57th GST Council Meeting: Key Recommendations

57th GST Council Meeting: Key Recommendations, Compliance Changes and GST Rate Updates

The 57th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman in New Delhi on 8 October 2026, focused on simplifying GST compliance, improving input tax credit (ITC) flow, accelerating refunds, reducing litigation and facilitating trade.

The recommendations cover GST registration, returns, refunds, dispute resolution, prosecution, e-way bills, exports, goods and services taxation, and relief for small taxpayers.

Important: The measures discussed below are recommendations of the GST Council. Their implementation will depend on the relevant amendments, notifications and circulars.

1. GST Registration: Simplified Procedures and Faster Approvals

1.1 Improved registration application process

The Council recommended several changes to make GST registration applications easier to prepare and process:

• A comprehensive circular will specify the documents and information required for registration, supported by FAQs.
• FORM GST REG-01 will be modified to include predefined document and information options.
• The GST portal will provide improved navigation, drop-down menus, tooltips and contextual guidance.

These changes are intended to reduce registration errors, unnecessary queries and application rejections.

1.2 Automatic acceptance of registration amendments

An amendment to Rule 19 of the CGST Rules, 2017, has been recommended to allow automatic acceptance of changes to registration particulars, except changes relating to the Principal Place of Business (PPoB).

For taxpayers registered under Rule 14A, changes to all registration particulars, including the PPoB, would be accepted automatically.

The objective is to enable faster updating of registration details with minimal interaction with tax officers.

1.3 Simplified cancellation of GST registration

The Council proposed a phased system-based cancellation process.

Phase 1: Cancellation applications in FORM GST REG-16 would be automatically accepted, subject to filing all pending returns and payment of outstanding dues, in the following cases:

• The taxpayer has not passed on ITC exceeding ₹2.5 lakh in any month since registration.
• The taxpayer has passed on ITC exceeding ₹2.5 lakh in a month but has filed FORM GSTR-10 within the prescribed time.

Phase 2: Automatic acceptance would be extended to all eligible cancellation applications once pending returns are filed and dues are paid. FORM GST REG-16 would also be modified to allow details of FORM GSTR-10 to be provided within the cancellation application.

The Council also recommended changes to Rules 21, 21A and 22, along with the introduction of Rule 23A, to establish a system-based mechanism for cancellation and revocation following specified defaults, including non-filing of returns and failure to furnish bank account details within the prescribed period.

1.4 Registration for small sellers operating through e-commerce platforms

A new Rule 14B was recommended for small suppliers of goods selling through Electronic Commerce Operators (ECOs).

Eligible sellers would be able to obtain automatic registration in States or Union Territories where they have no physical presence, subject to prescribed conditions, including:

• The monthly ITC passed on must not exceed ₹2.5 lakh.
• The seller must declare the e-commerce operator’s warehouse in that State or Union Territory as the Principal Place of Business.
• Stock transfers between distinct persons would be excluded when calculating the specified ITC limit.

This proposal is intended to help small sellers expand into other States without establishing a separate physical place of business in each State.

2. GST Returns: Better Reconciliation of Tax Liability and ITC

The Council recommended a revised mechanism for reducing mismatches between GSTR-1, GSTR-1A, the Invoice Furnishing Facility (IFF), GSTR-3B and GSTR-2B.

The proposed measures include:

• Enhancements to GSTR-1, GSTR-1A and IFF to improve reconciliation with GSTR-3B.
• Introduction of Rule 86D for an electronic statement of tax paid under the Reverse Charge Mechanism (RCM) and ITC claimed.
• Insertion of Rule 61(1A) to facilitate correction of tax liability reported in GSTR-3B so that it aligns with GSTR-1, GSTR-1A and IFF.
• Changes to FORM GST DRC-03 to capture the underlying invoice details for which payment is made.
• Introduction of Rule 60(6A) for the Invoice Management System (IMS), allowing recipients to accept, reject or keep inward-supply documents pending, subject to prescribed conditions. These actions would be relevant to the generation of GSTR-2B, including restrictions on keeping credit notes pending.
• Introduction of Rule 86C for an Electronic Credit Reversal and Reclaim Statement to track ITC reversals and subsequent reclaims.
• Insertion of Rule 61(1B) to facilitate correction of ITC reported in GSTR-3B so that it aligns with the ITC available in GSTR-2B.
• A circular explaining the correct reporting of ITC, reversals and reclaims in the context of IMS and the proposed electronic statements.

Proposed implementation: The Council recommended bringing the alternate mechanism for correcting tax liability and ITC into force from the April 2027 return period. The revised mechanism is also to be placed in the public domain for time-bound stakeholder consultation.

3. GST Refunds: Greater Automation and Faster Processing

The Council recommended amendments to Section 54 of the CGST Act, 2017, and related rules to automate refund acknowledgements and sanctions for eligible claims.

