027 implementation proposal. Refund measures include automatic processing of excess cash balances, system-based provisional refunds and shorter acknowledgement timelines, alongside expanded refund eligibility for specified input services and capital goods. The Council also recommended removing several restrictions on blocked ITC and allowing objections and hearings in cases of credit blocking. Proposed dispute-resolution changes include a ₹10,000 show-cause notice threshold, reduced penalties in specified circumstances and limits on certain appeal pre-deposits. Enforcement recommendations include omitting GST arrest powers under Section 69, increasing the prosecution threshold to ₹5 crore and restricting interception of goods in transit. Other proposals address export services, e-commerce, small taxpayers, scrap transactions and specified goods and services. These are Council recommendations rather than automatically operative legal changes. Their application depends on the relevant statutory amendments, rules, notifications or circulars, and taxpayers should continue following the law currently in force until implementation.

57th GST Council Meeting: Registration, Returns, Refunds, ITC and Enforcement Reforms

Overview

The 57th GST Council meeting, held on 8 October 2026, moved GST from rate reform to process reform. It recommended removing arrest powers, raising the prosecution threshold to ₹5 crore, automating refunds and unblocking input tax credit (ITC) on several items.

The meeting was chaired by Union Finance & Corporate Affairs Minister Smt. Nirmala Sitharaman in New Delhi. Chief Ministers of Delhi, Goa, Haryana, Jammu & Kashmir, Karnataka, Kerala, Maharashtra and Meghalaya attended, along with Deputy Chief Ministers of Manipur and Telangana, State Finance Ministers, the Revenue Secretary and CBIC officials.

The 56th meeting (September 2025) focused on rate rationalisation and rate cuts. The 57th meeting focused on four areas:

• Process reforms covering registration, returns, refunds and adjudication
• Reforms for smoother ITC flow and exports
• Decriminalisation and ease of doing business
• Clarifications and changes in GST rates on goods and services

Important: These are recommendations of the Council. They become law only when notified through circulars, notifications or amendments to the CGST/IGST Acts. Taxpayers should act only on the notified text.

1. Registration reforms

Registration amendments and cancellations will become largely automatic, with less contact with tax officers.

Clearer registration process. Automatic registration under Rule 14A (for applicants passing on ITC up to ₹2.5 lakh per month) already exists from the 56th meeting. For other cases, the Council recommended:

• A comprehensive circular with FAQs listing the documents and information required
• Drop-down boxes in FORM GST REG-01 to select prescribed documents
• A more user-friendly GST portal with navigation paths, tool-tips and guidance

This aims to reduce rejections and queries caused by incomplete applications.

Amendment of registration. Rule 19 will be amended so that changes to all registration details are accepted automatically, except the Principal Place of Business (PPoB). For Rule 14A registrants, even PPoB changes will be accepted automatically.

Cancellation on taxpayer’s application (FORM GST REG-16).

• Phase 1: Automatic acceptance once all returns are filed and dues paid, where the taxpayer never passed on ITC above ₹2.5 lakh in any month, or filed the final return (GSTR-10) within time.
• Phase 2: All cancellation applications accepted automatically once returns are filed and dues paid. GSTR-10 details will be filed within REG-16 itself.

Suo-moto cancellation by officers. Some grounds in Rule 21 will be removed. A new system-based process (Rules 21A, 22 and new Rule 23A) will cancel and revoke registrations based on non-filing of returns or missing bank details, and their later rectification.

Small sellers on e-commerce platforms. New Rule 14B will let small suppliers of goods selling through e-commerce operators register in a State where they have no physical presence. They can declare the operator’s warehouse as their PPoB, if they pass on ITC of not more than ₹2.5 lakh per month (excluding stock transfers). Registration will be granted automatically, subject to conditions.

2. Return reforms

A new correction mechanism will align liability and ITC across GSTR-1, GSTR-2B and GSTR-3B, proposed to apply from the April 2027 return period.

Mismatches between returns are a major source of system notices and demands today. The Council recommended:

• Enhancements in GSTR-1/1A/IFF for better reconciliation with GSTR-3B.
• New Rule 86D: an “Electronic Statement of tax paid on Reverse Charge basis and ITC claimed” on the portal, for correct reporting of RCM liability and credit.
• New Rule 61(1A): a mechanism to correct liability in GSTR-3B so it matches GSTR-1/1A/IFF.
• Amendment of FORM DRC-03 to capture the underlying invoice for which payment is made.
• New Rule 60(6A) for the Invoice Management System (IMS): recipients can accept, reject or keep pending inward documents for GSTR-2B, with conditions including how long a credit note may stay pending.
• New Rule 86C: an “Electronic Credit Reversal and Reclaim Statement” for correct reporting of ITC reversed and reclaimed.
• New Rule 61(1B): a mechanism to correct ITC in GSTR-3B so it matches GSTR-2B.
• A circular explaining how to report ITC and reversals in GSTR-3B in light of IMS and the new statements.

