The 57th meeting of the GST Council, held in New Delhi on 8 October 2026, has recommended a series of reforms aimed at simplifying GST administration, improving compliance procedures, facilitating input tax credit and refunds, and reducing the regulatory burden on businesses.
Unlike the previous exercise, which focused on rationalising the GST rate structure, the latest meeting has concentrated on improving the functioning of the GST system.
The Council has not recommended any change in GST rates. Instead, its attention has shifted towards the processes that taxpayers encounter regularly, including registration, return filing, refunds, litigation, movement of goods, export transactions and electronic commerce.
Among the major recommendations are faster automated refunds, expanded availability of input tax credit, simplified registration and cancellation procedures, restrictions on physical inspection of goods in transit, removal of arrest powers under GST, and an increase in the prosecution threshold.
These proposals represent the next stage of GST reforms, with the emphasis moving from tax rates to the day-to-day administration of the law.
1. One Year of the Two-Rate GST Structure: Review of Performance
The Council reviewed the performance of GST following the introduction of the rationalised two-rate structure.
The data presented at the meeting indicate growth in taxable supplies, improved reporting of consumer transactions and increased tax revenue, notwithstanding a reduction in the effective tax rate.
The key indicators are as follows:
- Taxable supplies increased from ₹40.19 lakh crore per month to ₹50.58 lakh crore per month, representing growth of 25.8%. Taxable supplies grew by more than 25% during FY 2025-26, compared with 13% during FY 2024-25.
- Supplies to consumers reported in the GST system increased from ₹5.98 lakh crore per month to ₹7.58 lakh crore per month, representing growth of 26.7%.
- Gross tax liability increased from ₹5.85 lakh crore per month to ₹6.64 lakh crore per month, representing growth of 13.6%.
- Effective tax rate on domestic supplies declined from 14.55% to 13.13%, a reduction of approximately 1.5 percentage points.
- GST revenue registered growth of 11% in FY 2026-27 over the previous year, with revenue growth for June to August 2026 reaching 14.7% over the corresponding period of the preceding year.
The increase in consumer supplies reported in the system also indicates improvement in reporting.
The principal outcome highlighted by the Council is that tax rates have come down while the reported tax base has expanded.
2. Shift Towards Process Reforms
With the rate structure having been rationalised, the Council has now turned its attention to the functioning of GST administration.
For taxpayers, interaction with the GST system is generally more frequent in matters of registration, returns, input tax credit and refunds than in matters concerning tax rates.
The Council noted that the GST system now has the capability to match transactions reported by suppliers against the credit claimed by recipients on an invoice-by-invoice basis.
Network analysis is also being used to identify fraudulent credit close to the point of its creation.
These technological capabilities have created the basis for simplifying procedures and reducing the need for direct officer intervention.
The proposals were developed through consultations between Central and State tax administrations. Three National Coordination Meetings of Central and State officers were held
during the preceding year, apart from several meetings of a smaller group of officers.
Each proposal was circulated to the States before being placed before the Council.
3. Registration Reforms: Greater Automation and Faster Processing
The Council has recommended further simplification of GST registration procedures.
At present, registration is being granted through the system within three working days, without officer intervention, for applicants assessed as low risk and those whose output tax on supplies to registered persons will not exceed ₹2.5 lakh per month.
Approximately 61% of registrations are already processed through this automated route, while the remaining 39% require officer-level processing.
The Council has recommended improving the registration application form so that applicants are guided through the process.
The form will display only those fields relevant to the particular applicant, and documents will be mapped to their specific purposes.
Automatic approval of registration amendments
Routine amendments to registration particulars will also be automated.
Between November 2025 and September 2026, approximately 16.73 lakh applications were filed for amendment of registration particulars.
Of these, 10.95 lakh applications, representing 65.45%, related to changes in trade names, directors or partners, or addresses of additional places of business.
These categories of amendments will be accepted automatically under the proposed framework.
The measures are intended to simplify registration procedures, reduce processing time and minimise officer intervention in routine matters.
4. Return Filing: Reducing Mismatches and Strengthening Invoice-Level Reconciliation
The Council has recommended changes to GST return procedures to address recurring discrepancies between returns and improve the accuracy of credit reporting.
According to the meeting note, approximately 95,000 system-generated notices are issued annually due to differences between returns.
Recovery against these notices represents only about 0.08% of the amount involved, with the differences being largely attributable to data-entry problems.
Correction of supplier-reported transactions
Where a supplier reduces an amount already reported, the adjustment will be made through the supplier’s sales statement so that the revised information reaches the recipient who
has claimed input tax credit.
Corrections relating to earlier tax periods will also be permitted.
