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57th GST Council Meeting: Key Recommendations at a Glance

57th GST Council Meeting: Key Recommendations at a Glance

Area	Recommendation	How it will be implemented	Current status
Arrest	Complete withdrawal of arrest powers by omitting section 69	Amendment to the CGST Act	Recommended; no implementing instrument identified
Prosecution	Monetary threshold proposed to increase from ₹1 crore to ₹5 crore, with section 132 offences rationalised	Amendment to the CGST Act	Recommended; no implementing instrument identified
General penalty	Maximum general penalty under section 125 proposed to reduce from ₹25,000 to ₹10,000	Amendment to the CGST Act	Recommended; no implementing instrument identified
Show cause notices	No notice where the total tax amount involved is below ₹10,000, counting CGST, SGST, IGST and Cess together	Amendments to sections 73, 74 and 74A	Recommended; no implementing instrument identified
Refunds	System-based excess cash ledger refunds, 10-day acknowledgement and provisional sanction of 90% for eligible zero-rated and inverted duty claims	Amendment to section 54 and the CGST Rules in two phases	Recommended; no implementing instrument identified
Refund of ITC on input services and capital goods	Input-service ITC proposed for inverted duty refunds from 1 November 2026 and capital-goods ITC proposed from 1 April 2027 over 60 months	Amendment to section 54(3) and relevant rules	Recommended; proposed dates do not create a current entitlement
Blocked ITC	Restrictions proposed to be removed for specified expenses including outdoor catering, insurance, telecom towers, certain pipelines, free samples and legally required destruction or write-off	Amendment to section 17(5)	Recommended; existing restrictions continue until amendment
Registration	Guided document filing, wider automatic amendments and phased automatic cancellation and revocation	Portal changes, circulars and amendments to registration rules	Recommended; detailed implementation pending
Returns and IMS	Better GSTR-1, GSTR-2B and GSTR-3B reconciliation, new statements and an IMS framework	Amendments to rules 61, 86C and 86D, with consultation before rollout	Recommended for returns from April 2027; final details may change
E-Way Bill and interception	Interception proposed only on specific intelligence and authorised jurisdiction, with section 130 confiscation removed for goods in transit	Amendments to sections 68, 129 and 130	Recommended; existing provisions continue until amendment
Export of services	Distinct-establishment condition and specified place-of-supply rule proposed to be omitted	Amendments to the IGST Act and supporting circular	Recommended; no implementing instrument identified
Small taxpayers	Late-fee relief and an optional Annual Return Quarterly Payment concept proposed for eligible taxpayers up to ₹5 crore turnover	Notifications, rules and detailed scheme framework	Recommended or approved in principle; details pending
GST rate changes	Selected exemptions, rate options, reverse charge, TDS and classification clarifications proposed	Rate notifications and clarificatory instruments	Recommended; current rates continue until notification

1. Arrest and Prosecution

The Council recommended complete withdrawal of arrest powers under GST by omitting section 69 of the CGST Act.

On prosecution, the Council recommended:

• raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore;

• omitting clause (i) of section 132(1), and deleting the words “evades tax” in clause (e) and “or in any other manner deals with” in clause (h);

• limiting clause (c) of section 132(1) to fraudulent availment of ITC without receipt of goods or services or without an invoice or bill;

• rationalising the punishment for various offences under section 132.

Status: these are recommendations only. Until the necessary amendments to the CGST Act take effect, the existing provisions of sections 69 and 132 continue to govern arrest and prosecution. Under the current section 132, the monetary limits differ by offence; the PIB release describes the proposal as raising the threshold from ₹1 crore to ₹5 crore. Source: PIB release, para 11.

2. Penalties, Show Cause Notices and Appeals

The Council recommended reducing the maximum general penalty under section 125 from ₹25,000 to ₹10,000.

It also recommended amendments to sections 73, 74 and 74A to:

• set a minimum threshold of ₹10,000 for issuing show cause notices. The threshold applies to the tax amount involved, counting CGST, SGST, IGST and Cess together. The Council also recommended that pending notices and appeals below this amount be decided as if the threshold had been in force when the notice was issued;

• treat the penalty amount as a ‘charge’ where the full tax, interest and penalty are paid voluntarily within the specified time;

• allow a reduced penalty of 5% in non-fraud cases where tax and interest are paid within 30 days (section 73) or 60 days (section 74A) of the adjudication order;

• remove the minimum penalty of ₹10,000 in non-fraud cases.

The Council also recommended a circular giving officers guidelines on the quality and timing of notices and orders, invoking fraud or suppression only on the merits of each case, and following natural justice, including personal hearings.

For appeals in penalty-only cases (no tax demand), the Council recommended capping the pre-deposit at ₹40 crore (₹20 crore CGST and ₹20 crore SGST/UTGST) before the Appellate Authority and the Appellate Tribunal.

Status: recommended; no implementing instrument identified as of 9 October 2026. Existing penalty and notice provisions continue to apply. Source: PIB release, paras 7.1 to 7.4.

