The GST Council’s 57th meeting, held in New Delhi on 8 October 2026 under Finance Minister Nirmala Sitharaman, recommended removing arrest powers under GST, raising the prosecution threshold from ₹1 crore to ₹5 crore, and automating GST refunds in two phases. These are recommendations, not operative law. They take effect only when circulars, notifications or amendments to the law give them force.
Recommended, not yet law
The package was published as a summary of Council recommendations in a Press Information Bureau (PIB) release from the Ministry of Finance dated 8 October 2026. The PIB states that the recommendations will be given effect through relevant circulars, notifications or amendments to the law. Until such an instrument is issued, the existing GST provisions continue to apply, and a news report or summary should not be treated as the legal text.
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The meeting moved attention away from last year’s rate rationalisation and toward process: registration, returns, refunds, adjudication, input tax credit (ITC), exports and enforcement, alongside trade facilitation and clarifications. Prime Minister Narendra Modi’s post of the same day, reproduced by the Prime Minister’s Office, summed up the intent: “The focus is clear: Faster decisions. Lower compliance costs. Automated refunds. Trust-based administration.”
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Arrest powers and prosecution
Arrest powers
The Council recommended a complete withdrawal of GST arrest powers by omitting section 69 of the Central Goods and Services Tax (CGST) Act, 2017.
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The ₹5 crore threshold and linked offence changes
The Council also recommended raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore. The threshold is one part of a connected set of proposals, which also include:
- omitting one offence clause;
- deleting specified language in two clauses;
- narrowing another ITC offence so that it covers fraudulent availment of credit made without receipt of goods or services, or without an invoice or bill;
- rationalising the punishments attached to offences.
Fines, imprisonment and penalties
News On AIR, the public broadcaster, reported in its contemporaneous coverage that the choice between a fine, imprisonment, or both would be left to judicial discretion. It also reported that late filing, mistakes or delayed payment would still lead to recovery, interest and a proportionate penalty. The PIB release is the primary source for the legal recommendation; the broadcast is a secondary summary.
A separate proposal would reduce the general penalty that applies where no specific penalty is prescribed. No revised amount has been published in the coverage of the recommendation, so the change should be treated as directional until the amending instrument appears.
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The refund changes amend section 54 of the CGST Act and related rules so that refund processing runs on system-based workflows. They are proposed in two phases.
Phase one
- Excess balance in the electronic cash ledger is refunded automatically, in full.
- The deadline for an acknowledgement or a deficiency memo falls from 15 days to 10 days. If neither is issued in time, acknowledgement is deemed.
- The system provisionally sanctions 90% of eligible zero-rated or inverted-duty refund claims, after risk assessment.
Phase two
- Acknowledgement is automated after system verification.
- Eligible zero-rated claims receive automated full sanction, after adjusting any pending dues and applying system risk assessment.
- Refund applications become machine-readable.
How the two phases compare
| Element | Phase one (proposed) | Phase two (proposed) |
|---|---|---|
| Excess electronic cash ledger balance | Refunded automatically in full | Not stated in the PIB summary |
| Acknowledgement or deficiency memo | Due within 10 days (previously 15); deemed acknowledgement if neither is issued | Automated after system verification |
| Zero-rated claims | 90% provisionally sanctioned after risk assessment | Automated full sanction after adjusting pending dues and risk assessment |
| Inverted-duty claims | 90% provisionally sanctioned after risk assessment | Not stated in the PIB summary |
| Form of refund application | Not stated in the PIB summary | Machine-readable |
So refunds will be automatic in part, not in whole. The excess ledger balance is refunded automatically in phase one, and most eligible zero-rated and inverted-duty claims receive a provisional sanction, but that sanction covers 90% of the claim. Full automated sanction is proposed in phase two and is limited to eligible zero-rated claims. The only timeline change stated in the coverage is the shortened acknowledgement window, from 15 days to 10.
Other refund recommendations
The Council also recommended removing a specified turnover cap for refunds on zero-rated goods. The coverage does not state the amount of the cap that would be removed.
