JSA Prism | Indirect Tax | October 2026

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Key highlights of the 57^th Goods and Services Tax Council meeting

The 57^th meeting of the Goods and Services Tax (“GST”) Council was held on October 8, 2026 in New Delhi, under the chairpersonship of the Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman. The key recommendations proposed by the GST Council were focused on process reforms covering registration, returns, refund, adjudication and other trade facilitation measures.

Key changes proposed to the GST laws

1. The Council has not recommended any changes in the rates of GST on supply of goods or services.
2. Reforms for widening of refunds and credits:
   • The Council proposes to amend Section 54(3) of the Central Goods and Services Tax Act, 2017 (“CGST Act”) to allow refund of accumulated Input Tax Credit (“ITC”) on capital goods for zero-rated supplies, and refund of accumulated ITC on input services and capital goods under an inverted duty structure.
   • Refund of ITC on input services under an inverted duty structure will apply to ITC availed on or after November 1, 2026.
   • The Council proposes to spread refund of ITC on capital goods for zero-rated supplies and inverted duty structure over 60 (sixty) months. This refund will be available for ITC availed on capital goods on or after April 1, 2027.
   • The Council proposes to remove the ITC restrictions under Section 17(5) of the CGST Act for outdoor catering, health and life insurance, telecom towers, pipelines outside factory premises, free samples, and goods destroyed or written off on expiry of shelf life as required by law.

3. Refund related reforms:
   • The Council proposes phased reforms for faster, system-based processing and sanction of refunds of unutilised ITC for low-risk claims relating to zero-rated supplies or inverted duty structure:
     • phase 1 will reduce the timeline for issuing an acknowledgement or deficiency memo from 15 (fifteen) days to 10 (ten) days. If the proper officer does not issue the acknowledgement or deficiency memo within 10 (ten) days of the application, the application will be deemed acknowledged. Phase 1 will also provide automatic provisional sanction of 90% refund for zero-rated supplies and inverted duty structure, and automatic sanction of the full refund of excess balance in the cash ledger; and
     • phase 2 will provide automatic system-based acknowledgement after the system verifies the application, and automated sanction of the full refund for zero-rated supplies based on risk assessment.
   • The Council proposes to amend Rule 89(4)(C) of the Central Goods and Services Tax Rules, 2017 (“CGST Rules”) to remove the cap on turnover of zero-rated supply of goods at 1.5 (one and a half) times the value of like goods supplied domestically.
   • At present, Section 115 of the CGST Act ties interest on refund of pre-deposits to Section 56 of the CGST Act, a general provision on interest, for delayed refunds. This creates uncertainty about the applicable rate of interest on refund of pre-deposits. The Council has therefore recommended making Section 115 of the CGST Act a standalone provision governing that rate, and issuing a circular to clarify the rate of interest on refund of pre-deposits.
4. Reforms for dispute resolution:
   • The Council proposes to amend Sections 73, 74 and 74A as follows:

• • • officers will not issue show cause notices where the tax involved is below INR 10,000 (Indian Rupees ten thousand), and will withdraw pending notices below this threshold;
    • where a taxpayer voluntarily pays the full tax, along with interest and penalty, within the specified time limit, the term ‘penalty’ will be replaced by ‘charge’. This change will not alter the amount payable, which will remain as prescribed under the relevant provisions of the CGST Act;
    • in non-fraud cases, where the taxpayer pays the tax along with interest within 30 (thirty) days (under Section 73 of the CGST Act) or 60 (sixty) days (under Section 74A of the CGST Act) of the adjudication order, the penalty will be 5%; and
    • the minimum penalty of INR 10,000 (Indian Rupees ten thousand) in non-fraud cases will be removed.

• • The Council proposes to issue comprehensive guidelines to tax officers to streamline the issuance of demand notices, adjudication orders and appeal orders. The guidelines will cover the quality and timely issuance of these notices and orders, invocation of grounds of fraud, wilful misstatement or suppression of facts only on the merits of each case, and adherence to the principles of natural justice, including the conduct of personal hearings.
  • The Council proposes to reduce the general penalty under Section 125 of the CGST Act from INR 25,000 (Indian Rupees twenty-five thousand) to INR 10,000 (Indian Rupees ten thousand).
  • For orders involving only penalty and no tax demand, the Council proposes to cap the pre-deposit for filing an appeal at INR 40,00,00,000 (Indian Rupees forty crore) (CGST: INR 20,00,00,000 (Indian Rupees twenty crore); and SGST: INR 20,00,00,000 (Indian Rupees twenty crore)).

