57th GST Council Meeting 2026: Key Recommendations & Updates

The 57th GST Council made recommendations on process reforms (registration, returns, refunds, adjudication), clarifications on goods and services, and ease-of-living measures. These take effect only through notifications, circulars and law amendments.

A. Process Reforms

Registration

• A circular with FAQs will list the documents required. FORM GST REG-01 will have drop boxes, and the portal will be more user-friendly.
• Rule 19: all amendments will be accepted automatically except a change in Principal Place of Business (PPoB). For Rule 14A registrations, PPoB changes are also automatic.
• Cancellation on the taxpayer's own application (REG-16) will be accepted automatically once returns are filed and dues paid, in two phases. In Phase 2, GSTR-10 details can be furnished in the application itself.
• Officer-initiated cancellation: fewer grounds under Rule 21. For non-filing of returns and non-furnishing of bank details, the system will cancel and also revoke on compliance (Rules 21A, 22, new Rule 23A).
• New Rule 14B: small sellers on ECO platforms can declare the ECO's warehouse as PPoB in States where they have no presence. The condition is ITC pass-on of not more than ₹2.5 lakh per month.

Returns

• GSTR-1/1A/IFF will be enhanced for better reconciliation with GSTR-3B.
• The RCM Liability/ITC Statement (Rule 86D), the Credit Reversal and Reclaim Statement (Rule 86C) and IMS (Rule 60(6A)) will get statutory backing.
• FORM GST DRC-03 will capture the underlying invoice details.
• New Rule 61(1A) and 61(1B) will allow correction of liability and ITC in GSTR-3B, from the April 2027 return (to be confirmed on notification).

Refunds (Section 54)

• Phase 1: excess cash ledger balance is refunded automatically. The time for acknowledgement or deficiency memo is cut from 15 to 10 days, with deemed acknowledgement. For zero-rated and IDS claims, 90% is paid provisionally.
• Phase 2: full automatic refund for zero-rated supplies, after adjusting dues.
• RFD-01 will be system-readable, with no scanned uploads for zero-rated and IDS claims.
• The 1.5 times cap on export turnover (Rule 89(4)(C)) is removed.
• The ₹1,000 minimum refund limit applies to CGST, SGST/UTGST and IGST taken together.
• Section 115 becomes standalone for interest on pre-deposit refund.
• Refund of ITC on input services (IDS) is allowed for ITC availed on or after 01.11.2026. For capital goods (IDS and zero-rated), it applies to ITC availed on or after 01.04.2027, refunded over 60 months.
• Omission of Rule 96(10) is to be clarified as effective from 23.10.2017.

Dispute Resolution

• A circular will set guidelines on the quality and timeliness of notices and orders, fraud/suppression invoked only on merits, and personal hearings.
• No SCN if tax involved is below ₹10,000 (Sections 73, 74, 74A). Pending notices and appeals below this limit will be decided as if the limit applied.
• Reduced 5% penalty in non-fraud cases if tax and interest are paid within 30 days (Section 73) or 60 days (Section 74A) of the order. The ₹10,000 minimum penalty is removed in non-fraud cases.
• Section 125 general penalty is reduced from ₹25,000 to ₹10,000.
• Pre-deposit for penalty-only orders is capped at ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST).

B. Other Major Reforms

• Blocked credit (Section 17(5)): relaxed for outdoor catering, health and life insurance, telecom towers and pipelines outside factory, free samples, and goods destroyed or written off on expiry of shelf life.
• Exports (IGST Act):
• The "distinct person" condition is removed for export of services.
• Section 13(3)(a) is omitted.
• A circular will clarify payment in foreign exchange or INR.
• Supplies to an overseas buyer delivered in an SEZ/FTWZ are deemed supplies to an SEZ/FTWZ.

C. Ease of Living

• Arrest powers withdrawn (Section 69 omitted). Prosecution threshold is raised from ₹1 crore to ₹5 crore.
• E-way bill: interception only on specific intelligence, authorised by an officer not below Joint Commissioner. No interception in transit States. Section 130 confiscation does not apply to goods and conveyances in transit.
• Transfer of title in IPR, temporary or permanent, is treated as a supply of services.
• Rule 86A: objection and personal hearing against blocking of the electronic credit ledger.
• No late fee on GSTR-3B for turnover up to ₹5 crore if filed by the end of the month in which it was due.
• In-principle approval for an optional Annual Return Quarterly Payment (ARQP) scheme for B2C-only taxpayers up to ₹5 crore.
• Time limits under Sections 37 and 39 to be aligned with Section 16(4). E-invoicing is extended to RCM purchases from unregistered persons and import of services for turnover ₹5 crore and above.
• Circulars on ISD, ITC for banks/NBFCs under Section 17(4), pre-deposits, and demonstration vehicles.

D. Goods

• Sublimation paper: heading 4809.
• Toys: entries cover all toys in heading 9503 (other than electronic toys).
• Seaweed-extract biostimulants: heading 3101, if registered under the Fertiliser Control Order.
• Psyllium seeds (Isabgol): NIL rate.
• Re-treaded tractor tyres: rate aligned with new tractor tyres.
• Used vehicle margin scheme: ITC allowed on inputs and input services. The restriction applies only to the vehicle purchased.
• Plastic, e-waste, tyre scrap and used cooking oil: RCM (unregistered to registered) and 2% TDS (registered to registered).
• CSD/Unit Run Canteens: compensation cess not levied on past sales is exempted.

E. Services

• EV passenger transport/rental with operator: 5% option with restricted ITC where battery charging cost is included.
• ECO-related transport/delivery:
• Entry 21A exemption for GTA is withdrawn for goods supplied or ordered through an ECO.
• Delivery services (other than courier and postal) through an ECO are taxed at 5% without ITC, and covered under Section 9(5) where the provider is not liable to register.
• Limited ITC in same line of business: allowed for restaurant/outdoor catering, hotels up to ₹7,500 per unit per day, and gym/fitness services.
• Exemptions:
• Helicopter seat-sharing in the North-East, Sikkim and Bagdogra.
• Storage of seeds for sowing.
• Coffee curing.
• SPFO services.
• NHAI TOT upfront amount.
• Import of services by Indian establishments of foreign shipping lines (without consideration).
• R&D (Entry 44A): self-certification by head of institution.
• TOT O&M services: special valuation and time of payment procedure.
• Motor vehicle leasing recoveries and Funds Transfer Pricing in banks: clarifications to be issued.

Important: These are GST Council recommendations, not automatically effective law. Applicability will depend on the relevant notifications, statutory amendments and effective dates.

Source: ICAI GST Update-271 – 57th GST Council Meeting

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