Outcome of the 57th Meeting of the GST Council

Summary: The 57th meeting of the GST Council, held on 8 October 2026 in New Delhi under the chairpersonship of Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman, recommended wide-ranging reforms to simplify GST administration and improve taxpayer compliance. The recommendations cover simplified registration and cancellation, automated acceptance of registration amendments, revised GST return reporting, faster refunds, provisional refunds for eligible zero-rated supplies and inverted duty structure cases, and expanded refund eligibility for accumulated input tax credit (ITC). The Council also proposed measures to streamline adjudication, rationalise penalties, increase the prosecution threshold, withdraw GST arrest powers, and improve safeguards concerning ITC blocking and movement of goods in transit. Other recommendations address export facilitation, e-invoicing, the proposed Annual Return Quarterly Payment scheme for eligible small taxpayers, and clarifications concerning the classification and tax treatment of specified goods and services. The proposals are intended to reduce compliance burdens, improve working capital management, facilitate trade and minimise disputes. Their implementation will depend on the relevant statutory amendments, rules, notifications and circulars, which will determine their binding legal effect. The GST Council, inter alia, made recommendations relating to process reforms primarily covering registration, returns, refund and adjudication, along with clarifications regarding the applicability of GST on the supply of certain goods and services and other measures for trade facilitation and streamlining compliances in GST, as stipulated below.

1. GST Registration

A. Simplification of GST Registration Applications

A comprehensive circular, revised Form GST REG-01 and portal enhancements have been recommended to clarify the documents and information required for registration, reduce unnecessary queries and expedite processing.

B. Automatic Acceptance of Amendments in GST Registration

Amendments to Rule 19 of the CGST Rules have been recommended to enable automatic acceptance of changes in registration particulars, except changes relating to the principal place of business. For taxpayers registered under Rule 14A, automatic acceptance is proposed even for changes to the principal place of business.

C. Simplified Cancellation of GST Registration

Automatic processing of Form GST REG-16 has been recommended in eligible cases, subject to filing pending returns and payment of outstanding dues. A phased mechanism is also proposed for system-based cancellation and revocation linked to defaults such as non-filing of returns or non-furnishing of bank account details.

D. Simplified Registration for Small E-commerce Sellers

A new Rule 14B is proposed to enable eligible small suppliers of goods to obtain simplified, automatic GST registration in States/UTs where they have no physical presence, by declaring an e-commerce operator’s warehouse as their principal place of business, subject to prescribed conditions. The proposed facility is intended for suppliers meeting the specified monthly ITC-passing threshold of Rs. 2.5 lakh.

2. GST Returns and Input Tax Credit

A. Comprehensive Changes to GST Return Reporting — Proposed from April 2027

The Council has recommended an alternative mechanism to align tax liabilities reported in GSTR-1/GSTR-1A/IFF with GSTR-3B and ITC claimed in GSTR-3B with ITC available in GSTR-2B. The proposed changes include:

• Enhanced reconciliation features in GSTR-1, GSTR-1A and IFF.
• An electronic statement of tax paid under reverse charge and ITC claimed.
• A mechanism to correct mismatches in tax liability and ITC reported in GSTR-3B.
• Reporting invoice-level details in Form GST DRC-03.
• Changes to the Invoice Management System (IMS), including prescribed conditions for keeping credit notes pending.
• An Electronic Credit Reversal and Reclaim Statement to track ITC reversals and reclaims.

3. GST Refunds

A. Automated Refunds of Excess Cash Ledger Balance

Full refunds of excess balances in the electronic cash ledger are proposed to be sanctioned automatically, without officer intervention.

B. Faster Processing of GST Refund Applications

The time limit for issuing an acknowledgement or deficiency memo is proposed to be reduced from 15 days to 10 days. If neither is issued within the proposed period, system-generated deemed acknowledgement is envisaged.

