GST Council 57th Meeting Recommends Process Reforms

GST Council 57th Meeting Process Reforms Summary

The 57th GST Council meeting held in October 2026 recommended comprehensive next-generation process reforms aimed at creating simpler, faster, and more predictable GST processes. These reforms build on the GST system's progress since its introduction on 1 July 2017, which has seen registered taxpayers increase from approximately 60 lakh in 2017 to ~1.70 crore as of September 2026, with cumulative processing of 3,053 crore invoice uploads and 833.82 crore e-way bills. Gross GST collections reached ~₹12.46 lakh crore during April-September 2026, registering an 11.6% year-on-year increase.

Registration Process Reforms

The Council recommended significant simplifications to the GST registration framework. This includes issuing comprehensive documentation and FAQs for registration applications, amending the application form for improved clarity, and enhancing the GST portal interface with better navigation, drop-down lists, tool-tips, and contextual guidance. For amendments to registration particulars, automatic acceptance will be enabled on the portal except for changes relating to Principal Place of Business (PPoB). For taxpayers registered through the automatic route, amendments to all registration particulars including PPoB would be accepted automatically.

The registration cancellation process will be streamlined through amendments to the CGST Act, 2017 and CGST Rules, 2017. Phase 1 implementation will feature automatic cancellation applications after pending returns are filed and all dues are paid, applicable to taxpayers who have not passed on ITC exceeding ₹2.5 lakh in any month, or where ITC exceeded ₹2.5 lakh but the final return is filed within specified time. Phase 2 will see all cancellation applications accepted automatically once pending returns are filed and dues paid, with FORM GST REG-16 amended to include FORM GSTR-10 details.

For e-commerce sellers, small sellers passing ITC not more than ₹2.5 lakh/month (excluding stock transfer) can opt for simple PAN-based registration in States/UTs other than their Home State/UTs, with the electronic commerce operator warehouse declared as PPoB where there is no physical presence.

Return Filing Reforms

The Council recommended streamlining the return filing process to reduce mismatches and improve ITC integrity across the supply chain. Key proposals include enhancing GSTR-1/1A/IFF for better reconciliation with GSTR-3B, introducing an "Electronic Statement of tax paid on Reverse charge basis and input tax credit claimed" facility, enabling reporting/correction of liability in GSTR-3B to align with GSTR-1/1A/IFF details, and amending GST DRC-03 to allow declaration of underlying invoice details for payments made.

The Invoice Management System (IMS) will allow recipients to accept, reject or keep documents pending for ITC reporting, while an Electronic Credit Reversal and Reclaim Statement will facilitate correct reporting of ITC reversed and reclaimed. A mechanism will enable reporting/correction of ITC reported in GSTR-3B to align with ITC available in GSTR-2B, with clarifications issued on reporting ITC and its reversal in GSTR-3B via circular. The alternate mechanism for correcting liability and ITC will apply from the April 2027 return period.

Refund Processing Reforms

The reforms provide for system-based processing and sanctioning of refund claims enabling faster processing with reduced manual intervention. Phase 1 includes automatic refunds of excess cash ledger balances, reduced acknowledgement period from 15 to 10 days with deemed acknowledgement where no response is issued, and based on risk assessment, 90% of claimed amount expected to be sanctioned for refund claims on account of zero-rated supplies and inverted duty structure.

Phase 2 will feature system-based automated acknowledgment without officer intervention for refund claims on zero-rated supplies and inverted duty structure, with automated sanction of full refund claims by the system without officer intervention for zero-rated supply claims after adjusting pending dues based on system risk identification and evaluation.

Additional measures include amending refund application FORM GST RFD-01 to capture refund details in system-readable format, amending rule 89(4)(C) of CGST Rules, 2017 to remove the cap limiting turnover of zero-rated supply of goods to 1.5 times the value of like goods supplied domestically, and amending section 54(14) of CGST Act, 2017 to apply the ₹1,000 refund threshold to the total refund amount including CGST, SGST/UTGST and IGST.

For interest on refund of pre-deposit, the Council recommended amending section 115 of CGST Act, 2017 to make it a standalone provision specifying interest rate applicable to refunds of pre-deposit amounts paid for filing appeals, with a circular to clarify concerns relating to interest rates.

Dispute Resolution Reforms

The Council recommended comprehensive guidelines for tax officers covering streamlined processes for demand notices, adjudication orders and appeal orders. Key proposals include no show cause notices if tax amount involved is less than ₹10,000, with pending notices and appeals involving amounts below ₹10,000 to be decided based on this threshold. Penalty will be termed as 'Charge' when full tax amount is voluntarily paid with interest and penalty within specified time limits.

A reduced penalty of 5% will apply where tax and interest are discharged within 30 days (under section 73) or 60 days (under Section 74A) of adjudication order. The minimum penalty of ₹10,000 will be removed in non-fraud cases, and the maximum general penalty would be reduced from ₹25,000 to ₹10,000. For orders involving only penalty with no tax demand, an upper limit of ₹40 crore would apply for pre-deposit for appeals before Appellate Authority or Appellate Tribunal.

