57th GST Council Meeting 2026 Recommends Changes to ITC, Refunds and GST Penalties

India has announced a new set of Goods and Services Tax (GST) reforms on 8 October 2026, at the 57th GST Council meeting chaired by the Union Finance Minister here in New Delhi. The announcement comes approximately a year after the previous round of GST rate overhaul.

While the 2025 GST reforms primarily focused on rationalising tax rates, the 2026 GST measures aim to improve the efficiency and clarity of GST administration, with a broader focus on the following areas:

1. GST registration procedures
2. GST return filing and compliance
3. Refund processing and adjudication
4. Clarification of GST applicability to specific goods and services
5. Trade facilitation measures

*Important distinction: The outcomes announced on 8 October are recommendations for amendments, notifications and circulars. They should not automatically be treated as implemented legal changes; the applicable legal instrument and effective date must be verified separately.

GST registration reforms

India’s GST Council has recommended measures to simplify registration procedures, reduce administrative delays, and facilitate interstate e-commerce operations for eligible small sellers.

Overview of Proposed GST Registration Changes
Area	Proposed reform	Expected benefit
New registrations	Standardised documentation, clearer guidelines, and an improved GST portal	Fewer application errors and rejections
Registration amendments	Automatic acceptance of eligible changes to registration details	Faster updates with less officer intervention
Registration cancellation	Phased automation of cancellation processing	Simpler procedures and greater transparency
Small e-commerce sellers	Simplified registration in states where eligible sellers lack a physical business presence	Easier interstate expansion

Simplifying new GST registrations in India

Under the existing simplified registration route, eligible applicants who do not intend to pass on more than INR 250,000 in input tax credit (ITC) per month can receive automatic registration under Rule 14A of the Central Goods and Services Tax (CGST) Rules, 2017, without tax officer intervention.

For other applicants, the Council has recommended the following improvements:

1. Standardised documentation: A comprehensive circular and frequently asked questions (FAQs) will clarify the documents and information required for registration.
2. Revised application form: Form GST REG-01 will include predefined options for selecting the prescribed documents and information.
3. Improved GST portal: Drop-down menus, clearer navigation, tooltips, and contextual guidance will help applicants submit accurate applications.

These measures are intended to reduce errors, unnecessary queries, and rejections while accelerating the processing of registration applications.

Amendments to GST registration details

The Council has recommended amending Rule 19 of the CGST Rules, 2017, to enable automatic acceptance of amendments to most GST registration particulars through the portal.

Changes to the principal place of business (PPoB) would generally be excluded from this mechanism. However, taxpayers registered under Rule 14A would be able to update all registration particulars, including their principal place of business, automatically.

Simplifying GST registration cancellation

A two-phase approach has been recommended to automate the acceptance of GST registration cancellation applications. These are subject to prescribed compliance requirements.

Implementation phase	Proposed mechanism
Phase 1	Automatic acceptance for specified categories of taxpayers who have filed all pending returns and paid outstanding dues. Eligible categories include taxpayers who have not passed on more than INR 250,000 in ITC in any month since registration and those who exceeded this amount but filed Form GSTR-10 within the prescribed period.
Phase 2	Extension of automatic acceptance to all cancellation applications, subject to filing pending returns and paying outstanding dues. Form GST REG-16 will also be amended to incorporate the required Form GSTR-10 details.

The Council has also recommended a system-based mechanism for cancellation and revocation of registration in cases involving specified non-compliance, including failure to file returns or furnish bank account details within the prescribed period.

Simplified GST registration for small e-commerce sellers

The Council has recommended introducing Rule 14B of the CGST Rules, 2017, to simplify GST registration for eligible small suppliers selling goods through electronic commerce operators (ECOs), such as online marketplaces.

Under the proposed mechanism, eligible sellers could register in states or union territories where they do not have a physical business presence by declaring an ECO’s warehouse in that jurisdiction as their principal place of business. This would be subject to prescribed conditions, including an intended monthly ITC transfer limit of INR 250,000.

GST return filing and input tax credit reconciliation

The GST Council has recommended changes to reduce discrepancies between GST returns and input tax credit (ITC) claims. As of 8 October 2026, businesses operating in India must ensure that sales, tax liabilities and ITC reported across different GST forms are consistent.

For example, the tax liability reported in Form GSTR-3B may differ from the sales details furnished in Form GSTR-1. Similarly, the ITC claimed in GSTR-3B may not match the credit available in GSTR-2B. Such discrepancies can trigger system-generated alerts, notices or tax demands.