The proposals specifically include allowing correction of a recipient’s GST registration number where it was entered incorrectly.
Role of the Invoice Management System
The Invoice Management System will become the mechanism through which input tax credit is settled.
Credit accepted by the recipient through the system will flow into the recipient’s return.
The proposed arrangement seeks to ensure that supplier reporting and recipient credit claims are aligned within the system itself.
These changes are intended to reduce avoidable mismatches, incorrect credit reporting and the resulting notices.
5. Refund Reforms: Faster Acknowledgement and Automated Sanction
Refund administration is one of the principal areas covered by the Council’s process reforms.
The recommendations seek to reduce processing time and increase automation.
Reduction in acknowledgement period
The time limit for acknowledging a refund application is proposed to be reduced from 15 days to 10 days.
Where neither an acknowledgement nor a deficiency memorandum is issued within 10 days, the refund application will be treated as acknowledged.
System-based sanction of 90% refund
Under the proposed mechanism, the system, rather than the officer, will sanction 90% of the refund claim based on risk assessment.
The order will be issued within three working days from acknowledgement, compared with the present seven-working-day period mentioned in the note.
Automatic refund of excess cash ledger balances
Refunds of excess balances lying in the electronic cash ledger will become fully automatic, without officer involvement.
The Council noted that these balances represent money already deposited with the Government.
The meeting note also provides the following data:
- Approximately 65% of refund claims relate to exports or an inverted rate structure.
- Of these claims, 55% are already categorised as low risk.
- A further 19% of refund claims relate to balances lying in the cash ledger.
Pre-filled refund applications
Refund application forms will also be simplified by incorporating information already available in government systems.
Shipping particulars will be drawn from Customs systems, while payment particulars will be obtained from the banking system.
These recommendations are expected to reduce procedural requirements and accelerate refund processing, particularly for exporters and businesses affected by an inverted rate structure.
6. Litigation Reforms: Uniform Procedures and Monetary Threshold for Notices
The Council has recommended introducing common standards for departmental proceedings under GST.
The proposed standards will govern:
- Issuance and service of notices;
- Pre-notice intimation;
- Circumstances in which fraud may be alleged;
- Conduct of hearings; and
- Preparation and issuance of orders.
The objective is to bring greater uniformity to the initiation and conduct of proceedings.
The Council has also recommended that no notice should be issued where the amount involved is below ₹10,000.
This measure is intended to reduce proceedings involving small monetary amounts.
7. Input Tax Credit: Important Recommendations for Businesses
The Council has proposed several changes relating to input tax credit, including examining the protection available to genuine recipients and expanding credit eligibility for specified business expenditure.
Protection of genuine buyers
The issue of input tax credit being denied to genuine buyers due to supplier-related concerns has been referred to a Committee of Officers.
The Committee will examine the position of a buyer who possesses a proper invoice, has received the goods and has paid the supplier in full.
The Committee is expected to complete its examination within three months, following which an agenda will be placed before the next meeting of the GST Council.
Thus, the issue remains under examination, and a final recommendation regarding protection of genuine recipients is yet to be made.
Credit on ordinary business expenditure
The Council has recommended allowing input tax credit on certain expenditures which were earlier subject to restrictions.
These include:
Health and life insurance for employees: Input tax credit will be available on health insurance and life insurance taken for employees.
Telecommunication towers: Credit will be available on telecommunication towers.
Pipelines outside factory premises: Credit will be available on pipelines laid outside a factory.
Free samples: Input tax credit will be available on free samples.
Expired goods: Credit will be available on stock written off on expiry of shelf life where the law requires such goods to be destroyed.
These recommendations are particularly relevant to businesses incurring expenditure on employee insurance, infrastructure, samples and goods that must be destroyed upon expiry.
Eliminating double taxation in specified services
The Council has also addressed the treatment of services purchased and resupplied in the same line of business.
Under the existing structure described in the note, certain services are taxed at 5% without input tax credit, resulting in tax being imposed again when the service is supplied
through an intermediary.
The Council has recommended allowing the credit chain to continue in such cases so that the service does not suffer tax twice.
The specified services include:
- Hotel accommodation up to ₹7,500 per night booked through an agent;
- Restaurant services;
- Catering services; and
- Passenger transport services.
The recommendation is intended to address the denial of input tax credit in transactions involving the purchase and onward supply of the same category of service.
8. Refund of Input Tax Credit on Input Services and Plant & Machinery
The Council has recommended changes to the refund of accumulated input tax credit, particularly in cases involving an inverted rate structure and exports.