5. Reforms relating to exports/zero-rating of supplies of goods and services:

• • The Council proposes to omit Section 2(6)(v) of the Integrated Goods and Services Tax Act, 2017 (“IGST Act”), removing the condition that the supplier and recipient of a service must not be establishments of a distinct person for the supply to qualify as an ‘export of services’.
  • The Council proposes to clarify issues relating to receipt of consideration in foreign exchange or Indian Rupees, as permissible, for export of goods and services.
  • The Council proposes to omit Section 13(3)(a) of the IGST Act. Where the recipient makes the goods physically available to the supplier, the default rule under Section 13(2) will then determine the place of supply, that is, the location of the recipient of the services.
  • The Council proposes to insert an Explanation to Section 16(1) of the IGST Act. Where a supplier delivers goods to an overseas buyer in an Special Economic Zone (“SEZ”)/Free Trade Warehousing Zone (“FTWZ”) and receives payment in convertible foreign exchange or permitted Indian Rupees, the supply will be deemed to be made to the SEZ/FTWZ and will therefore qualify for zero-rating.

6. Rationalisation of provisions relating to arrest and prosecution
   • The Council proposes to remove the arrest powers of GST officers, while proceedings under the Bharatiya Nyaya Sanhita, 2023 may continue in warranted cases.
   • The Council proposes to raise the monetary threshold for prosecution from INR 1,00,00,000 (Indian Rupees one crore) to INR 5,00,00,000 (Indian Rupees five crore).
   • The Council proposes to rationalise the punishment for the various offences specified under Section 132 of the CGST Act.

7. Rationalisation of provisions relating to e-way bills:
   • Goods can be intercepted only in the supplier or recipient States (not in transit States), based on specific intelligence and with authorisation of an officer not below the rank of Joint Commissioner.
   • Where no e-way bill has been generated, or the conveyance does not carry documents evidencing the origin or destination of the goods, the goods may be inspected, detained or seized irrespective of jurisdiction.
   • Confiscation under Section 130 of the CGST Act will not apply to goods/conveyances in transit.
8. Registration-related reforms:
   • The Council will issue comprehensive clarifications and frequently asked questions to simplify and streamline the registration process.
   • The Council proposes automatic acceptance of amendments to all registration particulars on the GST portal, except those relating to the Principal Place of Business (“PPoB”). For taxpayers registered through the automatic route, the Council proposes automatic amendment of all registration particulars, including the PPoB.
   • The Council proposes a system-based mechanism in specified cases to automatically cancel registration on a taxpayer’s application, once the taxpayer files all pending returns and pays all dues.
   • The Council also proposes a system-based mechanism to cancel and revoke registration based on non-compliance, and subsequent compliance, where a taxpayer does not file returns or furnish bank account details within the specified time period.
   • The Council proposes to omit certain grounds on which tax officers may cancel registration.
   • The Council proposes a simplified automatic registration mechanism for small suppliers making supply of goods through Electronic Commerce Operators (“ECOs”) in States/Union Territories where they have no physical presence and they intend to pass on ITC of not more than INR 2,50,000 (Indian Rupees two lakh fifty thousand) per month, excluding stock transfers between distinct persons. Such small suppliers will not need to set up a place of business in each State/Union Territory, provided they declare the ECO’s warehouse in that State/Union Territory as their PPoB.
9. Proposed return-related changes to improve liability and ITC reconciliation from April 2027:

The Council proposes several key return-related changes with effect from April 2027 to minimise mismatches in liabilities and ITC in returns and reduce notices/ intimations. These include the following:

1. • enhancements in Form GSTR-1/1A/IFF to enable better reconciliation of details furnished in these forms with details reported in Form GSTR-3B;
   • the Council proposes to introduce a new facility on the GST portal, the ‘Electronic Statement of tax paid on Reverse charge basis and ITC claimed’, to help taxpayers correctly report tax liability and ITC on supplies liable to reverse charge mechanism in their returns;
   • the Council proposes a mechanism for correct reporting and rectification of liability and ITC in Form GSTR-3B, so that the liability in Form GSTR-3B aligns with Form GSTR-1/1A/IFF and the ITC availed in Form GSTR-3B aligns with the ITC made available in Form GSTR-2B;
   • the Council proposes to amend the invoice management system to allow a recipient to accept, reject or keep pending a document relating to an inward supply received on the portal, for generating the statement of ITC in Form GSTR-2B, subject to certain conditions;
   • the Council proposes to introduce a new facility on the GST portal, the “Electronic Credit Reversal and Reclaim Statement”, to help taxpayers correctly report ITC reversed and reclaimed in Form GSTR-3B; and
   • the Council proposes to amend Form GST DRC-03 to require taxpayers to declare details of the underlying invoices for which they have paid.

The Council proposes to issue a circular clarifying the above aspects.