3.1 Proposed two-phase refund mechanism

Phase 1

• Refunds of excess balances in the electronic cash ledger would be sanctioned automatically without officer intervention.
• The time limit for issuing an acknowledgement or deficiency memo would be reduced from 15 days to 10 days.
• If neither is issued within 10 days, the system would provide deemed acknowledgement.
• For refunds relating to zero-rated supplies and inverted duty structure, 90% of the claimed amount would be sanctioned provisionally through a risk-based automated process.

Phase 2

• Refund applications would receive automated acknowledgement after system verification.
• Eligible zero-rated supply refunds would be sanctioned automatically in full, after adjustment of pending dues, where applicable, based on system risk assessment.

3.2 Other proposed refund changes

• FORM GST RFD-01 would be modified to capture information in a system-readable format, dispensing with scanned-document uploads for refund claims relating to zero-rated supplies and inverted duty structure.
• The restriction limiting the turnover of zero-rated goods for refund computation to 1.5 times the value of like domestically supplied goods would be removed.
• The ₹1,000 minimum refund threshold under Section 54(14) would apply to the combined refund amount under CGST, SGST/UTGST and IGST.
• Section 115 would be amended to provide a standalone provision for the interest rate applicable to refunds of pre-deposits paid for appeals. A circular would clarify the relevant interest-related issues.

These proposals aim to reduce manual processing, improve transparency and provide businesses with faster access to eligible refunds.

4. GST Litigation, Penalties and Appeals

The Council recommended measures to improve the quality of GST proceedings and reduce avoidable disputes.

4.1 Guidelines for notices and adjudication

A comprehensive circular would guide tax officers on issuing demand notices, adjudication orders and appeal orders. The guidance would cover timely issuance, quality of orders, proper invocation of fraud or suppression provisions based on the facts of each case, and compliance with natural justice, including personal hearings.

4.2 Minimum threshold for show-cause notices

A minimum tax threshold of ₹10,000, calculated collectively across CGST, SGST, IGST and cess, was recommended for issuing show-cause notices.

The Council also recommended a statutory provision for dealing with notices and appeals below this threshold that remain pending when the new provision comes into force.

4.3 Reduced penalties in specified non-fraud cases

The proposed amendments to Sections 73, 74 and 74A include:

• Treating the penalty amount as a charge where the full tax, interest and penalty are voluntarily paid within the prescribed time.
• Reducing the penalty to 5% 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.
• Removing the minimum penalty of ₹10,000 in non-fraud cases.

4.4 Reduction in general penalty

The maximum general penalty under Section 125 of the CGST Act, 2017, is proposed to be reduced from ₹25,000 to ₹10,000.

4.5 Cap on appeal pre-deposit for penalty-only cases

For cases involving only a penalty and no tax demand, the Council recommended an upper limit of ₹40 crore on the pre-deposit required for filing an appeal.

The proposed cap would comprise ₹20 crore under CGST and ₹20 crore under SGST/UTGST, applying separately to appeals before the Appellate Authority under Section 107(6) and the Appellate Tribunal under Section 112(8).

5. Expanded Availability of Input Tax Credit

5.1 Refund of ITC on capital goods and input services

The Council recommended amendments to Section 54(3) and related rules to expand refunds of accumulated ITC.

The proposals include:

• Allowing refund of accumulated ITC on capital goods for zero-rated supplies.
• Allowing refund of accumulated ITC on input services and capital goods under the inverted duty structure mechanism.
• Making ITC on input services eligible for inverted duty structure refunds where the credit was availed on or after 1 November 2026.
• Spreading refunds of ITC on capital goods over 60 months for zero-rated supplies and inverted duty structure cases, for ITC availed on or after 1 April 2027.

These changes are intended to reduce the accumulation of blocked credit and ease working-capital pressure.

5.2 Proposed relaxation of blocked ITC

An amendment to Section 17(5) of the CGST Act, 2017, was recommended to remove restrictions on ITC for specified categories, including:

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

The scope and effect of the proposed amendment will depend on the final legislative text.

6. Export of Goods and Services: Changes to Zero-Rating Provisions

The Council recommended amendments and clarifications under the IGST Act, 2017, to address issues affecting export eligibility and refunds.

6.1 Services supplied through foreign offices or branches

The proposal would remove the condition under Section 2(6) of the IGST Act that the supplier and recipient must not be establishments of a distinct person, through omission of the specified sub-clause.

This is intended to facilitate export-related refunds for Indian service providers supplying services to or through foreign offices or branches.

6.2 Receipt of export consideration

A circular would clarify the circumstances in which export payments may be received in foreign exchange or in Indian rupees, where permitted.