Refund on input services under an inverted rate structure
An inverted rate structure arises where inputs are taxed at a higher rate than the outward supplies, resulting in the accumulation of input tax credit.
The refund mechanism described in the note has been confined to credit on goods, excluding input services.
The Council has recommended extending the refund facility to input services.
The proposed benefit will apply to credit availed on or after 1 November 2026.
This would allow businesses affected by an inverted rate structure to obtain refunds of eligible credit relating to input services as well as goods.
Refund on plant and machinery
The Council has also recommended removing the exclusion of tax paid on plant and machinery from the refund mechanism.
The benefit is proposed for both exporters and businesses affected by an inverted rate structure.
Under the proposed mechanism, the refundable amount relating to plant and machinery will be calculated at one-sixtieth of the credit for each month, corresponding to a period of 60 months.
The benefit will apply to credit availed on or after 1 April 2027.
This recommendation would allow businesses investing in new plant and machinery to recover the credit over the prescribed period rather than leaving it accumulated in the credit pool.
The note specifically identifies the pharmaceutical and FMCG sectors as industries that could benefit through improved working-capital management.
9. Ease of Doing Business: Simplified Cancellation and Restoration of Registration
The Council has recommended simplifying the process of closing a business under GST.
Cancellation of registration will be automated in stages, beginning with smaller taxpayers.
Approximately 90% of taxpayers seeking cancellation have never passed on input tax credit exceeding ₹2.5 lakh in any month.
The Council considers the revenue risk associated with automated cancellation for such taxpayers to be relatively low.
The final return will also be incorporated into the cancellation application instead of being filed separately after closure.
Restoration of suspended or cancelled registration
Where the system has suspended or cancelled a registration due to non-filing of returns or failure to provide bank account details, restoration will take place once the taxpayer
remedies the deficiency.
These changes are aimed at simplifying both the closure of businesses and restoration of registrations affected by routine compliance deficiencies.
10. Optional Annual Return Filing for Small B2C Taxpayers
The Council has approved in principle an optional simplified return-filing arrangement for smaller taxpayers supplying exclusively to consumers.
Under the proposed scheme, taxpayers having turnover up to ₹5 crore and making only business-to-consumer supplies will be permitted to:
- File a GST return once a year; and
- Pay tax quarterly.
The meeting note indicates that approximately 1.05 crore taxpayers are active under GST.
Of these, an average of 16.85 lakh taxpayers report supplies exclusively to consumers.
Approximately 16.66 lakh of these taxpayers, representing 99%, have turnover below ₹5 crore.
Together, these taxpayers account for less than 1% of the total tax liability reported under GST.
The proposal is intended to reduce the return-filing burden for this category of smaller taxpayers.
However, the scheme has been approved only in principle. Its detailed framework and the necessary amendments will be placed before the Council at its next meeting.
11. Movement of Goods: Restrictions on Physical Inspection in Transit
The Council has recommended significant changes to the physical inspection of goods being transported across States.
Under the proposed framework, a vehicle may be stopped only where specific intelligence is available.
The decision to stop the vehicle must be authorised in advance by an officer not below the rank of Joint Commissioner.
Further, the power to inspect goods in transit will be restricted to the State from which the goods originate and the State of destination.
States falling along the transit route will not be permitted to stop the conveyance for inspection under the proposed arrangement.
For example, where a consignment travels through five States, the existing possibility of checks in multiple States will be replaced by inspections restricted to the origin and destination States.
The requirement to maintain the relevant transportation documents will continue.
These documents will also continue to be matched electronically.
The proposed change concerns the circumstances in which physical checks may be conducted. Such checks will be based on specific information rather than routine interception.
12. Arrest, Prosecution and Penalty: Major Enforcement Reforms
Among the most significant recommendations of the meeting are the proposed changes relating to arrest, prosecution and penalties under GST.
Removal of power of arrest
The Council has recommended removing the power of arrest from GST.
The recommendation is based on the increasing ability of the GST system to identify suspicious transactions and fraudulent credit through invoice matching and network analysis.
Increase in prosecution threshold
The monetary threshold for prosecution is proposed to increase from ₹1 crore to ₹5 crore.
The Council has also recommended removing the prescribed minimum punishment.
Under the proposed arrangement, the punishment, whether in the form of a fine, imprisonment or both, will be left to judicial discretion in each case.
Reduction in general penalty
The general penalty applicable where no specific penalty is prescribed is proposed to be reduced from ₹25,000 to ₹10,000.
The Council’s approach is that routine defaults such as delayed filing, mistakes or delays in payment should be addressed through recovery, interest and proportionate penalties.
Technology-based enforcement
The Council has linked these recommendations to the development of GST technology.