10. Other key reforms:

• • The Council proposes to treat transfer of title in intellectual property rights, whether temporary or permanent, uniformly as a supply of services.
  • The Council proposes to amend Rule 86A of the CGST Rules to allow a taxpayer to object to the blocking of any amount in the electronic credit ledger and to be heard in person before the proper officer decides the objection.
  • The Council proposes to amend Section 9(5) of the CGST Act to clarify that the ECOs are liable to pay tax on notified services irrespective of the business model they follow.
  • The Council proposes to waive the late fee on delayed filing of Form GSTR-3B for taxpayers with an annual turnover up to INR 5,00,00,000 (Indian Rupees five crore) in the preceding financial year, if they file the delayed return by the end of the month in which it was due.
  • The Council proposes to introduce a validation clause in the CGST Act to validate notices that various Courts have held invalid on the ground that they were issued for multiple financial years.
  • The Council proposes to extend e-invoicing to domestic supplies received from an unregistered person where tax is payable under the reverse charge mechanism, and to the import of services, for taxpayers with an aggregate annual turnover of INR 5,00,00,000 (Indian Rupees five crore) and above.
  • The Council proposes to amend Sections 16, 37 and 39 of the CGST Act to align the provisions on furnishing the statement of outward supply and returns with the provisions on the time limit for availing ITC.
  • The GST Council approved various amendments to CGST Act and GSTAT (Appointment and Conditions of Service of President and Members) Rules, 2023 to align the provisions in respect of the GST Appellate Tribunal with the relevant provisions of the Tribunals Reforms Act, 2026 and the National Tribunals Commission and Qualification, Selection and Conditions of Service of Chairpersons and Members of Tribunals Rules, 2026.
  • The Council proposes a concept note on an Annual Return Quarterly Payment Scheme for taxpayers with turnover up to INR 5,00,00,000 (Indian Rupees five crore) that supply exclusively to unregistered customers, under which they would file 1 (one) annual return and make quarterly tax payments.

11. Clarifications proposed to be issued:

• • Issues relating to the input service distributor mechanism, pre-deposits, ITC on demonstration vehicles in certain situations, and omission of Rule 96(10) of the CGST Rules with effect from October 23, 2017 in line with the decision of the Hon’ble Supreme Court of India, etc.
  • Recommendations related to supply of goods:
    • Clarification that suppliers of second-hand vehicles under the GST margin scheme may avail ITC on inputs and input services, other than the tax paid on the second-hand vehicles they procure.
    • The Council proposes to bring waste and scrap of plastics, electrical/electronics, tyres and used cooking oil under the reverse charge mechanism where an unregistered person supplies them to a registered person. For B2B supplies of such waste and scrap by registered persons, the Council proposes 2% TDS.
    • Correction of anomaly of GST treatment on re-treaded tractor tyres by aligning the GST rate thereon with that applicable on new tractor tyres.
    • Exempt compensation cess not levied by the Canteen Stores Department (“CSD”) on 2 (two) and 4 (four) wheelers for the period July 1, 2017, to September 30, 2022, and by CSD and unit-run canteens on aerated drinks for the period July 1, 2017, to March 31, 2022.
• Recommendations related to supply of services:
  • 5% GST with restricted ITC for passenger transport and rental of motor vehicles with operators, where the servicesupplied using electric vehicles and battery charging cost is included in consideration.
  • Where a GTA supplies services of transportation of goods to an unregistered person through an ECO, the Council proposes to withdraw the GST exemption for the GTA. The GTA service provider will pay 5% GST without ITC or 18% GST with ITC, and the ECO will not be liable to pay tax.

• • GST exemption for import of services by Indian establishments of foreign shipping companies from related foreign establishments, where made without consideration, with past cases to be regularised on an ‘as is where is’ basis.
  • GST exemption for upfront/concession amounts paid to National Highways Authority of India for supply of services by way of grant of exclusive right, license and authority to the concessionaire for highway projects to demand, collect and appropriate toll fee under the Toll Operate Transfer (“TOT”) model. The Council will also introduce a special procedure for valuation and the time of payment of GST on operation and maintenance services that concessionaires provide to the concessioning authority for highway projects under the TOT model.
  • Clarification proposed on the GST treatment of certain statutory and ancillary recoveries, such as registration charges, road tax, insurance and FASTag charges, that a lessor incurs and later recovers from the lessee in connection with the leasing of motor vehicles.
  • To exempt services by way of storage or warehousing of seeds meant for sowing from payment of GST.
  • To exempt agricultural support services of curing coffee provided by the coffee curers to the cultivators from the payment of GST.

This Prism has been prepared by:

Manish Mishra Partner & Head of Practice – Indirect Tax	Shareen Gupta Partner	Shashank Shekhar Partner
Shikha Parmar Principal Associate	Shreshtha Khatri Senior Associate

For more details, please contact km@jsalaw.com.