6.3 Place of supply for certain services involving goods

The Council recommended omitting Section 13(3)(a) of the IGST Act. For services where the recipient makes goods physically available to the supplier, the default place-of-supply rule under Section 13(2)—generally the recipient’s location—would apply.

This is intended to facilitate export-related benefits for eligible Indian service providers.

6.4 Supplies delivered to overseas buyers in SEZs or FTWZs

A proposed explanation to Section 16(1) of the IGST Act would treat specified supplies as supplies to an SEZ or Free Trade Warehousing Zone (FTWZ) where:

• Goods are supplied to an overseas buyer but delivered to that buyer in an SEZ/FTWZ for warehousing or further processing.
• Payment is received in convertible foreign exchange or in Indian rupees where permitted by the RBI.

The objective is to provide greater certainty regarding zero-rating for eligible transactions.

7. Arrest and Prosecution Provisions

The Council recommended significant changes to GST enforcement.

• Arrest powers: Complete withdrawal of GST arrest powers through omission of Section 69 of the CGST Act, 2017, was recommended.
• Prosecution threshold: The monetary threshold for prosecution would increase from ₹1 crore to ₹5 crore.
• Specified offences: Changes were proposed to Section 132, including omission of clause (i) of Section 132(1), deletion of the words “evades tax” from clause (e), and deletion of the words “or in any other manner deals with” from clause (h).
• Fraudulent ITC: The offence under Section 132(1)(c) would be narrowed to fraudulent availment of ITC without receipt of goods or services or without an invoice or bill.
• Punishment: Penalties and punishments for various offences under Section 132 would be rationalised.

These are recommendations for legislative change, not confirmation that the existing enforcement provisions have already been removed.

8. E-Way Bills and Movement of Goods

The Council recommended amendments to Sections 68, 129 and 130 of the CGST Act to streamline interception, inspection and detention of goods in transit.

The proposed framework includes:

1. A vehicle carrying goods may be intercepted only on the basis of specific intelligence and with authorisation from an officer not below the rank of Joint Commissioner.
2. Inspection and further detention or seizure action would generally be permitted where either the supplier or recipient is located or registered in the State of interception. Interception in transit States would not be permitted under the proposed general rule.
3. Where no e-way bill has been generated, or the conveyance carries no document showing the origin or destination of goods, inspection, detention or seizure could take place irrespective of jurisdiction.
4. Confiscation under Section 130 would not apply to goods or conveyances in transit.

The proposed changes are intended to reduce unnecessary interruptions during transportation while retaining enforcement powers in specified cases.

9. Other Major Compliance and Business Reforms

9.1 Transfer of intellectual property rights

The transfer of title in intellectual property rights (IPR), whether temporary or permanent, would be uniformly classified as a supply of services through a proposed amendment to Schedule II of the CGST Act.

9.2 Opportunity to challenge blocked ITC

A proposed amendment to Rule 86A of the CGST Rules would allow taxpayers to object to amounts blocked in their electronic credit ledger and receive a personal hearing before the proper officer decides the objection.

9.3 Late-fee relief for small taxpayers

Late fees for delayed returns under Section 39(1) would be waived for taxpayers whose turnover in the preceding financial year did not exceed ₹5 crore, provided the delayed return is filed by the end of the month in which it was due.

9.4 Clarifications through circulars

The Council recommended clarification of the following matters:

• Input Service Distributor (ISD) rules for distributing input-service credit.
• ITC eligibility for banks, financial institutions and NBFCs opting for the method under Section 17(4) of the CGST Act.
• Payment of appeal pre-deposits.
• ITC eligibility for demonstration vehicles in specified circumstances.
• Omission of Rule 96(10) of the CGST Rules with effect from 23 October 2017, in line with the Supreme Court decision referred to in the Council’s recommendations.

9.5 Proposed Annual Return Quarterly Payment scheme

The Council approved in principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme.

The proposed scheme would cover taxpayers with aggregate turnover of up to ₹5 crore in the preceding financial year who are engaged exclusively in supplies to unregistered persons (B2C supplies).

9.6 Additional compliance-related recommendations

The Council also recommended:

• Aligning Sections 16, 37 and 39 of the CGST Act to coordinate the provisions for outward-supply statements, returns and the time limit for claiming ITC under Section 16(4).
• Clarifying the liability of e-commerce operators under Section 9(5), irrespective of their business model, for notified services.
• Introducing a validation provision in the CGST Act for notices held invalid by courts because they cover multiple financial years.
• Extending e-invoicing to specified domestic supplies received from unregistered persons under RCM and imports of services for taxpayers with aggregate annual turnover of ₹5 crore or more.

The Council also approved amendments concerning the GST Appellate Tribunal to align its framework with the Tribunals Reforms Act, 2026, and the related 2026 rules on tribunal appointments, qualifications and service conditions.