3. Faster Refunds

The Council recommended system-based processing of refunds relating to excess cash ledger balance, zero-rated supplies and inverted duty structure, in two phases.

Phase 1 : Full refund of excess cash ledger balance sanctioned by the system without officer intervention.

Time limit for acknowledgement or deficiency memo reduced from 15 to 10 days; deemed acknowledgement if neither is issued in 10 days.

For zero-rated and inverted duty refunds, 90% of the amount claimed is sanctioned provisionally by the system, based on risk evaluation.

Phase 2 : System-based automated acknowledgement after verification.

Automated sanction of the full claim for zero-rated supplies, after adjusting pending dues, based on risk evaluation.

Other refund recommendations include system-readable RFD-01 data instead of scanned uploads, removal of the 1.5 times cap on zero-rated turnover of goods in rule 89(4)(C), clarification that the ₹1,000 refund threshold applies to the total of CGST, SGST/UTGST and IGST taken together, and clarity on interest on refund of appeal pre-deposits.

Status: recommended; no implementing instrument identified as of 9 October 2026. Current refund procedures and timelines continue to apply. Source: PIB release, para 6.

4. Input Tax Credit

Blocked credit under section 17(5)

The Council recommended amending section 17(5) to remove the restriction on ITC, among other things, on:

• outdoor catering;

• health and life insurance;

• telecommunication towers;

• pipelines laid outside factory premises;

• free samples;

• goods destroyed or written off on expiry of shelf life as required by law.

Current law: under the existing text of section 17(5) of the Indian Code, ITC on outdoor catering, life insurance and health insurance is available only in limited cases, such as where it is used for an outward supply of the same category or where the employer is legally obliged to provide it. Free samples and goods destroyed or written off are blocked under clause (h), and telecommunication towers and pipelines laid outside factory premises are excluded from “plant and machinery”. Source: CGST Act on India Code.

Status: recommended; no implementing instrument identified as of 9 October 2026. The existing section 17(5) restrictions continue to apply, and the scope and conditions will depend on the final amended text. This does not make all business expenses eligible for ITC. Source: PIB release, para 9.

Refund of ITC on input services and capital goods

The Council recommended amending clause (ii) of the proviso to section 54(3) so that:

• for inverted duty structure refunds, accumulated ITC on input services becomes refundable for ITC availed on input services on or after 1 November 2026;

• for zero-rated supplies and inverted duty refunds, accumulated ITC on capital goods becomes eligible for refund. The release states that refund of such ITC will be spread over 60 months, and will be available for ITC availed on capital goods on or after 1 April 2027. The detailed method will depend on the amended rules.

Status: recommended. These are proposed applicability dates and do not create a current refund entitlement. They will apply only if and when the amendment to section 54(3) and the rules take effect. Source: PIB release, para 8.

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, the Council recommended allowing limited ITC in the same line of business. This is in the same manner as is currently available for passenger transport, tour operator and motor vehicle renting services. This will apply only once the relevant notifications take effect. Source: PIB release, Part C2, item 4.

The Council also clarified that dealers of second-hand vehicles under the margin scheme can take ITC on inputs and input services other than the vehicles themselves.

5. Registration

The Council recommended the following registration changes:

• Clearer filing: a circular and FAQs listing required documents, drop-down document selection in REG-01, and a more guided portal interface.

• Amendments: automatic acceptance of amendments to all registration particulars except the principal place of business (PPoB). For taxpayers registered through the automatic route under rule 14A, PPoB changes will also be accepted automatically.

• Cancellation: automatic acceptance of cancellation applications (REG-16) once returns are filed and dues paid, in phases, and system-based cancellation and revocation for non-filing of returns or non-furnishing of bank details.

• Small e-commerce sellers: a new rule 14B for small suppliers of goods through e-commerce operators (ECOs) in States where they have no physical presence and do not intend to pass on ITC above ₹2.5 lakh a month (excluding stock transfers). They may declare the ECO’s warehouse in that State as their PPoB, with registration granted automatically, subject to conditions.

Status: recommended; no implementing instrument identified as of 9 October 2026. The rule 14A automatic route already operates, as per the release notes. Source: PIB release, paras 1 to 4.

6. Returns and the Invoice Management System (IMS)

To reduce mismatches and the notices that follow, the Council recommended:

• enhancements to GSTR-1/1A/IFF for better reconciliation with GSTR-3B;

• new statements on the portal for reverse charge liability and ITC (Rule 86D) and for ITC reversal and reclaim (Rule 86C);

• mechanisms in rule 61 to correct liability and ITC so that GSTR-3B aligns with GSTR-1/1A/IFF and GSTR-2B;

• a rule on IMS allowing recipients to accept, reject or keep pending inward documents for generating GSTR-2B, subject to conditions;

• invoice details in DRC-03 payments.

The Council recommended that this mechanism apply from the return for April 2027. It will first be placed in the public domain for time-bound consultation, so details may change. Source: PIB release, para 5.

