Recommendations of the 57th GST Council Meeting
Every recommendation of the Council, in simple language — registration, returns, refunds, disputes, ITC, exports, ease of doing business and rate changes.
At a glanceRecommendations most taxpayers will feel
- BArrest powers under GST withdrawn — section 69 to be omitted. Prosecution threshold raised from ₹1 crore to ₹5 crore.
- ANo show cause notice if tax involved is below ₹10,000. Maximum general penalty under section 125 cut from ₹25,000 to ₹10,000.
- ACash-ledger refunds sanctioned automatically. 90% provisional refund for zero-rated and inverted duty claims.
- ANew mechanism to correct liability and ITC in returns, to cut mismatch notices — from the return of April 2027.
- BBlocked ITC eased — outdoor catering, health & life insurance, free samples and more. Refund of ITC on input services in inverted duty from 1 Nov 2026.
- BLate fee waived for taxpayers up to ₹5 crore turnover who file the return by the end of the month in which it was due.
Part A · 10 recommendationsProcess Reforms
A1Registration related reforms4 recommendations
1. Streamlining registration process with clear guidelines on filing and processing
As per recommendations of the 56th meeting, automatic registrations without officer intervention are being granted by the portal under rule 14A of the CGST Rules, 2017, where the applicant does not intend to pass on ITC of more than ₹2.5 lakh per month. To streamline processing in the remaining cases, the Council recommended:
| No. | Recommendation |
|---|---|
| (i) | Issuance of a comprehensive circular specifying the documents and information required for GST registration, along with FAQs |
| (ii) | Amendment in FORM GST REG-01 to provide drop boxes for selection of prescribed documents/information, so that both the taxpayer and the tax officer have clarity |
| (iii) | User-friendly interface on the GST portal with clear navigational paths, drop-down lists, tool-tips and contextual guidance |
2. Rationalization of Procedure for Amendment in GST registration
Amendment to rule 19 of the CGST Rules, 2017 for automatic acceptance of amendments on the portal:
| Taxpayer | Amendments accepted automatically |
|---|---|
| All taxpayers | All registration particulars, except those relating to Principal Place of Business (PPoB) |
| Taxpayers registered under rule 14A (automatic route) | All registration particulars, including those relating to PPoB |
3. Rationalization of registration cancellation process under GST
3.1.1 Automatic cancellation of registration on the application of the taxpayer
Applications in FORM GST REG-16 will be accepted automatically by the system once all pending returns are filed and all dues are paid:
| Phase | Cases covered |
|---|---|
| Phase 1 | (a) Taxpayer has not passed on ITC exceeding ₹2.5 lakh in any of the months since registration; or (b) Taxpayer has passed on ITC exceeding ₹2.5 lakh in a month, but has filed the final return in FORM GSTR-10 within the specified time |
| Phase 2 | All applications for cancellation accepted automatically. FORM GST REG-16 to be amended so that details of FORM GSTR-10 can be furnished in the application itself |
3.1.2 Suo-moto cancellation of registration
| Rule | Recommendation |
|---|---|
| Rule 21 | Amendment to omit certain grounds of cancellation of registration by tax officers |
| Rules 21A, 22 and new rule 23A | System-based cancellation and revocation of registration based on non-compliance and subsequent compliance of defaults of non-filing of returns or non-furnishing of bank account details, within the specified time |
4. Simplified GST registration mechanism for small sellers on the Electronic Commerce Operators (ECO) platform
In continuation of the in-principle approval in the 56th meeting, the Council recommended insertion of rule 14B in the CGST Rules, 2017.
