The change to prepare for this quarter
For businesses facing an inverted duty structure, the most immediate working-capital proposal is the refund of accumulated input tax credit on input services. It is recommended to apply to credit availed on or after 1 November 2026.
That date is close. Finance teams should identify eligible input-service credit, check supporting records and model the potential cash-flow effect. Do not file on the assumption that the change is already operative: the Council’s recommendation still requires formal implementation.
At its 57th meeting on 8 October 2026, the GST Council recommended broad process reforms. It made no GST rate changes and decided that rate-related matters will be taken up once a year in a dedicated meeting. The recommendations focus instead on registration, refunds, ITC, returns, enforcement and the movement of goods.
The measures respond to a tax system that has expanded considerably. Registered taxpayers rose from about 60 lakh in 2017 to 1.70 crore as at 30 September 2026. Gross GST collections were about Rs 12.46 lakh crore during April to September 2026, up 11.6% year on year.
Registration: less friction for routine changes
The Council recommended simplifying the registration form so that only relevant fields appear, supported by comprehensive documentation, FAQs and portal guidance such as drop-down menus, tool-tips and contextual prompts.
Routine amendments to details such as a trade name, director or partner, and additional place of business would be accepted automatically, except for a change to the principal place of business. For taxpayers registered through the automatic route, principal-place amendments would also be auto-accepted.
The potential to reduce administrative delay is material: between November 2025 and September 2026, taxpayers filed 16.73 lakh amendment applications, about 65.45% of which involved routine changes.
Cancellation applications would also move towards automatic processing. In Phase 1, applications would be accepted automatically once pending returns are filed and dues are paid where ITC passed on did not exceed Rs 2.5 lakh in any month. The route would also apply above that threshold if the final return is filed within the specified time. In Phase 2, all cancellation applications would be auto-accepted after returns are filed and dues are paid; FORM GST REG-16 would be amended to include GSTR-10 details.
The Council also recommended removing some grounds for suo-moto cancellation and introducing system-based cancellation and revocation for specified non-filing or non-furnishing of bank details.
Refunds and ITC: stronger cash-flow potential
The proposed refund reforms aim to reduce waiting time and manual processing. The acknowledgement window would fall from 15 days to 10 days, with deemed acknowledgement if no response is issued. For eligible zero-rated and inverted-duty-structure claims, the system would sanction 90% of the claimed amount based on risk assessment, with an order within 3 working days of acknowledgement, compared with 7 days now. Excess cash-ledger balances would be refunded automatically.
Other recommendations include making FORM GST RFD-01 system-readable, removing the cap that limits zero-rated goods turnover to 1.5 times the value of like domestic supplies, and clarifying that the Rs 1,000 refund threshold applies to the total refund amount across CGST, SGST/UTGST and IGST.
The dated ITC proposals require careful tracking:
- Input services: accumulated ITC refunds under inverted duty structure for credit availed on or after 1 November 2026.
- Capital goods: refunds for zero-rated supplies and inverted duty structure for credit availed on or after 1 April 2027, spread over 60 months at one-sixtieth of the credit each month.
The Council also recommended removing ITC restrictions for outdoor catering, health and life insurance, telecommunication towers, pipelines outside factory premises, free samples, and goods destroyed or written off after their shelf life expires where law requires destruction.
Enforcement and transit: clearer boundaries
The enforcement proposals include withdrawing the power of arrest under GST in specified cases and raising the prosecution threshold from Rs 1 crore to Rs 5 crore. The maximum general penalty would fall from Rs 25,000 to Rs 10,000, and the minimum penalty of Rs 10,000 would be removed in non-fraud cases.
The Council recommended a reduced penalty of 5% where tax and interest are paid within 30 days under section 73 or 60 days under section 74A of the adjudication order. It also proposed no show-cause notice where the tax involved is below Rs 10,000, with specified pending notices and appeals below that amount to be decided on that basis. Where an order involves only penalty and no tax demand, the pre-deposit upper limit for appeals before the Appellate Authority or Tribunal would be Rs 40 crore.
For goods in transit, interception would require specific intelligence and authorisation from an officer of at least Joint Commissioner rank. Inspection, detention or seizure would generally be limited to cases where the supplier or recipient is located or registered in the state of interception. Transit states could not stop goods solely because a vehicle passes through them.
