57th GST Council Meeting: Registration, ITC and Process Reforms in Focus

Summary: The 57th meeting of the GST Council is expected on 7 October 2026 in New Delhi, with reports indicating that procedural reform rather than broad-based rate changes may take centre stage. Key areas expected to receive attention include GST registration, input tax credit (ITC), protection of bona fide recipients, blocked credits under Section 17(5), invoice matching, registration cancellation and reduction of avoidable disputes. The earlier registration reform introduced an electronic route for eligible taxpayers with monthly output tax liability on supplies to registered persons not exceeding ₹2.5 lakh, and attention may now shift towards greater standardisation for other applicants. Another significant issue concerns genuine buyers facing ITC consequences because of supplier defaults. Reports also indicate possible consideration of restrictions under Section 17(5), while invoice mismatches involving GSTR-1, GSTR-3B and GSTR-2B remain an important compliance concern. Registration cancellation is another area where greater automation may need to be balanced with natural justice safeguards. GST implications of Merchant Discount Rate (MDR) on UPI transactions may also arise, although its treatment as an agenda item has not been confirmed. The precise recommendations will become known only after the Council meets; reported proposals, particularly concerning Section 17(5) and MDR, should therefore not be treated as final decisions.

57th GST Council Meeting: Process Reform Takes Centre Stage

Reports point to registration, input tax credit and dispute reduction, rather than rate changes, as the focus of the 7 October 2026 meeting.

The 57th meeting of the GST Council is expected on 7 October 2026 in New Delhi. Unlike earlier meetings dominated by rate rationalisation, this one is expected to concentrate on procedure: ease of doing business, input tax credit (ITC) and fewer avoidable disputes. After nearly a decade of GST, that shift is timely, because the greatest friction for compliant taxpayers now lies in day-to-day process rather than in rates.

Registration: from simplification to standardisation

The previous reform round introduced automated registration within three working days for small, low-risk applicants whose self-assessed output tax liability on supplies to registered persons does not exceed ₹2.5 lakh per month. This became operational on 1 November 2025.

The forthcoming meeting is expected to look at businesses outside that category. One reported proposal is to frame uniform documentation and approval norms for applicants passing on ITC above ₹2.5 lakh per month. Government sources cited in reports say a substantial share of registrations already flows through the simplified route, so attention is shifting to the remainder.

Excessive officer discretion in seeking documents has led to inconsistent practice across jurisdictions. A standard national checklist could define:

• what may ordinarily be demanded;
• when additional documents may be sought;
• timelines for approval or rejection;
• when physical verification is warranted; and
• objective parameters for cancellation proceedings.

Protecting the bona fide buyer

Perhaps the most significant issue is the position of a genuine purchaser whose supplier fails to deposit the GST collected. Section 16 links ITC entitlement, among other conditions, to payment of tax to the Government, yet the buyer has little practical means of verifying that deposit. This has made the subject among the most litigated under GST.

Consider a buyer who holds a valid tax invoice, received the goods or services, paid through banking channels, recorded the transaction correctly, filed returns and exercised reasonable commercial due diligence. Making that buyer automatically liable for a later supplier default undermines the seamless credit chain that GST is meant to provide.

Reports suggest the Council may examine safeguards for compliant recipients while still preventing fraudulent claims. A balanced framework could:

• deny ITC clearly in fraudulent or collusive transactions;
• pursue recovery first against the defaulting supplier in genuine transactions; and
• prescribe objective due-diligence standards, so that ITC is not denied merely on a later supplier default unless collusion, knowledge or participation in fraud is established.

Such a clear legislative solution could remove a substantial body of present litigation.

Section 17(5): reviewing blocked credits

Reports also indicate that the Council may consider relaxing some restrictions in Section 17(5) of the CGST Act. Subject to exceptions, this provision blocks credit on motor vehicles and certain conveyances, food and beverages, outdoor catering, club memberships, specified employee-related facilities, and goods or services used to construct immovable property.

The provision was designed to exclude personal consumption. Yet GST is meant to tax value addition, and every blocked credit creates cascading. Rather than deleting the section, a business-use test could be considered: where expenditure is demonstrably incurred wholly and exclusively for business, credit may deserve reconsideration.

Any relaxation would need a statutory amendment and careful drafting to prevent personal-consumption credits from entering.

Invoice matching and mismatches

Invoice filing, data matching and mismatches between supplier and recipient returns are also expected to feature. GST relies on system matching through GSTR-1, GSTR-3B and GSTR-2B, which is necessary to control fraudulent credit. The difficulty arises when a genuine transaction suffers adverse consequences solely because of delayed supplier reporting, later-period amendments, technical mismatches, incorrect GSTIN reporting, timing differences or subsequent supplier cancellation.

A pre-demand correction mechanism could help. A mismatch would first be communicated to both parties, with a reasonable electronic window to correct it before any tax demand is initiated. This would reduce unnecessary notices and allow the department to concentrate on actual fraud.

Registration cancellation: automation with natural justice

Automated cancellation norms are another reported area. Automation is valuable against dormant or fictitious registrations, but cancellation can interrupt a business, affect customers’ ITC and sometimes disturb completed transactions retrospectively. Any automated system should therefore provide:

• precise communication of the detected default;
• a reasonable opportunity to rectify it;
• electronic notice stating specific grounds;
• a hearing in disputed cases; and
• quick restoration once the default is cured.

The objective is fast removal of fake registrations without disproportionate hardship to genuine businesses.

GST on MDR and UPI

Reports indicate that GST at 18% applies to MDR charges, but the treatment of MDR on UPI is not confirmed as part of the agenda. MDR is not itself a tax; it is a payments-ecosystem charge on which GST may apply as a supply of service. Any discussion would need to weigh who bears the charge, whether eligible merchants receive ITC, the effect on small merchants, the policy of encouraging digital payments, and whether differential treatment of payment methods distorts choices. It would be premature to assume a rate change will be recommended.

Making ITC litigation less adversarial

A considerable share of GST litigation stems from reconciliation issues rather than fictitious transactions, and earlier-year disputes are still judged through the lens of later technological capability. Although not part of the reported agenda, the Council could usefully require officers, before denying ITC for a mismatch, to record findings on:

• existence of the invoice;
• receipt of goods or services;
• payment to the supplier;
• the supplier’s registration status at the time of the transaction;
• reflection in statutory returns;
• evidence of movement, where relevant; and
• material indicating collusion or fraud.

Certainty rather than more circulars

Where a difficulty arises from the wording of the statute, the remedy should preferably be a clear legislative amendment. Circulars help administrative uniformity but cannot replace statutory certainty on substantive rights such as ITC. Likewise, process reforms meant for national benefit should be embedded in the portal and rules, so that implementation does not depend on differing field interpretations.

Summary of expectations

Conclusion

The 57th meeting may prove significant not for dramatic rate changes but for addressing persistent friction in GST administration. The next stage of reform should be guided by three objectives: certainty, simplicity and protection of bona fide compliance, while retaining strong tools against tax fraud. The best outcome would be a system in which a genuine taxpayer who has kept documents, paid consideration, reported correctly and acted without collusion is not drawn into prolonged litigation over technical mismatches or defaults beyond reasonable control. Better procedure is itself substantive tax reform.

Please note: the precise recommendations will be known only after the Council meets. Matters discussed in the media, particularly changes to Section 17(5) and the MDR issue, are expected or possible agenda items, not final decisions.