57th GST Council Meeting: Every Recommendation Explained with Examples
The 57th meeting of the GST Council, held in New Delhi on 8th October 2026 under the chairpersonship of the Union Finance Minister Smt. Nirmala Sitharaman, has recommended the largest package of process reforms since GST began. Where the 56th meeting focused on rate rationalisation, the 57th meeting focuses on how taxpayers register, file returns, claim refunds and face notices.
The headline changes are: removal of arrest provisions, a higher prosecution threshold of ₹5 crore, a lower general penalty of ₹10,000, no show cause notice below ₹10,000, faster automated refunds, wider input tax credit (ITC), simplified registration for small e-commerce sellers and a late fee waiver for small taxpayers.
Important: These are recommendations of the GST Council. They take effect only when the Government issues the relevant notifications, circulars or amendments to the CGST Act, 2017, the IGST Act, 2017 and the CGST Rules, 2017. Some changes need an amendment by Parliament. Check the notified text and effective date before acting.
At a glance
Area | Key recommendation | Who benefits |
Registration | Clear document list, auto-approval of amendments (except PPoB), auto-cancellation, Rule 14B for e-commerce sellers | New and small taxpayers, online sellers |
Returns | Alignment of GSTR-1, GSTR-3B and GSTR-2B; new ITC and RCM statements; IMS rules (from April 2027 returns) | All regular taxpayers |
Refunds | System-based processing; 90% provisional refund for exports and inverted duty; refund of ITC on input services and capital goods | Exporters, inverted duty businesses |
Disputes | No SCN below ₹10,000; 5% penalty in non-fraud cases; general penalty capped at ₹10,000; pre-deposit cap of ₹40 crore in penalty-only appeals | All taxpayers |
ITC | Restrictions under section 17(5) removed for outdoor catering, health and life insurance, free samples and others | Employers, manufacturers, pharma |
Ease of doing business | No arrest under GST; prosecution only above ₹5 crore; e-way bill interception only on specific intelligence | Transporters, traders |
Small taxpayers | Late fee waiver if return is filed within the due month; optional Annual Return Quarterly Payment (ARQP) scheme for B2C units up to ₹5 crore | MSMEs, retailers |
Exports | Supply to foreign branch can be export of services; SEZ/FTWZ delivery for overseas buyers zero-rated | Service exporters, manufacturers |
1. Registration reforms
Registration will need fewer officer interactions at every stage: applying, amending and cancelling.
1.1 Clear list of documents for new registration
Since the 56th meeting, applicants who do not intend to pass on ITC of more than ₹2.5 lakh per month get automatic registration under rule 14A of the CGST Rules, 2017. For all other applicants, the Council recommended:
a comprehensive circular listing the documents and information required, with FAQs;
drop-down boxes in FORM GST REG-01 to select the prescribed documents; and
a user-friendly portal with tool-tips and contextual guidance.
Example: Ravi, a Bengaluru manufacturer, applies for registration. Today his application may be queried twice for an electricity bill and a rent agreement in a particular format. With a fixed document list in REG-01, he knows in advance what to upload and the officer knows what to check. Queries and rejections should reduce.
1.2 Automatic acceptance of amendments
Rule 19 of the CGST Rules, 2017 will be amended so that amendments to all registration particulars are accepted automatically on the portal, except changes in the Principal Place of Business (PPoB). For taxpayers registered under rule 14A, even PPoB changes will be accepted automatically.
Example: A company adds a new director and changes its email ID. Both changes are approved by the system almost immediately. If it shifts its office from Jayanagar to Whitefield, that change still goes to the officer, unless the company was registered under rule 14A.
1.3 Automatic cancellation on application
Applications for cancellation in FORM GST REG-16 will be accepted by the system once all pending returns are filed and all dues are paid.
Phase | Who gets automatic cancellation |
Phase 1 | Taxpayers who never passed on ITC above ₹2.5 lakh in any month; or who did, but filed the final return in FORM GSTR-10 within time |
Phase 2 | All applicants. GSTR-10 details will be given in REG-16 itself |
For cancellation by the officer (suo moto), certain grounds in rule 21 will be omitted, and a new rule 23A will provide system-based cancellation and revocation linked to non-filing of returns or non-furnishing of bank account details, and their later compliance.
