The 57th GST Council meeting, held on 8 October 2026, has recommended a wide set of process reforms under GST. The focus is not on rate changes, but on reducing compliance friction through fewer notices, automated refunds, simplified registration, rationalised prosecution provisions and smoother movement of goods across States.
For Company Secretaries, the recommendations have direct implications for board reporting, litigation assessment, contingent liabilities, refund cash flows, compliance calendars and internal controls. These are recommendations of the GST Council and will take effect only through the relevant circulars, notifications and law amendments.
The Council has recommended:
These are recommendations of the GST Council. They do not become law merely because they have been announced. Section 69 still exists, the prosecution threshold remains Rs. 1 crore, and the present penalty provisions, blocked-credit restrictions and refund procedures continue to apply until the amendments are enacted and notified.
The official release states that the recommendations will be given effect through the relevant circulars, notifications and law amendments, which alone shall have the force of law.
Therefore, a Company Secretary should avoid advising the board that “arrest powers are gone” or that “section 17(5) reversals can stop.” The safer position is that the Council has recommended these changes, and businesses should prepare for them while continuing to comply with the law as it stands today. Arrest Powers and Prosecution The Council has recommended complete withdrawal of arrest powers under GST by omission of section 69 of the CGST Act. If enacted, this would remove the power to arrest under GST altogether. The Council has also recommended increasing the monetary threshold for prosecution from Rs. 1 crore to Rs. 5 crore. In addition, section 132(1) is proposed to be amended as follows:
This does not mean that GST fraud has been decriminalised. Tax, interest, penalty and prosecution beyond the prescribed threshold will continue. The proposed change is intended to focus prosecution on clear fraud rather than honest interpretational disputes.
For directors, CFOs and Company Secretaries, the message for the board should be measured: the exposure is expected to reduce, but it does not disappear.
The Council has recommended issuance of a circular to provide comprehensive guidelines to tax officers for streamlining the issuance of demand notices, adjudication orders and appeal orders. The circular is expected to cover the quality of notices and orders, timely issuance, proper invocation of fraud, wilful misstatement or suppression of facts only on merits, and adherence to principles of natural justice, including personal hearings.
The Council has also recommended that no show cause notice be issued where the tax involved is below Rs. 10,000, computed together for CGST, SGST/UTGST, IGST and cess. Pending notices and appeals below this amount are proposed to be decided as if the threshold had applied when they were issued.
In non-fraud cases, a reduced penalty of 5% has been recommended where tax and interest are paid within:
30 days of the adjudication order in section 73 matters; and
60 days of the adjudication order in section 74A matters.
The minimum penalty of Rs. 10,000 in non-fraud cases is proposed to be removed. The maximum general penalty under section 125 is proposed to be reduced from Rs. 25,000 to Rs. 10,000.
For penalty-only appeals, the pre-deposit is proposed to be capped at Rs. 40 crore, comprising Rs. 20 crore under CGST and Rs. 20 crore under SGST/UTGST. This applies where the order involves only penalty and no demand of tax.
For Company Secretaries, this is an appropriate time to revisit the litigation register. Small notices, penalty-only appeals and old demands may require a fresh assessment. Contingent liability disclosures may also need revision once the amendments are notified.
The Council has recommended amendments to section 54 and the related rules to provide for system-based processing and sanctioning of refund claims relating to excess balance in the electronic cash ledger, zero-rated supplies and inverted duty structure. The proposal is to be implemented in two phases.
dispense with the requirement to upload scanned documents for zero-rated supply and inverted duty structure refunds. The 1.5 times cap on zero-rated goods turnover under rule 89(4)(C) is also proposed to be removed.
The Council has further recommended amendment of section 54(14) to clarify that the Rs. 1,000 refund threshold shall apply to the total refund amount, that is, the amounts under CGST, SGST/UTGST and IGST taken together.
The Council has also recommended amendment of section 115 to make it a standalone provision regarding the rate of interest applicable for refund of pre-deposit, along with a clarificatory circular.
Exporters and businesses operating under an inverted duty structure should begin factoring the proposed 90% provisional refund into cash-flow planning. The balance 10% should continue to be treated separately, as it will depend on verification, risk evaluation and adjustment of pending dues.