| Aspect | Detail |
|---|---|
| Who | Small suppliers making supplies of goods through ECOs |
| Where | States/UTs where they do not have physical presence |
| Condition | Intend to pass on ITC of not more than ₹2.5 lakh per month, excluding stock transfers between distinct persons |
| Principal Place of Business | Warehouse of the ECO in that State/UT can be declared as PPoB |
| Grant | Automatically by the system, subject to certain conditions |
A2Return related reforms1 recommendation
5. Alternate mechanism for making amendment of liabilities and input tax credit in returns to minimize mismatches and reduction of notices/intimations on account thereof
5.1 Measures recommended
| No. | Provision | Measure |
|---|---|---|
| 1 | FORM GSTR-1/1A/IFF | Enhancements to enable better reconciliation with details reported in FORM GSTR-3B |
| 2 | New rule 86D | Facility "Electronic Statement of tax paid on Reverse charge basis and input tax credit claimed" for correct reporting of RCM liability and ITC |
| 3 | Rule 61(1A) (new) | Mechanism for correct reporting and correction/rectification of liability, so that GSTR-3B liability aligns with GSTR-1/1A/IFF |
| 4 | FORM GST DRC-03 | Amendment to declare details of the underlying invoice for which payment is made |
| 5 | Rule 60(6A) (new) | Invoice Management System (IMS): recipient may accept, reject or keep pending an inward supply document for generation of GSTR-2B, subject to conditions including the period for which a credit note can be kept pending |
| 6 | New rule 86C | Facility "Electronic Credit Reversal and Reclaim Statement" for correct reporting of ITC reversed and reclaimed in GSTR-3B |
| 7 | Rule 61(1B) (new) | Mechanism for correct reporting and correction/rectification of ITC, so that ITC in GSTR-3B aligns with GSTR-2B |
| 8 | Circular | Manner of furnishing ITC and its reversal in GSTR-3B in the context of IMS, Credit Reversal and Reclaim Statement and RCM Statement |
5.2 Effective date
5.3 Public consultation
The proposed revised mechanism will be placed in the public domain for a time-bound consultation. The Union Finance Minister is authorised to approve changes based on stakeholder feedback.
A3Refunds related reforms1 recommendation
6. Faster, system-based automated processing of refunds
6.1 System-based processing (amendment in section 54)
Covers refund claims of excess balance in electronic cash ledger, zero-rated supplies and inverted duty structure.
| Phase | Measure |
|---|---|
| Phase 1 | Full refund of excess balance in the electronic cash ledger sanctioned automatically, without officer intervention |
| Phase 1 | Time limit for acknowledgement or deficiency memo reduced from 15 days to 10 days; deemed acknowledgement if not issued within 10 days |
| Phase 1 | Zero-rated supplies and inverted duty structure: 90% of the claim sanctioned provisionally by the system, based on system risk evaluation |
| Phase 2 | System-based automated acknowledgement on due verification of the application by the system |
| Phase 2 | In such acknowledged cases, automated sanction of full refund for zero-rated supplies, after adjusting pending dues, based on system risk evaluation |
6.2 Other amendments
| Provision | Recommendation |
|---|---|
| FORM GST RFD-01 | Capture details in system-readable format; no uploading of scanned documents for zero-rated and inverted duty refunds |
| Rule 89(4)(C) | Remove the restriction capping turnover of zero-rated supply of goods at 1.5 times the value of like goods domestically supplied |
| Section 54(14) | Explanation that the ₹1,000 threshold applies to the total refund amount (CGST, SGST/UTGST and IGST taken together) |
6.3 Interest on refund of pre-deposit
| Provision | Recommendation |
|---|---|
| Section 115 | To be made a standalone provision for the rate of interest on refund of pre-deposit |
| Circular | To clarify issues regarding rate of interest on refund of pre-deposit |
A4Reforms related to dispute resolution4 recommendations
7.1 Guidelines for issuance of demand notices, adjudication orders and appeal orders
A circular will provide comprehensive guidelines to tax officers covering:
- Quality of demand notices and adjudication / appeal orders
- Timely issuance of such notices and orders
- Proper invocation of grounds of fraud, wilful misstatement or suppression of facts only on merits in each case
- Adherence to principles of natural justice, including conduct of personal hearings
7.2 Amendment in section 73, section 74 and section 74A of the CGST Act, 2017
| No. | Recommendation |
|---|---|
| 1 | Minimum threshold of ₹10,000 (CGST + SGST + IGST + Cess) for issuance of show cause notices. No notice if tax involved is less than ₹10,000. Notices and appeals below ₹10,000 pending on the date the provision comes into force will be decided as if the threshold had been in force when the notice was issued |