Input tax credit and inverted-duty refunds
The Council recommended extending accumulated ITC refunds to certain capital goods for zero-rated supplies, and to input services and capital goods under inverted-duty refunds. The two dates that matter are set out below.
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| Element | Applies to credit availed | Terms |
|---|---|---|
| Input-service credit for inverted-duty refunds | On or after 1 November 2026 | Qualifies for inverted-duty refunds |
| Eligible capital-goods credit refunds | On or after 1 April 2027 | Refund spread over 60 months |
The release frames these dates as applying to the relevant ITC refund categories; check the final instrument for which capital goods qualify.
Easing ITC restrictions on specified items
The Council also recommended easing ITC restrictions on the following specified items and services:
- outdoor catering;
- health and life insurance;
- telecom towers;
- pipelines outside factory premises;
- free samples;
- goods destroyed or written off on expiry, where destruction is legally required.
The list names specific items. It does not widen ITC across business expenses generally.
Registration, amendments and cancellation
Registration amendments and the REG-01 form
The Council recommended clearer registration instructions and FAQs, along with a redesigned REG-01 form and portal interface. Amendments to registration particulars would be accepted automatically, with one major exception: changes to the principal place of business are excluded for most registrants. For taxpayers on the specified automatic registration route, all particulars, including the principal place of business, would be accepted automatically.
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Cancellation and revocation
Eligible cancellation applications would be accepted automatically in phases, after outstanding returns are filed and dues are paid. The Council also recommended system-based cancellation and revocation in specified non-compliance cases.
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Small goods suppliers selling through e-commerce operators
A proposed rule 14B would let small goods suppliers that sell through e-commerce operators register in a state where they have no physical presence. The route is subject to conditions, including an ITC-passing limit and a declaration that the platform warehouse is the principal place of business. The coverage does not give the ITC-passing limit figure, and eligibility should be checked against the final rule.
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The Council recommended enhancements to GSTR-1, GSTR-1A and IFF, along with a new mechanism for correcting liability and ITC reporting, so that GSTR-3B aligns with outward-supply and ITC records. According to the release, these return amendments may apply from the April 2027 return. The Council also recommended a time-bound public consultation on the revised mechanism.
Goods in transit and e-way bills
The transit proposals matter most to logistics operators and transporters. Under the recommendation:
Quick Recap
- A vehicle carrying goods could be intercepted only on specific intelligence.
- Interception must be authorised by an officer not below the rank of Joint Commissioner.
- Detention or seizure would generally be limited to the state where the supplier or recipient is located or registered. Transit states would not intercept.
- Exceptions include a missing e-way bill, or documents that do not show the origin or destination of the goods.
- Confiscation provisions would not apply to goods or vehicles in transit.
Exports, place of supply and other changes
Exports and place of supply
- A condition that can prevent services between related establishments in India and overseas offices from qualifying as exports would be removed.
- Questions on foreign-currency or permitted rupee payments would be clarified.
- Place-of-supply treatment would change for services involving goods made physically available by the customer.
- A further proposal addresses goods delivered in a special economic zone (SEZ) or free-trade warehousing zone for an overseas buyer.
Notices, hearings and small taxpayers
- Common standards would apply to notices.
- A hearing mechanism would be introduced for objections to amounts blocked in the electronic credit ledger.
- Late-fee relief would apply to some small taxpayers if a delayed return is filed by the end of its due month.
- An optional annual-return, quarterly-payment scheme for qualifying B2C taxpayers with turnover up to ₹5 crore is at the in-principle stage. The coverage does not set out its mechanics.
What to check before acting
- Use the PIB release to establish what was recommended, and the final circular, notification or amending Act to establish what applies.
- Look for the instrument on the CBIC and GST portal notifications pages before changing filing, refund or registration practice.
- Match each item to its own trigger date. ITC dates depend on when credit is availed, and return changes depend on the return period.
- Confirm eligibility conditions for the small-supplier registration route, the cancellation process and the optional scheme; each depends on conditions that are not yet final.
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