The Council has recommended amendment of clause (ii) of the proviso to section 54(3) and the related rules to extend refund of accumulated ITC in the following cases:
Capital goods ITC in cases of refunds pertaining to zero-rated supplies.
Input services ITC and capital goods ITC in cases of refunds pertaining to inverted duty structure.
The proposed conditions are:
Input services ITC will be available where availed on or after 1 November 2026.
Capital goods ITC will be available where availed on or after 1 April 2027.
Refund of capital goods ITC is proposed to be spread over 60 months.
This may ease working-capital constraints for businesses whose ITC remains blocked due to the nature of inputs or capital goods.
The Council has recommended amendment of section 17(5) to remove restrictions on availment of ITC for certain supplies, including:
Outdoor catering.
Health and life insurance.
Telecommunication towers.
Pipelines laid outside factory premises.
Free samples.
Goods destroyed or written off on expiry of shelf life, as required by law
The Council has also recommended limited ITC in the same line of business for restaurant and outdoor catering services, hotel accommodation services up to Rs. 7,500 per unit per day, and gym and fitness services, in the same manner as currently available for passenger transportation, tour operator and motor vehicle renting services.
This is a significant proposed shift. However, companies should not immediately stop reversing credit. The final wording, exclusions, conditions and effective date will determine the actual position.
A large share of GST notices arises from differences between GSTR-1, GSTR-3B and GSTR-2B. The Council has recommended an alternate mechanism, proposed to be brought into force from the return for April 2027, to reduce such mismatches.
The proposed framework includes:
Enhancements to GSTR-1, GSTR-1A and IFF for better reconciliation with GSTR-3B.
An Electronic Statement of tax paid on reverse charge basis and ITC claimed under proposed rule 86D.
An Electronic Credit Reversal and Reclaim Statement under proposed rule 86C.
Rules 61(1A) and 61(1B) for correction of liability and ITC in GSTR-3B, aligning them with GSTR-1/1A/IFF and GSTR-2B.
Statutory backing for the Invoice Management System through proposed rule 60(6A), including the period for which a credit note may remain pending.
Amendments to FORM GST DRC-03 to capture details of the underlying invoice.
A circular to clarify the manner of furnishing correct information of ITC and reversals in GSTR-3B in the context of IMS and the proposed statements.
The Council has recommended placing the proposed revised mechanism in the public domain for time-bound consultation. The Union Finance Minister has been authorised to approve necessary changes based on stakeholder feedback.
Company Secretaries should ask tax teams to map current IMS workflows, RCM reporting, ITC reversals and reclaim processes now, rather than waiting until March 2027.
For businesses moving goods across States, the proposed e-way bill changes may be among the most practical reforms. The Council has recommended amendments to sections 68, 129 and 130 of the CGST Act to provide that:
A conveyance carrying goods can be intercepted only on specific intelligence and with authorisation from an officer not below the rank of Joint Commissioner.
Inspection and further action for detention or seizure can be taken where either the supplier or recipient is located or registered in the State where interception is made.
No interception is proposed in transit States.
Where no e-way bill has been generated, or the conveyance is not carrying documents showing the origin or destination of goods, the goods can still be inspected, detained or seized irrespective of jurisdiction.
Confiscation under section 130 will not apply to goods or conveyances in transit.
Logistics teams, transporters and warehouse staff should update their documentation SOPs. The correct e-way bill, invoice, delivery challan and supporting documents should travel with every consignment.
The Council has recommended issuance of a comprehensive circular specifying documents and information required for GST registration, along with FAQs. FORM GST REG-01 is proposed to be amended to provide drop boxes for selection of prescribed documents or information. The GST Portal is also proposed to provide a user-friendly interface with clear navigation, drop-down lists, tooltips and contextual guidance.
The Council has recommended amendment of rule 19 to provide for automatic acceptance of amendments to all registration particulars, except those relating to the Principal Place of Business. For taxpayers registered under rule 14A through the automatic route, amendments to all registration particulars, including the Principal Place of Business, are proposed to be accepted automatically.
The registration cancellation process is proposed to be simplified in two phases:
Phase 1: Applications for cancellation in FORM GST REG-16 are proposed to be accepted automatically where all pending returns are filed and dues are paid, in cases where the taxpayer has not passed on ITC exceeding Rs. 2.5 lakh in any month since registration, or where the taxpayer has passed on ITC exceeding Rs. 2.5 lakh in a month but has filed the final return in FORM GSTR-10 within the specified time.