Example: A small trader closes her shop in March. She files all returns, pays dues and applies in REG-16. Her registration is cancelled by the system without waiting for an officer.
1.4 Rule 14B: simplified registration for small e-commerce sellers
A new rule 14B will let small suppliers of goods selling through Electronic Commerce Operators (ECOs) register in States/UTs where they have no physical presence. They can declare the ECO's warehouse in that State as their PPoB. Registration will be granted automatically, subject to conditions. The condition is that they intend to pass on ITC of not more than ₹2.5 lakh per month, excluding stock transfers between distinct persons.
As per news reports dated 22nd October 2026, this facility is expected to go live on the GST portal from 1st November 2026, with the ECO's consent required for use of its warehouse address.
Example: A Mysuru handloom seller wants faster delivery in Maharashtra and Telangana through a marketplace. Earlier, she needed a rented office in Pune and Hyderabad to register there. Under rule 14B, she can register in both States using the marketplace warehouses as PPoB, while her books and business remain in Mysuru.
2. Return reforms: fewer mismatches, fewer notices
The Council recommended a new mechanism to correct liability and ITC in returns, so that GSTR-1, GSTR-3B and GSTR-2B stay aligned. It is proposed to apply from the return for April 2027. The proposal will first be placed in the public domain for time-bound consultation.
Change | What it does |
Enhanced GSTR-1/1A/IFF | Better reconciliation with GSTR-3B |
New rule 61(1A) | Correct and rectify liability so GSTR-3B matches GSTR-1/1A/IFF |
New rule 61(1B) | Correct and rectify ITC so GSTR-3B matches GSTR-2B |
New rule 86C | "Electronic Credit Reversal and Reclaim Statement" to report ITC reversed and reclaimed |
New rule 86D | "Electronic Statement of tax paid on Reverse charge basis and input tax credit claimed" for RCM supplies |
New rule 60(6A) | Legal backing for Invoice Management System (IMS): accept, reject or keep pending an inward document, including a time limit for keeping a credit note pending |
Amended DRC-03 | Payment must show the underlying invoice |
Circular | Manner of reporting ITC and reversals in GSTR-3B using IMS and the new statements |
Example (liability): A trader reports sales of ₹10 lakh in GSTR-1 but ₹9.5 lakh in GSTR-3B by mistake. Today this mismatch leads to a system intimation and later a notice. Under rule 61(1A), the trader gets a mechanism to correct the GSTR-3B liability so that it matches GSTR-1.
Example (RCM): A company pays GST of ₹18,000 under reverse charge on legal services. The RCM statement under rule 86D will track the tax paid and the ITC claimed against it, so the ITC is not claimed twice or missed.
Example (IMS credit note): A supplier issues a credit note to a buyer. The buyer can keep it pending on IMS only for the period that will be prescribed, so that ITC reversal is not deferred indefinitely.
3. Refund reforms: faster money back
Section 54 of the CGST Act, 2017 and the related rules will be amended for system-based processing of refunds of excess cash ledger balance, zero-rated supplies and inverted duty structure.
Item | Phase 1 | Phase 2 |
Excess balance in electronic cash ledger | Full refund sanctioned by the system | — |
Acknowledgement / deficiency memo | Time limit cut from 15 to 10 days; deemed acknowledged if not issued in 10 days | System-based acknowledgement after verification |
Zero-rated supplies | 90% provisional refund by the system, based on risk evaluation | Full refund by the system after adjusting pending dues, based on risk evaluation |
Inverted duty structure | 90% provisional refund by the system, based on risk evaluation | — |
Other refund changes:
FORM GST RFD-01 will capture details in a system-readable format; scanned documents will no longer be needed for zero-rated and inverted duty refunds.
The cap in rule 89(4)(C), which limited turnover of zero-rated goods to 1.5 times the value of like goods supplied domestically, will be removed.
The ₹1,000 minimum in section 54(14) will apply to the total of CGST, SGST/UTGST and IGST taken together.
Section 115 will become a standalone provision on interest on refund of pre-deposit, with a clarifying circular.