C. Provisional Refund of 90% for Zero-Rated Supplies and Inverted Duty Structure

For eligible refund claims relating to zero-rated supplies and inverted duty structure, 90% of the claimed amount is proposed to be sanctioned provisionally through a risk-based automated system.

D. Automated Refund Sanction for Zero-Rated Supplies

In the proposed second phase, eligible zero-rated refund claims that have been acknowledged following system verification may be sanctioned automatically in full, after adjustment of pending dues and subject to risk evaluation.

E. Simplification of Refund Documentation

The refund application in Form GST RFD-01 is proposed to be revised to capture information in a system-readable format and dispense with scanned-document uploads for specified zero-rated and inverted duty structure refund claims.

F. Removal of Turnover Cap for Refund of Zero-Rated Goods

The restriction under Rule 89(4)(C) limiting the turnover of zero-rated goods to 1.5 times the value of like goods supplied domestically is proposed to be removed.

G. Rs. 1,000 Minimum Refund Threshold

The proposed amendment to Section 54(14) clarifies that the Rs. 1,000 threshold is to be applied to the aggregate refund amount under CGST, SGST/UTGST and IGST taken together.

H. Interest on Refund of Appeal Pre-Deposit

Section 115 is proposed to be amended to provide a standalone provision governing the applicable interest rate on refunds of pre-deposit amounts. A clarificatory circular is also proposed.

4. GST Dispute Resolution and Litigation

4.1 Guidelines for Show Cause Notices and Adjudication Orders

A comprehensive circular is proposed to guide officers on the quality and timely issuance of show cause notices, adjudication and appeal orders, proper invocation of fraud or suppression provisions, and compliance with natural justice, including personal hearings.

4.2 Minimum Threshold of Rs. 10,000 for GST Show Cause Notices

A minimum aggregate threshold of Rs. 10,000, covering CGST, SGST, IGST and cess, is proposed for issuance of show cause notices under the relevant demand provisions. Pending notices and appeals below this threshold are also proposed to be dealt with under the threshold once the provision comes into force.

4.3 Penalty Treatment Where Tax, Interest and Penalty Are Voluntarily Paid

An amendment is proposed to deem the penalty amount as a charge where the full tax, interest and penalty are voluntarily paid within the prescribed time limit.

4.4 Reduced Penalty for Non-Fraud Cases

A reduced penalty of 5% is proposed in non-fraud cases where tax and interest are paid within 30 days of the adjudication order under Section 73, or within 60 days under Section 74A.

4.5 Removal of Minimum Penalty in Non-Fraud Cases

The minimum penalty of Rs. 10,000 in non-fraud cases is proposed to be removed.

4.6 Reduction in General Penalty under Section 125

The maximum general penalty under Section 125 of the CGST Act is proposed to be reduced from Rs. 25,000 to Rs. 10,000.

4.7 Cap on Appeal Pre-Deposit in Penalty-Only Cases

For appeals involving only a penalty and no tax demand, the pre-deposit payable before the Appellate Authority or Appellate Tribunal is proposed to be capped at Rs. 40 crore in aggregate—Rs. 20 crore each under CGST and SGST/UTGST.

5. Input Tax Credit (ITC) Reforms

• Refund of accumulated ITC: Refund of ITC on capital goods is proposed for zero-rated supplies and inverted duty structure, subject to specified conditions. Refund of ITC on input services is also proposed for inverted duty structure cases, with specified effective dates and a 60-month spread for capital goods ITC.
• Rationalisation of blocked ITC: Removal of restrictions on ITC for specified items, including outdoor catering, health and life insurance, telecommunication towers, pipelines outside factory premises, free samples and goods destroyed or written off due to expiry of shelf life, has been recommended.

6. Export and Zero-Rated Supply Reforms

• Proposed amendments to facilitate export benefits for services supplied through foreign offices/branches and services involving goods made available by foreign recipients.
• Clarification on receipt of export consideration in foreign exchange or permitted Indian rupees.
• Proposed clarification regarding zero-rating of goods supplied to overseas buyers but delivered to SEZ/FTWZ units for warehousing or further processing.