Proposed Changes to GST Return Filing
Proposed measure	Expected outcome
Improvements to GSTR-1, GSTR-1A and IFF	Better reconciliation of outward supply details with tax liabilities reported in GSTR-3B
Electronic statement for reverse-charge tax and ITC	More accurate reporting of reverse charge mechanism (RCM) liabilities and related ITC
Correction of tax liabilities	A mechanism to rectify discrepancies between GSTR-3B and reported outward supplies
Revised Form GST DRC-03	Identification of the underlying invoice associated with payments made through the form
Improvements to the Invoice Management System (IMS)	Greater flexibility for recipients to accept, reject or keep eligible documents pending
Electronic Credit Reversal and Reclaim Statement	Improved tracking of ITC reversals and subsequent reclaims
ITC reporting corrections	Better alignment between ITC claimed in GSTR-3B and credit available in GSTR-2B
Additional reporting guidance	Clarification on reporting ITC, reversals and reverse-charge transactions

Implementation timeline and business implications

The Council recommended introducing the proposed mechanism for correcting tax liabilities and ITC reporting from the April 2027 return period. It also recommended time-bound stakeholder consultation on the revised framework before the necessary changes are finalised.

Until the new mechanism takes effect, businesses should continue reconciling their sales, tax liabilities and ITC across the relevant forms and statements.

Faster GST refunds

The GST Council has recommended automating refund processing to reduce delays, minimise manual intervention and improve businesses’ working capital.

Phase 1: Faster processing and provisional refunds

The first phase includes three key measures:

1. Eligible claims for excess balances in the electronic cash ledger would be sanctioned automatically.
2. The time allowed to issue an acknowledgement or deficiency memo would be reduced from 15 days to 10 days. If neither is issued within this period, the system would provide a deemed acknowledgement.
3. Eligible claims relating to zero-rated supplies and the inverted duty structure would receive 90 per cent of the claimed amount provisionally through a risk-based automated process.

Phase 2: Further automation

The second phase proposes automated acknowledgement following system verification and automatic sanction of the full eligible refund for qualifying zero-rated supply claims, after adjusting outstanding dues and subject to risk assessment.

The proposed full-refund automation should not be interpreted as applying to every refund category.

Other Proposed Refund Improvements
Area	Proposed change
Refund applications	Revise Form GST RFD-01 to capture information in a system-readable format and remove scanned-document upload requirements for specified zero-rated supply and inverted duty structure claims.
Turnover calculation	Remove the restriction capping turnover of zero-rated goods at 1.5 times the value of comparable domestic supplies.
Minimum refund threshold	Apply the INR 1,000 threshold to the combined refund amount across central GST, state GST, union territories GST, and integrated GST.
Interest on appeal pre-deposits	Clarify the applicable interest rate when appeal-related pre-deposits are refunded

GST disputes, notices and penalties

The GST Council has recommended measures to standardise tax proceedings, reduce compliance costs and simplify dispute resolution.

Guidelines for tax notices and orders

A proposed circular would establish guidelines for issuing demand notices, adjudication orders and appeal orders, covering their quality, timely issuance, grounds for alleging fraud or suppression of facts, and adherence to natural justice, including personal hearings.

Minimum threshold for show-cause notices

The Council recommended a minimum threshold of INR 10,000 in aggregate tax across CGST, SGST, IGST and cess for issuing show-cause notices under specified provisions. The threshold would also apply retrospectively to certain pending notices and appeals, as though it had been in force when the notices were issued.

Proposed penalty changes

The proposed amendments include:

• Treating the penalty amount as a charge where the full tax, interest and penalty are voluntarily paid within the prescribed period.
• Reducing penalties to 5 per cent in specified non-fraud cases where tax and interest are paid within 30 days under Section 73 or 60 days under Section 74A, as applicable.
• Removing the minimum INR 10,000 penalty in non-fraud cases.
• Reducing the maximum general penalty under Section 125 from INR 25,000 to INR 10,000.

These changes would remain subject to the applicable provisions and prescribed conditions and would not constitute a blanket waiver of penalties.

Cap on appeal pre-deposits in penalty-only cases

The Council recommended capping appeal pre-deposits at INR 400 million where the disputed order involves only a penalty and no tax demand. The proposed cap comprises INR 200 million under CGST and INR 200 million under SGST/UTGST.

Wider availability of ITC

In the latest round of the meeting, it has been recommended to expand refund eligibility for accumulated ITC and remove specified restrictions on credit claims.

Refunds of ITC on capital goods and input services

Capital goods include business assets such as machinery and equipment, while input services include services used for business operations. Under the proposed changes, eligible businesses could claim refunds of accumulated ITC in specified circumstances:

• Zero-rated supplies: Refunds of accumulated ITC on capital goods.
• Inverted duty structure: Refunds of accumulated ITC on input services and capital goods.
• Input services: Refund eligibility for ITC availed on or after 1 November 2026, in specified inverted duty structure cases.
• Capital goods: Refunds of eligible ITC spread over 60 months for credit availed on or after 1 April 2027, in the specified zero-rated supply and inverted duty structure cases.