Refund of ITC on input services and capital goods
Today, inverted duty refunds exclude ITC on input services and capital goods, and export refunds exclude capital goods. The Council recommended amending section 54(3):
Refund type | Input services ITC | Capital goods ITC |
Inverted duty structure | Allowed for ITC availed on or after 1st November 2026 | Allowed for ITC availed on or after 1st April 2027, spread over 60 months |
Zero-rated supplies (export with LUT) | Already allowed | Allowed for ITC availed on or after 1st April 2027, spread over 60 months |
Example (provisional refund): An exporter of garments from Tiruppur files a refund claim of ₹20 lakh for exports under LUT. In Phase 1, the system sanctions ₹18 lakh (90%) provisionally, without an officer. The officer decides the balance ₹2 lakh after scrutiny.
Example (capital goods): A manufacturer facing inverted duty buys a machine on 10th April 2027 with ITC of ₹6 lakh. Under the proposal, this ITC is counted in refund calculations over 60 months, that is, ₹10,000 per month, instead of remaining blocked in the credit ledger.
Example (₹1,000 limit): A refund of CGST ₹400, SGST ₹400 and IGST ₹300 totals ₹1,100. Under the clarification, the claim crosses the ₹1,000 limit because all three heads are added together.
4. Notices, penalties and appeals
The Council recommended a circular with comprehensive guidelines on the quality and timeliness of show cause notices (SCNs), adjudication orders and appeal orders. Fraud, wilful misstatement or suppression of facts may be invoked only on the merits of each case, and personal hearings must follow natural justice.
The amendments recommended to sections 73, 74 and 74A of the CGST Act, 2017 are:
No SCN below ₹10,000. If the tax involved (CGST + SGST + IGST + Cess) is less than ₹10,000, no notice will be issued. Pending notices and appeals below ₹10,000 on the date this comes into force will be decided as if the threshold had always applied.
Penalty deemed as charge. Where the full tax is paid voluntarily with interest and penalty within the time limit, the penalty amount will be deemed to be a "charge".
5% penalty in non-fraud cases if tax and interest are paid within 30 days (section 73) or 60 days (section 74A) of the adjudication order.
No minimum penalty of ₹10,000 in non-fraud cases.
In addition:
The maximum general penalty under section 125 is cut from ₹25,000 to ₹10,000.
In appeals where the order involves only penalty and no tax demand, pre-deposit before the Appellate Authority (section 107(6)) or the Appellate Tribunal (section 112(8)) will be capped at ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST).
Rule 86A will provide for an objection and a personal hearing before ITC in the electronic credit ledger is blocked.
Example (threshold): A department scrutiny finds a short payment of ₹7,800 in total. Under the new threshold, no SCN will be issued. If an SCN for ₹7,800 is already pending when the provision comes into force, it will be decided as though the threshold existed when it was issued.
Example (5% penalty): An order under section 73 confirms tax of ₹4,00,000 in a non-fraud case. If the taxpayer pays the tax and interest within 30 days of the order, the penalty is 5% of the tax, that is ₹20,000.
5. More input tax credit: changes to section 17(5)
The Council recommended removing the restrictions on ITC on, among others:
outdoor catering;
health and life insurance;
telecommunication towers;
pipelines laid outside factory premises;
free samples; and
goods destroyed or written off on expiry of shelf life as required by law.
It also recommended limited ITC in the same line of business for restaurant and outdoor catering services, hotel accommodation up to ₹7,500 per unit per day, and gym and fitness services, on the lines already available for passenger transport, tour operators and renting of motor vehicles.
Example (insurance): An IT company pays ₹18 lakh plus GST of ₹3.24 lakh for group health insurance of its employees. Today the ₹3.24 lakh ITC is blocked unless the insurance is compulsory under law. After the amendment, the company can claim it, subject to other conditions of section 16.
Example (expired goods): A pharma distributor destroys expired medicines as required by the Drugs and Cosmetics law. Today it must reverse ITC on them. After the amendment, the ITC need not be reversed.
6. Export of services and goods
Supply to own foreign branch: Sub-clause (v) of section 2(6) of the IGST Act, 2017 will be omitted. A supply of services to a foreign office or branch of the same entity can then qualify as "export of services".