There are exceptions: action would be permitted regardless of jurisdiction if no e-way bill was generated, or the conveyance carried no document showing origin or destination. Confiscation under section 130 would not apply to goods or conveyances in transit. GST documentation remains required and digitally matched; the proposed approach is information-led risk assessment, not inspection without a specific basis.
The Council also recommended allowing taxpayers to object to amounts blocked in the electronic credit ledger under Rule 86A and attend a personal hearing before the proper officer decides.
Small businesses and e-commerce: targeted simplification
Taxpayers with turnover up to Rs 5 crore in the previous financial year would receive a late-fee waiver for delayed returns if the return is filed by the end of the month in which it was due.
The Council introduced a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for eligible businesses with aggregate turnover of Rs 5 crore or less in the preceding year that supply exclusively to unregistered persons. The proposal is one annual return with quarterly tax payments. About 16.85 lakh of 1.05 crore active taxpayers report only consumer supplies; nearly 99% of these are below Rs 5 crore and together represent under 1% of reported GST liability. The detailed framework and legal amendments are expected to be considered at the next Council meeting.
For small e-commerce sellers, the proposed PAN-based registration would allow registration in states or UTs outside the home state where monthly ITC passed on is not more than Rs 2.5 lakh, excluding stock transfers. The operator’s warehouse could be declared as the principal place of business where the seller has no physical presence there, though the seller must have physical presence in at least one state. Sellers exceeding Rs 2.5 lakh monthly output tax would move to ordinary registration. Section 9(5) would also be amended so operators are liable for tax on notified services regardless of business model.
For taxpayers with annual aggregate turnover of Rs 5 crore or more, e-invoicing would extend to domestic supplies received from unregistered persons where tax is payable under reverse charge, and to imports of services.
Exports: broader routes to zero-rating
The Council recommended removing the condition that supplier and recipient must not be establishments of the same person. This could allow Indian service providers supplying foreign clients through their own overseas branch or office to qualify as export of services and claim refunds.
Work performed in India on goods owned by a foreign client, including testing, repair, certification, research or processing, would qualify as export of service even when the goods do not leave India. A circular would clarify that export payments may be received in foreign exchange or in Indian rupees where permitted.
Goods supplied to overseas buyers but delivered to an SEZ or FTWZ would be treated as zero-rated where payment is received in convertible foreign exchange or INR as permitted by RBI. The Council also recommended uniform treatment of temporary or permanent transfer of title in intellectual property rights as a supply of services.
Before 1 November 2026: business checklist
- Map inverted-duty input services: identify credit availed on or after 1 November and retain invoices, ledgers and return reconciliations.
- Review refund positions: quantify eligible zero-rated and inverted-duty claims and verify supporting data against the proposed system-readable format.
- Clean up registration records: confirm legal name, directors or partners, additional places of business and principal-place details.
- Check small-taxpayer exposure: assess prior-year turnover, return due dates and whether the proposed late-fee waiver conditions may be relevant.
- Review e-commerce and export structures: document state presence, warehouse arrangements, ITC passed on, foreign-client contracts, overseas branches and payment routes.
- Track implementation: do not treat any recommendation as effective until the relevant notification, circular, rule change or portal update is issued.
Compliance calendar
| Date or period | Recommended measure |
|---|---|
| 1 November 2026 | Refund of accumulated ITC on input services under inverted duty structure for credit availed on or after this date. |
| 1 April 2027 | Capital-goods refund eligibility for credit availed on or after this date, spread over 60 months. |
| April 2027 return period | Alternate mechanism for correcting liability and ITC in GSTR-3B against GSTR-1/GSTR-2B. |
| FY 2027-28 | Faceless assessment for CGST taxpayers registered under multiple jurisdictions is expected. |
These measures are Council recommendations. Formal notifications and circulars are awaited, and implementation dates and conditions must be confirmed from the operative legal instruments. Businesses should verify applicability with their GST advisor before changing filings, claiming refunds or revising systems.
Precise advice for a changing GST framework
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Sources: PIB, “Next-Gen GST Process Reforms,” 9 October 2026; The Economic Times, 8 October 2026.