| 2 | Penalty amount deemed as "charge" where full tax is voluntarily paid along with interest and penalty within the specified time |
| 3 | Reduced penalty of 5% in non-fraud cases where tax with interest is paid within 30 days (section 73) or 60 days (section 74A) of the adjudication order |
| 4 | Removal of the condition of minimum penalty of ₹10,000 in non-fraud cases |
7.3 Reduction in maximum general penalty under section 125
| Provision | Present | Recommended |
|---|---|---|
| Section 125, CGST Act | ₹25,000 | ₹10,000 |
7.4 Upper limit on pre-deposit in appeals involving only penalty
Amendment in the provisos to section 107(6) and section 112(8) of the CGST Act, 2017 where the order involves only penalty and no demand of tax:
| Forum | Maximum pre-deposit |
|---|---|
| Appellate Authority / Appellate Tribunal | ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST) |
Part B · 12 recommendationsOther major reforms under GST
B1Reforms for improving seamless flow of Input Tax Credit (ITC)2 recommendations
8. Refund of accumulated ITC on account of capital goods and input services
Amendment in clause (ii) of proviso to section 54(3) of the CGST Act and the CGST Rules:
| Type of refund | ITC now refundable | Applicable to ITC availed on or after |
|---|---|---|
| Zero-rated supplies | Capital goods (spread over 60 months) | 1 April 2027 |
| Inverted duty structure | Input services | 1 November 2026 |
| Inverted duty structure | Capital goods (spread over 60 months) | 1 April 2027 |
9. Rationalization of blocked ITC by amendment in section 17(5) of the CGST Act, 2017
Restrictions on availment of ITC to be removed, inter alia, on supplies of:
| No. | Item |
|---|---|
| 1 | Outdoor catering |
| 2 | Health and life insurance |
| 3 | Telecommunication towers |
| 4 | Pipelines laid outside factory premises |
| 5 | Free samples |
| 6 | Goods destroyed or written off on expiry of shelf life as required by law |
B2Reforms relating to exports/zero rating of supplies of goods and services1 recommendation
10. Recommendations of the GST Council
| No. | Provision | Recommendation and effect |
|---|---|---|
| 1 | Section 2(6)(v), IGST Act | Omission of sub-clause (v), removing the condition that supplier and recipient of services should not be establishments of a distinct person (Explanation 1 to section 8). Facilitates refunds for services supplied to/through foreign offices/branches |
| 2 | Circular | To clarify issues on receipt of payment in foreign exchange or Indian rupees, as permissible, for export of goods and services |
| 3 | Section 13(3)(a), IGST Act | Omission of clause (a), so place of supply where goods are made physically available by the recipient will follow section 13(2), i.e. location of the recipient. Facilitates export benefits for services to foreign recipients |
| 4 | Section 16(1), IGST Act | Explanation that supply to an overseas buyer with delivery in an SEZ/FTWZ, with payment in convertible foreign exchange or INR where permitted by RBI, is deemed a supply to an SEZ/FTWZ. Gives certainty of zero rating |
B3Ease of living and doing business9 recommendations
11. Rationalization of provisions relating to arrest and prosecution
11.1 Arrest
Complete withdrawal of arrest powers under GST by omission of section 69 of the CGST Act, 2017.
11.2 Prosecution (section 132)
| No. | Recommendation |
|---|---|
| 1 | Monetary threshold for prosecution raised from ₹1 crore to ₹5 crore |
| 2 | Omission of clause (i) of section 132(1); deletion of the words "evades tax" in clause (e); deletion of the words "or in any other manner deals with" in clause (h) |
| 3 | Clause (c) of section 132(1) to cover only fraudulent availment of ITC without receipt of goods or services or without invoice or bill |
| 4 | Rationalising the punishment for various offences under section 132 |
12. Rationalization of provisions relating to E-way Bill
Amendments in sections 68, 129 and 130 of the CGST Act, 2017:
| No. | Recommendation |
|---|---|
| 1 | Conveyance can be intercepted only on specific intelligence and with authorisation of an officer not below the rank of Joint Commissioner |
| 2 | Inspection, detention or seizure only when the supplier or recipient is located or registered in the State of interception. No interception in transit States |
| 3 | Where no e-way bill is generated or no document shows origin or destination, goods can be inspected, detained or seized irrespective of jurisdiction |
| 4 | Confiscation under section 130 not applicable to goods/conveyances in transit |
13. Treatment of transfer of title in Intellectual Property Rights (IPR)
Amendment in Schedule II of the CGST Act, 2017 so that transfer of title in IPRs, whether temporary or permanent, is uniformly treated as supply of services.