Phase 2: All cancellation applications are proposed to be accepted automatically once pending returns are filed and dues are paid. FORM GST REG-16 is proposed to be amended to allow GSTR-10 details to be furnished within the application itself.
For suo motu cancellation, the Council has recommended amendments to rules 21, 21A and 22, and insertion of rule 23A, to provide a system-based cancellation and revocation mechanism based on non-compliance and subsequent compliance relating to non-filing of returns or non-furnishing of bank-account details.
A new rule 14B is proposed for small suppliers making supplies of goods through e-commerce operators. Such suppliers, where they have no physical presence in a State/UT and intend to pass on ITC not exceeding Rs. 2.5 lakh per month, excluding stock transfers between distinct persons, may register by declaring the ECO’s warehouse in that State/UT as their Principal Place of Business. Registration is proposed to be granted automatically, subject to conditions.
The Council has recommended omission of sub-clause (v) of clause (6) of section 2 of the IGST Act, 2017, to remove the distinct-person condition for a supply to qualify as export of services. This is expected to facilitate refunds for Indian service providers supplying services to or through foreign offices or branches.
A circular is proposed to clarify issues relating to receipt of payment in convertible foreign exchange or Indian rupees, wherever permitted by the RBI, for export of goods and services.
The Council has also recommended omission of clause (a) of section 13(3) of the IGST Act, 2017, so that the place of supply for services where goods are made physically available by the recipient will follow the recipient’s location under the default provision.
Further, an explanation is proposed to section 16(1) of the IGST Act to provide that where goods are supplied to an overseas buyer but delivered in an SEZ/FTWZ, and payment is received in convertible foreign exchange or Indian rupees where permitted by the RBI, the supply will be deemed to be a supply of goods to an SEZ/FTWZ.
Late fee: Waiver is proposed for delayed filing of returns under section 39(1), where the return is filed by the end of the month in which it was due, for taxpayers with annual turnover up to Rs. 5 crore in the preceding financial year.
E-invoicing: E-invoicing is proposed to be extended to domestic supplies received from unregistered persons where tax is payable under RCM, and to import of services, for taxpayers with aggregate annual turnover of Rs. 5 crore and above.
ARQP: An optional Annual Return Quarterly Payment scheme has been approved in principle for taxpayers with aggregate turnover up to Rs. 5 crore in the preceding financial year, engaged exclusively in B2C supplies.
Rule 86A: A mechanism is proposed to enable a taxpayer to file an objection against blocking of any amount in the electronic credit ledger and to avail a personal hearing before the officer decides the objection.
IPR: Transfer of title in intellectual property rights, whether temporary or permanent, is proposed to be uniformly treated as a supply of services.
GSTAT: Provisions are proposed to be aligned with the Tribunals Reforms Act, 2026 and related rules.
Sections 16, 37 and 39: Amendments are proposed to align provisions relating to outward supplies and returns with the time limit for availment of ITC under section 16(4).
Section 9(5): Clarification is proposed regarding ECO liability to pay tax on notified services, irrespective of the business model followed.
Validation clause: A validation clause is proposed for notices held invalid by courts on the ground of being issued for multiple financial years.
Circulars: Clarificatory circulars are proposed on the ISD mechanism, ITC for banking companies, financial institutions and NBFCs opting for section 17(4), pre-deposit issues, ITC on demonstration vehicles, and omission of rule 96(10) with effect from 23 October 2017.
The Council has also recommended the following clarifications and changes:
Sublimation paper is proposed to be classified under heading 4809, with past cases regularised on an “as is where is” basis.
The toy notification entries are proposed to cover all categories of toys under heading 9503 of the Customs Tariff Act, 1975.
Sea-weed extract based bio-stimulants registered under the Fertiliser Control Order are proposed to be classified under heading 3101 as fertilisers.
Suppliers of second-hand vehicles under the margin scheme are proposed to be allowed ITC on inputs and input services other than the tax paid on procured second-hand vehicles.
Specified waste and scrap, including plastics, electrical and electronic waste, tyre waste and used cooking oil, are proposed to be brought under RCM where supplied by an unregistered person to a registered person. TDS at 2% is proposed for specified B2B supplies of such waste and scrap.