The revised mechanism will first be placed in the public domain for time-bound consultation. The Union Finance Minister is authorised to approve changes based on stakeholder feedback.

Impact: Fewer mismatch notices and better ITC integrity across the supply chain. Businesses should prepare their accounting systems and reconciliation process before April 2027.

3. Refund reforms

Refunds of excess cash ledger balance will be sanctioned automatically, and 90% of export and inverted duty refunds will be paid provisionally by the system.

Section 54 of the CGST Act and related rules will be amended for system-based processing in two phases.

Other refund changes:

• FORM RFD-01 to capture data in a system-readable format. No need to upload scanned documents for export and inverted duty refunds.
• Rule 89(4)(C) to be amended to remove the cap that limits zero-rated turnover of goods to 1.5 times the value of like goods supplied domestically.
• Section 54(14) to clarify that the ₹1,000 minimum refund applies to the total of CGST, SGST/UTGST and IGST together.
• Section 115 to become a standalone provision on interest for refund of appeal pre-deposits, with a clarifying circular.

Impact: Faster cash flow for exporters and businesses with inverted duty structures, and less interaction with the department.

4. Dispute resolution, notices and penalties

No show cause notice will be issued where tax involved is below ₹10,000, and the maximum general penalty falls from ₹25,000 to ₹10,000.

Guidelines for officers. A circular will set standards for demand notices, adjudication orders and appeal orders. It will cover quality and timeliness, invoking fraud or suppression only on merits, and following natural justice including personal hearings.

Amendments to Sections 73, 74 and 74A:

• Minimum threshold of ₹10,000 (CGST + SGST + IGST + Cess) for issuing show cause notices. Pending notices and appeals below ₹10,000 will be decided as if this threshold had applied from the start.
• Penalty treated as a “charge” where tax, interest and penalty are paid voluntarily within the specified time.
• Reduced penalty of 5% in non-fraud cases, if tax and interest are paid within 30 days (Section 73) or 60 days (Section 74A) of the adjudication order.
• Removal of the minimum penalty of ₹10,000 in non-fraud cases.

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

Pre-deposit cap. Sections 107(6) and 112(8) to be amended to cap pre-deposit at ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST) for appeals before the Appellate Authority or GSTAT, where the order involves only penalty and no tax demand.

Validation of notices. A validation clause will be added to the CGST Act for notices that courts held invalid because they covered multiple financial years.

GSTAT. Amendments to align GST Appellate Tribunal provisions with the Tribunals Reforms Act, 2026 and the related 2026 Rules.

5. Input tax credit (ITC) reforms

Several long-standing ITC blocks under Section 17(5) will be removed, and refunds of accumulated ITC on input services and capital goods will be allowed.

Removal of blocked credits (Section 17(5)). ITC restrictions to be removed on, among others:

• Outdoor catering
• Health insurance and life insurance
• Telecommunication towers
• Pipelines laid outside factory premises
• Free samples
• Goods destroyed or written off on expiry of shelf life, as required by law

This reduces cascading of taxes and improves credit flow.

Refund of accumulated ITC (Section 54(3)).

Hearing before blocking credit (Rule 86A). Taxpayers will be able to file an objection against blocking of credit in the electronic credit ledger and get a personal hearing before the officer decides.

Same line of business. Limited ITC will be allowed for restaurant and outdoor catering services, hotel accommodation up to ₹7,500 per unit per day, and gym or fitness services. This mirrors what is already available for passenger transport, tour operators and motor vehicle renting.

Clarifications through circulars on:

• Distribution of input service credit through the Input Service Distributor (ISD) mechanism
• ITC for banks, financial institutions and NBFCs opting for Section 17(4)
• ITC on demonstration vehicles in certain situations
• ITC for second-hand vehicle dealers under the margin scheme: credit is allowed on spares, repairs, technology, rent, marketing and similar inputs. Only tax on the purchased second-hand vehicle is restricted.

6. Export of goods and services

Services supplied by an Indian entity to its own foreign branch or office can now qualify as export of services.