14. Amendment in rule 86A of the CGST Rules, 2017 to provide for opportunity of being heard to the taxpayer
A mechanism for the taxpayer to file an objection against blocking of any amount in the electronic credit ledger, and to avail a personal hearing before the proper officer decides on the objection.
15. Extending relief for small taxpayers on late fees
| Aspect | Detail |
|---|---|
| Relief | Waiver of late fee on delayed filing of return under section 39(1) |
| Eligible taxpayers | Annual turnover up to ₹5 crore in the preceding financial year |
| Condition | Delayed return filed by the end of the month in which it was due |
16. Clarification in respect of various issues through circulars
| No. | Issue |
|---|---|
| 1 | Input Service Distributor (ISD) mechanism for distribution of input service credit |
| 2 | Availment of ITC by banking companies and financial institutions, including NBFCs, opting for section 17(4) |
| 3 | Various issues relating to payment of pre-deposits |
| 4 | Admissibility of ITC on demonstration vehicles in certain situations |
| 5 | Omission of rule 96(10) to be effective from 23.10.2017, in accordance with the Hon'ble Supreme Court decision |
17. Concept note for an optional scheme for Annual Return Quarterly Payment (ARQP)
| Aspect | Detail |
|---|---|
| Status | Concept note approved in-principle |
| Nature | Optional scheme |
| Turnover | Aggregate turnover up to ₹5 crore in the preceding financial year |
| Type of supplies | Engaged exclusively in supplies to unregistered persons (B2C) |
18. Recommendations to streamline compliances in GST
| No. | Provision | Recommendation |
|---|---|---|
| 1 | Sections 16, 37 and 39 | Align time limits for statement of outward supply (s.37) and return (s.39) with the time limit for availing ITC under s.16(4) |
| 2 | Section 9(5) | Clarity on liability of the ECO to pay tax for notified services, irrespective of its business model |
| 3 | Validation clause | Validation of notices held invalid by courts on the ground of being issued for multiple financial years |
| 4 | E-invoicing | Extended to domestic supplies received from unregistered persons under RCM and to import of services, for taxpayers with aggregate annual turnover of ₹5 crore and above |
19. Amendments relating to the GST Appellate Tribunal
Amendments to the CGST Act, 2017 and the GSTAT (Appointment and Conditions of Service of President and Members) Rules, 2023, to align GSTAT provisions with the Tribunals Reforms Act, 2026 and the National Tribunals Commission and Qualification, Selection and Conditions of Service of Chairpersons and Members of Tribunals Rules, 2026.
Part C · 21 recommendationsChanges/ Clarifications in relation to GST rates on Goods and Services
C1Recommendations relating to goods8 recommendations
1. Sublimation paper
Clarified that sublimation paper is classified under heading 4809. Past cases to be regularised on "as is where is" basis.
2. Toys
Clarified that notification entries for toys cover all categories of toys under heading 9503 (such as dolls, puzzles and other toys), not restricted to tricycles, scooters and pedal cars.
| Reference | Detail |
|---|---|
| Notification | Sr. No. 497 of Schedule I and Sr. No. 616 of Schedule II of Notification No. 09/2025-CTR dated 17.09.2025 |
3. Sea-weed extract based bio-stimulants
Bio-stimulants registered under Schedule VI of the Fertiliser (Inorganic, Organic or Mixed) (Control) Order, 1985 are classifiable under heading 3101 as fertilisers. Past cases regularised on "as is where is" basis.
| Reference | Detail |
|---|---|
| Notification | Explanation to be inserted in Sr. No. 237 of Schedule I of Notification No. 09/2025-CTR |
4. Second-hand vehicles under margin scheme
Suppliers of second-hand vehicles under the margin scheme may avail ITC on inputs (other than second-hand vehicles) and input services such as spares, repair and maintenance, technology services, rent, marketing and advertisement. The restriction applies only to tax paid on the second-hand vehicles procured.
| Reference | Detail |
|---|---|
| Notifications | 8/2018-Central Tax (Rate), 9/2018-Integrated Tax (Rate) and 1/2018-Compensation Cess (Rate) |
5. Waste and scrap under RCM and TDS
| Aspect | Detail |
|---|---|
| Items | Waste and scrap of plastics, electrical and electronics waste and scrap, waste and scrap of tyres, and used cooking oil |
| Unregistered to registered person | Under RCM. Recipient pays tax even if supplier is under threshold; supplier to take registration on crossing the threshold |
| Registered to registered person (B2B) | TDS @ 2% introduced |
6. Psyllium seeds (Isobgul / Isabgol)
NIL rate of GST, irrespective of whether the seeds are fresh, chilled, frozen or dried.