Psyllium seeds are proposed to attract NIL GST, irrespective of whether fresh, chilled, frozen or dried.
The GST treatment of re-treaded tractor tyres is proposed to be aligned with new tractor tyres.
Compensation cess not levied by CSDs on two- and four-wheelers for 1 July 2017 to 30 September 2022, and on aerated drinks for 1 July 2017 to 31 March 2022, is proposed to be exempted.
An optional 5% GST rate with restricted ITC is proposed for passenger transport and motor vehicle rental services using electric vehicles, where battery-charging cost is included in consideration.
Delivery services, other than courier and postal services, supplied through an ECO are proposed to be brought under section 9(5), with GST at 5% without ITC.
Clarifications are proposed for statutory and ancillary recoveries in motor vehicle leasing transactions.
Exemptions are proposed for helicopter passenger transport on specified routes, storage or warehousing of seeds meant for sowing, coffee curing, SPFO services, import of services by Indian establishments of foreign shipping lines in specified cases, and NHAI Toll Operate Transfer model transactions.
A self-certification mechanism is proposed for research and development services for exemption eligibility.
Clarification is proposed that notional interest under funds transfer pricing in banks is covered by the definition of “interest.”
Practical Action Points for Company Secretaries
Brief the board and audit committee. Explain the proposed removal of arrest powers, the higher prosecution threshold and the proposed penalty changes. The correct message is reduced exposure, not zero exposure.
Review the litigation register. Identify notices below Rs. 10,000, penalty-only appeals, non-fraud demands and old multi-year matters. Assess which matters may become irrelevant and which settlement decisions may change based on the proposed 30-day and 60-day payment windows.
Revisit contingent liabilities. Once the amendments are notified, update disclosures and provisioning assumptions where justified.
Prepare for April 2027. Map IMS, RCM, credit reversal and reclaim workflows. Participate in the consultation process through industry bodies where the proposed mechanism creates practical difficulties.
Re-examine ITC positions. Do not change positions immediately. Wait for the notified text, especially for section 17(5) items and input-service refunds under the inverted duty structure.
Clean up GST registrations. Identify dormant GSTINs, update authorised signatory, bank and return details, and close registrations that no longer serve a business purpose.
Update logistics SOPs. Ensure drivers, transporters and warehouse teams carry complete documentation and understand the proposed changes relating to transit States.
Plan refund cash flows. Exporters and inverted-duty businesses should model the proposed 90% provisional refund separately from the balance amount.
Maintain a notification tracker. Track amendments to the CGST Act, SGST Acts, rules, forms, circulars and press releases, along with effective dates.
Example 1: Small demand notice
Suppose a company receives a notice involving tax of Rs. 8,000. Under the recommendation, no show cause notice should be issued below Rs. 10,000 of tax. If such a notice is already pending, it is proposed to be decided as if the Rs. 10,000 threshold applied at the time of issuance.
Example 2: Export refund
Assume an exporter has a refund claim of Rs. 1 crore for zero-rated supplies. Under Phase 1, the system may sanction 90% provisionally, subject to risk evaluation. That would mean Rs. 90 lakh. The remaining Rs. 10 lakh should not be assumed as immediately available cash, since it will depend on verification and final sanction.
Dates to Monitor
Item
Proposed timeline
Refund of input services ITC under inverted duty structure
ITC availed on or after 1 November 2026
Alternate mechanism for liability and ITC correction
From the return for April 2027
Refund of capital goods ITC
ITC availed on or after 1 April 2027; refund spread over 60 months
Reduced 5% penalty window
30 days under section 73; 60 days under section 74A, from the adjudication order
Omission of rule 96(10)
Proposed to be effective from 23 October 2017
Other recommendations
Effective only after notification
The author opines that the 57th GST Council meeting signals a shift towards automation, fewer officer interventions and a more trust-based compliance environment, while retaining strong consequences for clear fraud. The proposal to omit section 69, raise the prosecution threshold to Rs. 5 crore, simplify refunds, relax certain blocked-credit restrictions and address invoice mismatches could materially reduce compliance friction.
Company Secretaries should now focus on briefing the board accurately, reviewing litigation exposure, updating controls and tracking the final notifications. The direction is welcome, but the real benefit will emerge only when the amendments are enacted and notified.