Key Details
The 57th GST Council meeting held on 8 October 2026, moved from the rate rationalisation addressed at the Council’s previous meeting to how GST is registered, reported, refunded and enforced.
Arrest and prosecution: The Council recommended removing GST arrest powers under Section 69 of the Central GST Act and raising the general monetary threshold for prosecution from ₹1 crore to ₹5 crore. It also proposed narrowing specified offences.
Notices and penalties: A proposed ₹10,000 minimum tax amount would apply to show-cause notices, including specified pending cases. The maximum general penalty would fall from ₹25,000 to ₹10,000; penalties in specified non-fraud cases would also be reduced.
Refunds: In the first proposed phase, excess electronic-cash-ledger balances would be refunded automatically. Risk-assessed claims for zero-rated supplies and inverted-duty cases could receive 90% of the claimed amount provisionally through the system. The deadline for a refund acknowledgement or deficiency memo would fall from 15 to 10 days.
Input tax credit: The Council proposed easing several restrictions on input tax credit (ITC) — the credit businesses claim for GST paid on eligible purchases — and widening refunds of accumulated credit on specified input services and capital goods, subject to proposed eligibility dates and conditions.
Returns and registration: Proposed tools would help reconcile sales, tax liability and ITC across GST returns. The revised return mechanism is proposed to begin with the April 2027 return, following public consultation. Most registration-detail amendments would be accepted automatically, with an exception for the principal place of business outside the existing automatic-registration route.
Small sellers: A proposed registration route would allow eligible sellers using e-commerce operators’ warehouses to supply goods in states where they have no physical presence, subject to conditions including a ₹2.5 lakh monthly ITC-passing limit.
These are Council recommendations; legal changes will require the relevant amendments, rules or notifications.
Enforcement Would Become More Targeted
The proposed removal of GST arrest powers is the package’s most consequential change to enforcement. It sits alongside a higher prosecution threshold, a lower ceiling on general penalties and guidance intended to improve the quality of tax notices and orders. The Council also recommended that fraud-related grounds be invoked on the merits of each case, with personal hearings and other principles of natural justice observed.
Two further proposals address points of friction for taxpayers. Before deciding an objection to blocked ITC, an officer would have to offer a personal hearing. For appeals involving only a penalty, with no tax demand, the required pre-deposit would be capped at ₹40 crore across central and state GST components.
For goods in transit, the Council proposed that interception generally require specific intelligence and authorisation by an officer of at least Joint Commissioner rank. The release also sets out jurisdictional limits and exceptions, including where an e-way bill or documents showing a consignment’s origin or destination are absent. The proposal therefore narrows routine interception; it does not eliminate checks on goods movement.
Refund and Return Changes Target Cash-Flow Blockages
The refund proposals combine faster provisional payment with risk-based checks. The 90% automated provisional sanction would initially cover specified zero-rated and inverted-duty claims; a later phase envisages fuller automation for eligible zero-rated claims. Making applications more readable by the GST system and reducing document uploads are intended to support that shift.
On ITC, the Council proposed refunds for credit on input services in inverted-duty cases from 1 November 2026, and on capital goods in specified zero-rated and inverted-duty cases from 1 April 2027. The proposed capital-goods refund would be spread over 60 months. These dates describe the Council’s recommended eligibility rules, not a statement that the amendments are already in force.
Changes to return forms and the Invoice Management System are intended to let taxpayers correct mismatches between reported liability and credit before they generate notices. The Council recommended putting this revised mechanism out for time-bound public consultation.
Smaller Sellers and Service Exporters Could Gain Clearer Routes
The proposed e-commerce registration mechanism would let eligible small goods sellers use an operator’s warehouse as their registered principal place of business in a state where they lack physical premises. Separately, proposed changes to the definition and place-of-supply rules for exports of services seek to make export-related GST benefits available in specified cross-border arrangements.
The Council also approved in principle, rather than introduced, an optional Annual Return Quarterly Payment scheme for qualifying businesses with turnover up to ₹5 crore that supply exclusively to unregistered customers. Other recommendations address particular sectors — including electric-vehicle transport, platform-based delivery, waste and scrap, research services and highway concessions — but they do not change the main administrative story.
What Is an Inverted-Duty Refund?
An inverted-duty structure arises when the GST rate on a business’s inputs is higher than the rate on what it sells. This can leave input tax credit accumulating instead of being used to pay output tax. The Council’s proposals would expand which eligible credits can be refunded in such cases.
Policy Relevance
Taxpayer protection: Narrower arrest and prosecution provisions, a floor for small tax notices, hearing rights and more disciplined inspections would change how businesses encounter GST enforcement. Their effect depends on the eventual legal text and its application by central and state officers.
Working capital: Faster refunds and wider eligible ITC refunds could release money otherwise tied up in the tax system, especially for exporters and firms facing inverted duties. Risk controls will have to distinguish valid claims without recreating lengthy manual delays.
Implementation: The package spans legislation, rules, portal changes and officer guidance. Businesses need clarity on which measure starts when; a Council recommendation alone does not alter their current obligations or rights.
Relevant Question for Policy Stakeholders: How will central and state GST administrations deliver faster automated refunds and more proportionate enforcement while retaining effective checks against fraud?
Follow the Full Press Release Here: Recommendations of the 57th Meeting of the GST Council