Foreign exchange or Indian rupees: A circular will clarify receipt of payment in foreign exchange or Indian rupees, as permitted, for exports.
Goods made available by the recipient: Section 13(3)(a) of the IGST Act will be omitted. Place of supply will follow the default rule of section 13(2), the location of the recipient.
SEZ/FTWZ delivery for overseas buyers: Supply to an overseas buyer with delivery in an SEZ or FTWZ, paid in convertible foreign exchange (or Indian rupees where RBI permits), will be deemed a supply to the SEZ/FTWZ and zero-rated.
Example: A Bengaluru software company provides development services to its own branch in Singapore and receives payment in US dollars. Today, the "distinct person" condition in section 2(6)(v) denies export status. After the amendment, this can be export of services, eligible for LUT and refund.
Example (section 13(3)(a)): An Indian firm repairs machinery sent by a German customer. Today, place of supply is the place of performance (India), so GST applies. After the change, place of supply is the recipient's location (Germany), and the service can qualify as export.
7. Arrest, prosecution and e-way bills
No arrest under GST
The Council recommended complete withdrawal of arrest powers by omitting section 69 of the CGST Act, 2017. Deterrence against fraud is retained through prosecution.
Prosecution
Monetary threshold raised from ₹1 crore to ₹5 crore.
Clause (i) of section 132(1) omitted; the words "evades tax" in clause (e) and "or in any other manner deals with" in clause (h) deleted.
Clause (c) limited to fraudulent availment of ITC without receipt of goods or services, or without an invoice or bill.
Punishments under section 132 to be rationalised.
E-way bill and interception of goods
Sections 68, 129 and 130 of the CGST Act, 2017 will be amended:
A conveyance can be intercepted only on specific intelligence, with authorisation of an officer not below Joint Commissioner.
Inspection, detention or seizure only in the State where the supplier or recipient is located or registered. No interception in transit States.
Where no e-way bill is generated, or there is no document showing origin or destination, goods can be inspected, detained or seized irrespective of jurisdiction.
Confiscation under section 130 will not apply to goods or conveyances in transit.
Example: A truck carrying goods from Bengaluru to Delhi with a valid e-way bill passes through Telangana, Maharashtra and Madhya Pradesh. Officers in these transit States cannot stop it for inspection. If the same truck had no e-way bill, it could be inspected anywhere.
8. Relief for small taxpayers and other changes
Late fee waiver: For taxpayers with turnover up to ₹5 crore in the preceding financial year, no late fee for a return under section 39(1) filed by the end of the month in which it was due.
ARQP scheme (in principle): An optional Annual Return Quarterly Payment scheme for taxpayers with turnover up to ₹5 crore making only B2C supplies.
IPR: Transfer of title in Intellectual Property Rights, temporary or permanent, will be treated uniformly as supply of services under Schedule II.
Time limits aligned: Sections 16, 37 and 39 will be amended so that the time limit for filing GSTR-1 and GSTR-3B matches the time limit for availing ITC under section 16(4).
ECO liability: Section 9(5) will clarify that the ECO pays tax on notified services, whatever its business model.
Multi-year notices: A validation clause will validate notices held invalid by courts for covering multiple financial years.
E-invoicing extended: For taxpayers with turnover of ₹5 crore and above, e-invoicing will extend to RCM supplies received from unregistered persons and to import of services.
GSTAT: Amendments to align the GST Appellate Tribunal with the Tribunals Reforms Act, 2026.
Clarificatory circulars: ISD mechanism; ITC of banks and NBFCs opting for section 17(4); payment of pre-deposits; ITC on demonstration vehicles; omission of rule 96(10) from 23.10.2017 as per the Supreme Court decision.
Example (late fee): A retailer with turnover of ₹2 crore files GSTR-3B for September, due on 20th October, on 28th October. Under the waiver, no late fee is payable because the return is filed within October. If filed on 3rd November, late fee applies as usual.
Example (ARQP): A bakery with turnover of ₹1.8 crore selling only to walk-in customers could, if the scheme is notified, pay tax every quarter and file just one annual return.