7. Rationalisation of Arrest and Prosecution Provisions

• Complete withdrawal of GST arrest powers by omitting Section 69 of the CGST Act has been recommended.
• The prosecution threshold is proposed to be increased from Rs. 1 crore to Rs. 5 crore.
• Amendments have been recommended to rationalise specified offences and penalties under Section 132.

8. E-Way Bill and Goods in Transit

• Interception of conveyances is proposed to be restricted to cases involving specific intelligence and authorisation by an officer not below the rank of Joint Commissioner.
• Inspection and detention proceedings are proposed to be restricted in transit States, subject to specified exceptions.
• Confiscation provisions under Section 130 are proposed not to apply to goods/conveyances in transit, subject to the recommended statutory framework.

9. Other Important Compliance Reforms

• Rule 86A: A mechanism is proposed to enable taxpayers to object to blocking of ITC and obtain a personal hearing.
• Late fee relief: Waiver of late fees is recommended for specified delayed returns of taxpayers having turnover up to Rs. 5 crore in the preceding financial year, where the return is filed by the end of the month in which it was due.
• Annual Return Quarterly Payment (ARQP): An optional scheme has been approved in principle for eligible taxpayers with turnover up to Rs. 5 crore, exclusively making B2C supplies.
• E-invoicing: Extension is proposed to specified reverse-charge supplies received from unregistered persons and import of services for taxpayers having aggregate annual turnover of Rs. 5 crore or more.
• Further clarifications are proposed on ISD, ITC for banking companies and NBFCs, pre-deposit requirements, demonstration vehicles and notices issued for multiple financial years.

10. Key Clarifications and Changes Relating to Goods

• Clarification on classification of sublimation paper under heading 4809.
• Clarification regarding GST treatment of toys covered under heading 9503.
• Clarification on classification of specified seaweed-extract-based bio-stimulants as fertilisers.
• Second-hand vehicle dealers under the margin scheme may avail ITC on eligible inputs and input services other than the tax paid on procured second-hand vehicles.
• Specified waste and scrap supplied by unregistered persons to registered persons is proposed to be brought under RCM, with TDS at 2% proposed for specified B2B supplies by registered persons.
• NIL GST rate is proposed for psyllium seeds, irrespective of whether fresh, chilled, frozen or dried.
• GST treatment of retreaded tractor tyres is proposed to be aligned with that of new tractor tyres.

11. Key Changes Relating to Services

• An option to pay GST at 5%, with restricted ITC, is proposed for specified passenger transport and vehicle rental services using electric vehicles.
• Specified delivery services supplied through e-commerce operators are proposed to attract GST at 5% without ITC.
• Clarification is proposed on GST treatment of statutory and ancillary recoveries in motor vehicle leasing transactions.
• Limited ITC is proposed for specified services within the same line of business, including restaurant/outdoor catering, hotel accommodation up to Rs. 7,500 per unit per day, and gym/fitness services.
• Exemptions are proposed for specified helicopter passenger transport services, storage of seeds meant for sowing, curing of coffee, and services provided by the Seamen’s Provident Fund Organisation.
• A self-certification mechanism is proposed for specified research and development services to establish eligibility for exemption.
• Exemption is proposed for specified import of services by Indian establishments of foreign shipping companies without consideration.
• Exemption and special procedures are proposed for certain highway projects under the Toll Operate Transfer (TOT) model.
• Clarification is proposed regarding the treatment of notional interest under banks’ Fund Transfer Pricing mechanism.

12. Transfer of Intellectual Property Rights (IPR)

Transfer of title in IPR, whether temporary or permanent, is proposed to be uniformly treated as a supply of services.

Note: The recommendations of the GST Council would be given effect through the relevant Circulars/Notifications/amendments in law wherever required, which alone shall have the binding force of law.