• Distinct person condition removed. Section 2(6)(v) of the IGST Act will be omitted. Supplier and recipient being establishments of the same person will no longer disqualify a supply from being an export. This opens refunds for services to foreign branches.
• Payment in foreign exchange or rupees. A circular will clarify issues on receiving export payment in foreign exchange or in Indian rupees, where permitted.
• Place of supply for services on goods. Section 13(3)(a) of the IGST Act will be omitted. Where a foreign recipient makes goods available to the Indian service provider, place of supply will follow the default rule: the recipient’s location. This helps Indian service providers claim export benefits.
• Delivery in SEZ/FTWZ. A new explanation to Section 16(1) of the IGST Act: goods supplied to an overseas buyer but delivered to that buyer in an SEZ or FTWZ, with payment in convertible foreign exchange (or rupees where RBI permits), will be treated as a supply to an SEZ/FTWZ. This gives certainty on zero-rating.
• Import of services by foreign shipping lines. Import of services by the Indian establishment of a foreign shipping company from a related person, without consideration, will be exempt. Past periods regularised on an “as is where is” basis.

7. Arrest, prosecution and e-way bill

Arrest powers under GST will be withdrawn completely, and the prosecution threshold rises from ₹1 crore to ₹5 crore.

Arrest and prosecution (Sections 69 and 132).

• Section 69 of the CGST Act, which gives arrest powers, to be omitted.
• Monetary threshold for prosecution raised from ₹1 crore to ₹5 crore.
• Clause (i) of Section 132(1) to be omitted. The words “evades tax” removed from clause (e) and “or in any other manner deals with” removed from clause (h).
• Clause (c) of Section 132(1) to cover only fraudulent ITC taken without receiving goods or services, or without an invoice or bill.
• Punishment amounts for offences under Section 132 to be rationalised.

The aim is a trust-based tax regime while keeping deterrence against genuine fraud.

E-way bill and movement of goods (Sections 68, 129 and 130).

• A vehicle may be intercepted only on specific intelligence, with authorisation from an officer not below Joint Commissioner.
• Inspection, detention or seizure allowed only where the supplier or recipient is located or registered in the intercepting State. No interception in transit States.
• Where no e-way bill exists, or no document shows the origin or destination, goods may be inspected, detained or seized in any jurisdiction.
• Confiscation under Section 130 will not apply to goods or vehicles in transit.

Impact: Lower risk of coercive action for procedural lapses, and smoother inter-State transport.

8. Other compliance and ease of business measures

Small taxpayers with turnover up to ₹5 crore get a late fee waiver and a proposed optional annual-return, quarterly-payment scheme.

• Late fee waiver. No late fee on a delayed Section 39(1) return for taxpayers with turnover up to ₹5 crore in the previous year, if filed by the end of the month in which it was due.
• ARQP scheme (in-principle). An optional Annual Return Quarterly Payment scheme for taxpayers with turnover up to ₹5 crore who supply only to unregistered persons (B2C). Details will follow once the concept note is developed.
• Aligned time limits. Sections 16, 37 and 39 to be amended so the deadlines for GSTR-1 and returns align with the ITC time limit under Section 16(4).
• E-commerce operator liability. Section 9(5) to clarify that the operator pays tax on notified services regardless of its business model.
• E-invoicing extended. For taxpayers with turnover of ₹5 crore and above, e-invoicing will cover RCM supplies received from unregistered persons and import of services.
• IPR transfers. Schedule II to treat transfer of title in intellectual property, temporary or permanent, uniformly as a supply of services.
• Pre-deposit issues. A circular to clarify various issues on payment of pre-deposits.
• Rule 96(10). Omission of Rule 96(10) effective from 23 October 2017, in line with the Supreme Court decision.

9. GST on goods: changes and clarifications

The main change for goods is RCM and 2% TDS on specified scrap; most other items are classification clarifications.

10. GST on services: changes and clarifications

The main changes for services are an optional 5% rate for EV-based transport, 5% on e-commerce delivery services, and several new exemptions.

11. Key dates and action points

Two dates are fixed so far: 1 November 2026 for input service refunds and April 2027 for capital goods refunds and the return correction mechanism.

All other dates depend on notifications and amendments to the CGST/IGST Acts.

Suggested action points for businesses:

• Track CBIC notifications, circulars and the FAQs being issued
• Review ITC on newly unblocked items (insurance, catering, free samples, telecom towers, pipelines)
• Exporters and inverted duty businesses: map input service ITC from 1 November 2026 for refunds
• Review pending notices and appeals below ₹10,000 and penalty-only appeals for pre-deposit relief
• Prepare reconciliation of GSTR-1, 2B, 3B and IMS ahead of April 2027
• Service exporters dealing with foreign branches: assess refund eligibility
• Turnover of ₹5 crore and above: plan e-invoicing for RCM and import of services
• Scrap dealers and buyers: prepare for RCM and 2% TDS

Conclusion

The 57th meeting signals a shift from enforcement to trust-based GST administration. If notified as recommended, these changes will reduce litigation, release working capital and simplify compliance, especially for small businesses and exporters.