7. Re-treaded tractor tyres
Anomaly corrected by aligning the GST rate on re-treaded tractor tyres with that on new tractor tyres.
8. Compensation Cess on Canteen Stores Department (CSD)
| Supplier | Goods | Period |
|---|---|---|
| CSD | Two and four wheelers | 01.07.2017 to 30.09.2022 |
| CSD and Unit Run Canteens | Aerated drinks | 01.07.2017 to 31.03.2022 |
Compensation Cess not levied for these periods to be exempted.
C2Recommendations relating to services13 recommendations
1. Passenger transport and rental of motor vehicles using Electric Vehicles
Option to pay GST at 5% with restricted ITC on passenger transport and rental of motor vehicles with operators, where an electric vehicle is used and battery charging cost is included in the consideration.
2. Transportation and delivery services supplied through Electronic Commerce Operators
| No. | Recommendation |
|---|---|
| 1 | Delivery services (other than courier and postal) through an ECO brought under section 9(5), where the supplier is not liable for registration under section 22(1); GST 5% without ITC |
| 2 | GST 5% without ITC on delivery services for goods supplied/ordered through an ECO |
| 3 | Exemption under Entry 21A of Notification No. 12/2017-Central Tax (Rate) (GTA to unregistered persons) excluded where the goods are supplied/ordered through an ECO |
3. Motor vehicle leasing transactions
Clarification on GST treatment of statutory and ancillary recoveries such as registration charges, road tax, insurance and FASTag charges incurred by the lessor and recovered from the lessee.
4. Input Tax Credit in the same line of business
Limited ITC in the same line of business allowed for:
- Restaurant / outdoor catering services
- Hotel accommodation services up to ₹7,500 per unit per day
- Gym / fitness services
In the same manner as presently available for passenger transportation, tour operator and renting of motor vehicles services.
5. Transport of passengers by Helicopters from/to specified states
Exempt: passenger transport by helicopter on seat-sharing basis from/to airports/helipads in north-eastern States, Sikkim and Bagdogra in West Bengal.
6. Storage or warehousing of seeds meant for sowing
Exempt: services by way of storage or warehousing of seeds meant for sowing.
7. Curing of coffee
Exempt: agricultural support services of curing coffee provided by coffee curers to cultivators.
8. Taxability of the services of Seamen's Provident Fund Organisation
Exempt: services by SPFO to persons governed by the Seamen's Provident Fund Act, 1966.
9. Research & Development Services
Self-certification by the head of the institution/organisation that the activity is research and development and not consultancy, for exemption under Entry 44A of Notification 12/2017-Central Tax (Rate).
10. Import of services by Indian establishments of foreign shipping lines
Exempt: import of services by an Indian establishment of a foreign shipping company from a related person or its establishment outside India, without consideration. Past period regularised on "as is where is" basis.
11. Upfront/concession amount paid to NHAI under Toll Operate Transfer Model for highway projects
Exempt: grant of exclusive right, licence and authority by the Government (including local authority, governmental authority and government entity) to the concessionaire to demand, collect and appropriate toll fee.
12. Operation and Maintenance services for highway projects under TOT model
Special procedure for valuation and time of payment of GST on O&M services by concessionaires to the concessioning authority.
13. Fund Transfer Pricing mechanism in banks
Clarified that the notional amount treated as "interest" in books for notional transfer of funds between bank branches by the head office under Funds Transfer Pricing is covered by the definition of "interest" in Notification No. 12/2017-Central Tax (Rate).
Note: The recommendations of the GST Council have been presented in simple language for information of the stakeholders. The same would be given effect through the relevant circulars / notifications / law amendments which alone shall have the force of law. Source: PIB, Ministry of Finance, 08 October 2026 (Release ID 2320934).