Input Tax Credit Reforms

The Council recommended changes to CGST Act and Rules to allow refunds of accumulated ITC in specified cases. For capital goods, refund eligibility applies to zero-rated supplies and inverted duty structure effective 1 April 2027, with refunds spread over 60 months. For input services, refund eligibility applies to inverted duty structure effective 1 November 2026.

Restrictions on claiming ITC for certain supplies will be removed, including Outdoor Catering, Health and Life Insurance, Telecommunication Towers, Pipelines outside factory Premises, Free Samples and Goods destroyed or written off after shelf life expiration (as required by law).

Export and Zero-Rating Reforms

The Council recommended changes to export status, place-of-supply rules and payment clarifications. The condition that supplier and recipient must not be establishments of the same person for service qualification as "export of services" will be removed, facilitating refunds for Indian service providers supplying services to or through foreign offices. A circular will clarify that payment for exports may be received in foreign exchange or Indian rupees where permitted.

For services where recipient makes goods physically available to supplier, place of supply will be determined based on recipient's location under default rule in section 13(2). Goods supplied to overseas buyers but delivered to SEZ or Free Trade & Warehousing Zone (FTWZ) will be treated as zero-rated supplies when payment is received in convertible foreign exchange or Indian rupees where permitted by RBI.

Compliance and Enforcement Reforms

The Council recommended rationalizing provisions relating to arrest and prosecution by withdrawing certain arrest powers, raising prosecution threshold from ₹1 crore to ₹5 crore, and removing specified offence provisions from section 132(1) of CGST Act, 2017 including clause (i) for receiving/services violating the Act, deleting "evades tax" from clause (e), and deleting "or in any other manner deals with" from clause (h). Clause (c) will be amended to cover only offence of fraudulent availment of ITC without receiving goods/services or without invoice.

E-way bill provisions will be rationalized with conveyances intercepted only on specific intelligence with Joint Commissioner authorization, inspection and action limited to States where supplier/recipient is located/registered (except transit States), exception for missing documents where no e-way bill or documentation shows goods' origin/destination, and no confiscation in transit under section 130 of CGST Act.

Transfer of IPR title, whether temporary or permanent, will be treated uniformly as supply of services. Taxpayers will be allowed to file objections to amounts blocked in electronic credit ledger under Rule 86A and attend personal hearings. Late fees will be waived for delayed returns for taxpayers with turnover up to ₹5 crore in previous financial year if return filed by end of due month.

GST Rate Changes and Clarifications

The Council recommended various GST treatment changes across goods and services. For goods: sublimation paper classified under heading 4809 with past cases regularized; toy notification entries cover all categories under heading 9503; sea-weed extract-based bio-stimulants registered under Fertiliser Order classifiable as fertilisers under heading 3101; under GST margin scheme for second-hand vehicles, suppliers may claim ITC on inputs other than procured second-hand vehicles and input services; Reverse Charge Mechanism applies when unregistered person supplies specified waste/scrap to registered person with 2% TDS on registered-to-registered supplies; nil GST rate for psyllium seeds; GST rate on retreaded tractor tyres aligned with new tractor tyres; Compensation Cess exemption for two-/four-wheelers not levied by CSDs from 01.07.2017 to 30.09.2022; Compensation Cess exemption for aerated drinks not levied by CSDs and Unit Run Canteens from 01.07.2017 to 31.03.2022.

For services: option to pay 5% GST with restricted ITC for passenger transportation and renting of motor vehicles using EVs; delivery services through ECO under Section 9(5) at 5% GST without ITC; 5% GST without ITC on delivery services for goods supplied/ordered through ECO; deny exemption for GTA services to unregistered persons for goods supplied/ordered through ECO; clarify GST treatment of statutory charges recovered by lessors as incidental to motor vehicle leasing; allow ITC in same line of business for restaurant/outdoor catering, hotel accommodation up to ₹7500/unit/day, and gym/fitness services; exempt passenger transportation by helicopter on seat-sharing basis to/from NE States, Sikkim and Bagdogra; exempt storage/warehousing of seeds meant for sowing; exempt coffee curing services by coffee curers to cultivators; exempt services provided by Seamen's Provident Fund Organisation; self-certification mechanism for R&D services exemption; exempt import of services without consideration by Indian establishments of foreign shipping lines from overseas offices; exempt service of granting exclusive rights to demand/collect/appropriate toll fees for highway projects; special procedure for valuation and payment timing of O&M services for highway projects under TOT model; clarify that notional "interest" in Fund Transfer Pricing transactions between bank branches is covered by interest definition.

Additional Measures

The Council recommended issuing circulars to clarify issues including Input Service Distributor credit distribution, ITC claims by banks/FIs/NBFCs opting for section 17(4), payment of pre-deposits, ITC on demonstration vehicles, and effective date of omission of rule 96(10) as 23 October 2017. A concept note for optional Annual Return Quarterly Payment (ARQP) scheme was introduced for taxpayers with aggregate turnover ≤ ₹5 crore making exclusively B2C supplies.

E-commerce operator tax liability will be amended under section 9(5) regardless of business model, and e-invoicing requirements will extend to domestic supplies from unregistered persons under reverse charge and imports of services for taxpayers with annual turnover ≥ ₹5 crore. GSTAT provisions will be aligned with Tribunals Reforms Act, 2026 and National Tribunals Commission Rules.