Invoice-level matching between suppliers and recipients, together with network analysis, allows potentially fraudulent credit to be identified close to the point at which it arises.
The proposed enforcement framework therefore places greater reliance on detection rather than deterrence.
13. Export of Services: Removal of Restrictions and Improved Refund Access
The Council has made several recommendations intended to improve the treatment of export of services.
Services supplied through overseas branches
The Council has recommended removing the legal condition that prevents export benefits where an Indian firm serves a foreign client through its own overseas branch, even though foreign exchange is received in the normal course.
The proposed change will allow such transactions to qualify for export benefits.
The note identifies analytics firms, design studios, engineering consultancies and Indian offices of global companies among the businesses that could benefit.
Services performed in India on goods belonging to foreign clients
The Council has also recommended export treatment for specified services performed in India on goods belonging to foreign clients, even where the goods do not leave India.
The note identifies services such as:
- Testing;
- Repairs;
- Certification;
- Research; and
- Processing.
These activities will be treated as exports of services under the proposed arrangement, notwithstanding that the goods remain in India.
The recommendation is intended to place Indian contract manufacturing and processing activities on a comparable tax footing with competing international locations.
Recognition of export payments
The Council has recommended aligning the recognition of export payments under GST with the applicable Reserve Bank of India rules.
The objective is to apply a common standard for determining when export payments are treated as received.
Together with the recommended changes to refunds on input services and plant and machinery, these measures are intended to improve the recovery of taxes incurred by service exporters.
14. Electronic Commerce: Facilitating Interstate Operations for Small Sellers
The Council has recommended changes to GST registration requirements for smaller sellers operating through electronic commerce platforms.
The existing requirement to maintain a place of business in each State where registration is required creates difficulties for small businesses wishing to sell through warehouses located outside their home State.
Under the proposed framework, a seller will be permitted to declare the warehouse of an electronic commerce operator in another State as the seller’s principal place of business in that State.
This arrangement will require the consent of the electronic commerce operator, which will be provided automatically through the system.
The proposed facility will operate subject to specified conditions:
- The seller must have a physical presence in at least one State, which will remain the home State.
- Only one registration per PAN will be permitted in a State.
- The registration will be restricted to supplies made through electronic commerce platforms.
- A seller crossing the prescribed credit threshold will move to the ordinary registration framework.
The meeting note records that more than 90% of sellers supplying through electronic commerce platforms pass on input tax credit below ₹2.5 lakh per month.
The proposed system seeks to facilitate interstate sales for these smaller sellers while retaining the ordinary registration framework for sellers exceeding the threshold.
Uniform taxation across electronic commerce platforms
The Council has also addressed differences in tax treatment arising from the commercial and contractual models followed by different platforms.
The same service delivered to the same customer has, in certain cases, been taxed differently depending on how the platform structures its contracts.
The Council has recommended that tax treatment should be determined by the actual service delivered rather than the manner in which the transaction is routed through a platform.
The objective is to ensure that equivalent services receive equivalent tax treatment across electronic commerce models.
15. GST Rates: No Changes Recommended
The Council has not recommended any changes to GST rates at its 57th meeting.
Instead, it has decided that rate-related matters will be considered once a year at a meeting dedicated exclusively to GST rates.
The present meeting has focused on addressing the inconsistencies and ambiguities remaining after the previous year’s rate rationalisation exercise.
The recommendations seek to ensure that the treatment of transactions under GST remains consistent with the principles underlying GST 2.0.
Conclusion
The 57th GST Council meeting marks a shift in the focus of GST reforms from rate rationalisation to procedural simplification and improvements in tax administration.
The recommendations cover several areas that directly affect businesses, including registration, return filing, input tax credit, refunds, litigation, movement of goods and export transactions.
The proposed expansion of input tax credit on business expenditure, refunds relating to input services and plant and machinery, and faster automated refund processing are important measures from a working-capital perspective.
Similarly, the proposed removal of arrest powers, increase in the prosecution threshold, reduction in general penalty and restrictions on physical inspection of goods reflect the Council’s increasing reliance on technology-based detection.
The recommendations concerning electronic commerce and small taxpayers are also intended to reduce compliance difficulties and facilitate business operations.
Certain matters, including protection of genuine buyers against supplier defaults and the optional annual return-filing scheme for smaller B2C taxpayers, remain subject to further examination and consideration by the Council.
The effectiveness of the proposed reforms will depend on their implementation through the necessary legal and procedural changes.
Taken together, the recommendations seek to advance the principles of GST 2.0 by making GST administration simpler, reducing unnecessary procedural intervention and ensuring more consistent treatment of business transactions.