Changes affecting exports and zero-rated supplies

In the 8 October meeting, the council has recommended clarifications to help eligible exporters and service providers access GST benefits and reduce uncertainty in cross-border transactions.

Export of services involving foreign branches

The Council recommended removing a condition affecting the classification of certain services supplied between establishments of the same legal entity in different locations.

The proposed change would facilitate export-related refunds for Indian service providers supplying services to or through their foreign offices or branches.

Payment for exports

A proposed circular would clarify that payments for exports of goods and services may be received in foreign currency or Indian rupees where permitted under the applicable rules.

Place of supply for specified services

For certain services involving goods made physically available by the recipient to the service provider, the Council recommended removing the specific place-of-supply provision and applying the default rule under Section 13(2) of the IGST Act, which generally refers to the recipient’s location.

This could help eligible Indian service providers qualify for export-related GST benefits when serving overseas customers.

Goods delivered to an SEZ or FTWZ for overseas buyers

The Council also recommended clarifying the zero-rating treatment of goods sold to overseas buyers but delivered to a Special Economic Zone (SEZ) or Free Trade Warehousing Zone (FTWZ) in India for storage or further processing.

Subject to the specified payment and other conditions, the proposal would provide greater certainty regarding zero-rated treatment.

These measures could benefit exporters, multinational businesses and Indian service providers engaged in cross-border transactions.

GST arrest and prosecution provisions

The Council recommended changes to the enforcement framework, including:

1. Removing the arrest powers under Section 69 of the CGST Act.
2. Raising the monetary threshold for prosecution from INR 10 million to INR 50 million.
3. Revising the scope of specified offences, including those relating to fraudulent ITC claims.
4. Rationalising punishments for various offences under Section 132.

The proposed changes are intended to distinguish serious tax offences from other compliance failures. They would not make GST fraud, fraudulent ITC claims or tax evasion permissible. The final amendments would determine the precise scope of the changes.

Revised rules for e-way bill inspections

An e-way bill is an electronic document required for specified movements of goods under GST. The Council recommended amendments to restrict unnecessary interception of consignments and clarify the circumstances in which authorities may inspect or detain goods.

Proposed measure	Implication
Authorised interception	Vehicles could be intercepted only on the basis of specific intelligence and with authorisation from an officer of at least Joint Commissioner rank.
Restrictions on transit-state action	Inspection and further detention or seizure would generally be permitted where the supplier or recipient is located or registered in the state of interception, rather than in an unrelated transit state.
Missing documentation	Goods could still be inspected, detained or seized irrespective of jurisdiction if the required e-way bill has not been generated or the vehicle lacks documents establishing the goods’ origin or destination.
Restrictions on confiscation	Confiscation under Section 130 would not apply to goods or vehicles merely in transit.

These proposals are intended to improve the movement of goods across state boundaries while retaining enforcement measures for specified violations.

Other measures to improve ease of doing business

The Council has recommended additional changes covering intellectual property, blocked ITC, late fees and other compliance requirements.

Transfer of intellectual property rights

The Council recommended treating temporary and permanent transfers of intellectual property rights (IPR) uniformly as supplies of services for GST purposes. This would simplify the tax treatment of transactions involving patents, trademarks and copyrights, including cross-border transfers.

Opportunity to object to blocked ITC

Under Rule 86A, tax authorities may block the use of amounts in a taxpayer’s electronic credit ledger in specified circumstances. The Council recommended allowing taxpayers to submit objections and receive a personal hearing before the officer decides on those objections.

This would provide a formal opportunity to challenge the blocking of ITC.

Late-fee relief for small taxpayers

The Council recommended waiving late fees for delayed filing of specified returns under Section 39(1) for taxpayers whose turnover did not exceed INR 50 million in the preceding financial year, provided the delayed return is filed by the end of the month in which it was due.

The proposed relief is conditional and would not apply to all overdue returns.

Proposed annual quarterly return 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 turnover of INR 50 million or less in the preceding financial year who exclusively make supplies to unregistered customers, or business-to-consumer (B2C) supplies. The concept note does not establish the final operating rules or implementation date.

Other compliance changes recommended at the 57th GST Council meeting

Additional recommendations include aligning certain GST return deadlines with ITC time limits, clarifying the tax liability of e-commerce operators for notified services, validating certain notices issued for multiple financial years, and extending e-invoicing to specified reverse-charge transactions involving unregistered suppliers and imports of services for taxpayers with annual turnover of INR 50 million or more.

Conclusion

The 57th GST Council meeting recommendations focus on improving GST administration through greater automation, clearer provisions and simplified compliance procedures.

Businesses should distinguish between recommendations and changes that have formally taken effect. The relevant statutory amendments, notifications, circulars and effective dates will determine when adjustments to GST compliance procedures are required.