9. Rate changes and clarifications
Goods
Item | Recommendation |
Sublimation paper | Classified under heading 4809; past cases regularised "as is where is" |
Toys | Rate entries cover all toys under heading 9503 (dolls, puzzles and others), not only tricycles, scooters and pedal cars |
Sea-weed extract bio-stimulants | Classified under heading 3101 as fertilisers if registered under Schedule VI of the Fertiliser Control Order, 1985; past cases regularised |
Second-hand vehicles (margin scheme) | ITC allowed on inputs and services such as spares, repairs, rent and advertising; restriction only on the vehicles bought |
Plastic waste, e-waste, tyre scrap, used cooking oil | RCM when supplied by unregistered to registered person; TDS at 2% on B2B supplies between registered persons |
Psyllium (isabgol) seeds | NIL rate, whether fresh, chilled, frozen or dried |
Re-treaded tractor tyres | Rate aligned with new tractor tyres |
CSD canteen supplies | Compensation Cess not levied by CSD on vehicles (01.07.2017 to 30.09.2022) and aerated drinks (01.07.2017 to 31.03.2022) exempted |
Services
Service | Recommendation |
Passenger transport and car rental with operator using electric vehicles | Option to pay 5% with restricted ITC, where battery charging cost is included |
Delivery services through ECOs (other than courier and postal) | ECO liable under section 9(5) where the supplier is not liable to register; 5% without ITC |
Delivery of goods ordered through ECOs | 5% without ITC; GTA exemption for transport to unregistered persons (entry 21A) excluded |
Motor vehicle leasing | Clarification on recovery of registration charges, road tax, insurance and FASTag |
Helicopter seat-sharing to/from North-East, Sikkim and Bagdogra | Exempt |
Storage or warehousing of seeds for sowing | Exempt |
Curing of coffee by coffee curers for cultivators | Exempt |
Seamen's Provident Fund Organisation services | Exempt |
Research and development services | Self-certification by head of institution for exemption under entry 44A |
Import of services by Indian establishment of foreign shipping line from related person, without consideration | Exempt; past period regularised |
Toll rights granted to concessionaire under TOT model | Exempt; special valuation procedure for O&M services |
Fund Transfer Pricing in banks | Notional interest covered by the definition of "interest" |
Example (scrap under RCM): A registered recycler in Peenya buys plastic scrap worth ₹50,000 from an unregistered kabadiwala. The recycler pays GST on it under RCM, even if the seller is below the registration threshold. If the recycler buys the same scrap from a registered dealer, the recycler deducts TDS of 2%, that is ₹1,000.
What you should do now
☐ E-commerce sellers: check eligibility for rule 14B registration in other States (₹2.5 lakh ITC limit, ECO consent).
☐ Exporters and inverted duty businesses: keep refund data ready in a clean format; track ITC on input services from 1st November 2026 and capital goods from 1st April 2027.
☐ Employers: review group health and life insurance and catering bills for ITC once section 17(5) is amended.
☐ Service exporters with foreign branches: review past and current billing for export status.
☐ All taxpayers: reconcile GSTR-1, GSTR-3B and GSTR-2B monthly, and use IMS regularly, ahead of the April 2027 mechanism.
☐ Small taxpayers: file returns at least within the due month to benefit from the late fee waiver.
☐ Pending notices below ₹10,000: keep the papers ready; these may be dropped when the threshold is notified.
The 57th GST Council meeting moves GST towards a trust-based system: fewer officer interactions, quicker refunds, wider credit and proportionate penalties. The real benefit will depend on the notifications, the Finance Bill amendments and how the portal is updated.
Need help with GST registration, returns, refunds or a notice? Contact Anjanadri H R – Business & Tax Consultants, Bengaluru – www.anjanadrihr.com.
Disclaimer: This is general information. Please consult us for advice on your specific case. The recommendations take effect only through notifications, circulars or law amendments.
Sources
Newspaper report "GST ecommerce registration for small sellers to start from Nov 1" by Monika Yadav, New Delhi, 22nd October 2026 (print clipping)
Central Goods and Services Tax Act, 2017; Integrated Goods and Services Tax Act, 2017; Central Goods and Services Tax Rules, 2017 (sections and rules cited above)
Comments