10. GST Rate and Classification Recommendations for Goods

The following goods-related changes and clarifications were recommended.

The waste-and-scrap proposal also states that an unregistered supplier must obtain registration when the applicable threshold is crossed, while the registered recipient remains liable to pay tax under RCM even if the supplier is below the threshold.

11. GST Rate and Exemption Recommendations for Services

11.1 Passenger transport and vehicle rental using electric vehicles

An option to pay GST at 5%, with restricted ITC, was recommended for passenger transportation and rental services of motor vehicles with operators where electric vehicles are used and battery-charging costs are included in the consideration.

11.2 Delivery services supplied through e-commerce operators

The Council recommended a 5% GST rate without ITC for specified delivery services supplied through ECOs, excluding courier and postal services, where the supplier is not liable for registration under Section 22(1) of the CGST Act.

The proposal also covers delivery services relating to goods supplied or ordered through an ECO and the withdrawal of the specified GTA exemption for transportation of goods to unregistered persons where the goods are supplied or ordered through an ECO.

11.3 Motor vehicle leasing recoveries

A clarification was recommended on the GST treatment of statutory and ancillary charges incurred by a lessor and recovered from a lessee, including registration charges, road tax, insurance and FASTag charges.

11.4 ITC for certain services in the same line of business

Limited ITC would be allowed in the same line of business for:

• Restaurant and outdoor catering services.
• Hotel accommodation up to ₹7,500 per unit per day.
• Gym and fitness services.

The proposal would follow the approach currently available for specified passenger transportation, tour operator and motor vehicle rental services.

11.5 Helicopter passenger transportation

An exemption was recommended for seat-sharing helicopter passenger services to or from airports or helipads in the north-eastern States, Sikkim and Bagdogra in West Bengal.

11.6 Storage of seeds for sowing

Services involving storage or warehousing of seeds intended for sowing would be exempt from GST under the proposal.

11.7 Coffee curing services

Agricultural support services for curing coffee, when provided by coffee curers to cultivators, would be exempt.

11.8 Seamen’s Provident Fund Organisation

Services provided by the Seamen’s Provident Fund Organisation to persons governed by the Seamen’s Provident Fund Act, 1966, would be exempt.

11.9 Research and development services

A simplified self-certification procedure was recommended for institutions and organisations undertaking research and development. The head of the institution or organisation would certify that the activity is R&D rather than consultancy for determining eligibility under Entry 44A of Notification No. 12/2017-Central Tax (Rate).

11.10 Services imported by Indian establishments of foreign shipping companies

The Council recommended exemption for services imported without consideration by an Indian establishment of a foreign shipping company from a related person or another establishment outside India. Past cases would be regularised on an “as is where is” basis.

11.11 Highway projects under the Toll-Operate-Transfer model

The proposed exemption would cover the grant by the Government or specified public authorities of the exclusive right, licence and authority to demand, collect and appropriate toll fees for highway projects under the Toll-Operate-Transfer (TOT) model.

A separate special procedure would govern valuation and the timing of GST payment on operation and maintenance services supplied by concessionaires to the concessioning authority for these projects.

11.12 Fund Transfer Pricing between bank branches

The Council recommended clarification that the notional amount treated as interest in a bank’s accounts for Funds Transfer Pricing transactions involving transfers between branches by the head office falls within the definition of “interest” under Notification No. 12/2017-Central Tax (Rate).

12. Key Takeaways for Businesses and Tax Professionals

The 57th GST Council meeting focused primarily on process reforms rather than another broad round of GST rate rationalisation.

The most significant areas to monitor are:

• Registration: Automatic amendment and cancellation procedures and simplified registration for eligible e-commerce sellers.
• Returns and ITC: New electronic statements and reconciliation mechanisms, with the proposed revised system beginning from the April 2027 return period.
• Refunds: A proposed 10-day acknowledgement timeline and automated provisional refunds of 90% for specified claims.
• Litigation: A ₹10,000 threshold for show-cause notices, a proposed 5% penalty in specified non-fraud cases, and a reduction in the maximum general penalty to ₹10,000.
• ITC refunds: Expanded eligibility for capital goods and input services, subject to the proposed conditions and effective dates.
• Enforcement: Recommended removal of arrest powers and an increase in the prosecution threshold to ₹5 crore.
• Transportation: Proposed restrictions on interception of goods in transit, with exceptions for specified documentation failures.
• GST rates and exemptions: Changes proposed for selected goods, e-commerce delivery services, electric-vehicle transport, agriculture-related services and highway projects.

Businesses should track the relevant notifications, circulars and amendments before changing their GST returns, invoicing practices, refund claims or tax positions.

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Also Read: GST ITC Set-Off Rules Changed from January 2026 — A Practical Guide for Taxpayers

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