7. E-Way Bill and Interception of Goods

The Council recommended amending sections 68, 129 and 130 so that:

• a conveyance may be intercepted only on specific intelligence and with authorisation of an officer not below Joint Commissioner rank;

• inspection, detention or seizure may be taken up only where the supplier or the recipient is located or registered in that State, with no interception in transit States;

• where no e-way bill has been generated, or no document shows the origin or destination, goods may be inspected, detained or seized irrespective of jurisdiction;

• confiscation under section 130 will not apply to goods and conveyances in transit.

Status: recommended; no implementing instrument identified as of 9 October 2026. Existing interception, detention and confiscation provisions continue to apply, and e-way bill requirements are not removed. Source: PIB release, para 12.

8. Export of Services

• Omission of sub-clause (v) of section 2(6) of the IGST Act, removing the condition that the supplier and recipient must not be establishments of a distinct person. According to the release, this will facilitate refunds for Indian service providers on services supplied to or through their foreign offices or branches.

• Omission of clause (a) of section 13(3) of the IGST Act, so that for services on goods made physically available by the recipient, the place of supply will be the recipient’s location under section 13(2). Whether a supply then qualifies as export will still depend on the other conditions in section 2(6).

• A circular on receipt of payment in foreign exchange or Indian rupees, and an explanation in section 16(1) for goods sold to overseas buyers but delivered in an SEZ or FTWZ.

Status: recommended; no implementing instrument identified as of 9 October 2026. Current export conditions continue to apply. Source: PIB release, para 10.

9. Relief for Small Taxpayers and Other Compliance Changes

• Late fee: waiver of late fee for returns under section 39(1) for taxpayers with turnover up to ₹5 crore in the preceding year, if the return is filed by the end of the month in which it was due.

• ARQP scheme: in-principle approval of a concept note for an optional Annual Return Quarterly Payment scheme for taxpayers with aggregate turnover up to ₹5 crore in the preceding year who supply only to unregistered persons (B2C). Details are yet to be framed.

• Credit ledger blocking: an objection and personal hearing mechanism under rule 86A.

• E-invoicing: extension to reverse charge supplies from unregistered persons and import of services for taxpayers with aggregate annual turnover of ₹5 crore and above.

• Others: a validation clause for notices covering multiple financial years, clarity on ECO liability under section 9(5) for notified services irrespective of business model, treatment of transfer of title in IPRs as a supply of services, and GSTAT alignment with the Tribunals Reforms Act, 2026.

Status: recommended; no implementing instrument identified as of 9 October 2026. Source: PIB release, paras 14 to 19.

10. GST Rate Changes Recommended at the 57th GST Council Meeting

The main focus was process reform, but the Council also recommended some rate changes, exemptions and clarifications. A recommendation is not an effective rate. These include:

• Nil GST on psyllium (isabgol) seeds, whether fresh, chilled, frozen or dried;

• aligning the GST rate on re-treaded tractor tyres with new tractor tyres;

• an option of 5% GST, with restricted ITC, on passenger transport and motor vehicle rental with operator using electric vehicles where charging cost is included;

• 5% GST without ITC on certain delivery services supplied through or in relation to e-commerce;

• reverse charge on specified plastic, e-waste, tyre scrap and used cooking oil supplied by unregistered persons, and 2% TDS on B2B supplies of these items;

• exemptions for helicopter seat-sharing passenger transport in the North-East, Sikkim and Bagdogra, warehousing of seeds for sowing, and curing of coffee, among others;

• classification clarifications for sublimation paper, toys and seaweed-based bio-stimulants.

Status: as of 9 October 2026, no rate notification implementing these recommendations was identified in the official sources reviewed. Current rates continue to apply until the relevant notification takes effect. Source: PIB release, Part C.

What Should Businesses Do Now?

1. Continue under the current law. Do not change ITC claims, invoicing or rates until notifications are issued.

2. Track notifications and circulars on the CBIC website and the GST Council website for exact text and effective dates.

3. Plan for inverted duty refunds. If you have an inverted duty structure, consider tracking input service ITC separately from 1 November 2026, subject to the final notification.

4. Prepare for the returns changes. Review GSTR-1, GSTR-2B and GSTR-3B reconciliation and IMS practices ahead of April 2027.

5. Keep handling pending notices on merit. Reply to existing notices within time; the proposed threshold and penalty changes are not yet law.

6. Exporters of services should review contracts involving overseas branches or services on foreign-owned goods with their advisor once the IGST amendments are notified.

Need Help Understanding GST Updates?

The GST Council’s recommendations may affect your compliance, ITC and refund planning once the relevant changes take effect. Cashwave Management Pvt. Ltd. can help businesses review relevant GST updates and understand their potential compliance impact.

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Disclaimer: This article is for general information only and reflects the GST Council’s recommendations of 8 October 2026 as published by the Government. It is not legal or tax advice. The recommendations do not automatically change the law; they take effect only when implemented through the legally required instruments. Please refer to the official texts and consult a qualified professional before acting.