57th GST Council Meeting 2026: 13 Major Recommendations for Businesses, MSMEs and Taxpayers

1. Removal of Arrest Powers Under GST

One of the most significant recommendations is the complete withdrawal of arrest powers under GST, through the proposed omission of Section 69 of the Central Goods and Services Tax (CGST) Act.

The recommendation represents a shift towards a more trust-based tax administration. Businesses have often expressed concerns about the consequences of stringent enforcement provisions.

If implemented as recommended, this change would reduce the risk of arrest under the GST provisions concerned. However, businesses must continue to comply with tax laws, maintain accurate records and report transactions correctly.

2. GST Refunds to Become Faster Through Automation

The Council recommended a more automated refund mechanism to reduce delays and manual intervention. Key proposals include:

• 90% provisional refund: Eligible refund claims relating to zero-rated supplies and the inverted duty structure could receive 90% of the claimed amount provisionally, based on system-driven risk assessment.
• Faster acknowledgement: The proposed deadline for issuing a refund acknowledgement or deficiency memo would be reduced from 15 days to 10 days.
• Automatic cash ledger refunds: Refunds of excess balances in the electronic cash ledger would be sanctioned automatically by the system, without officer intervention.

These measures could improve cash flow and reduce the time businesses spend following up on refund applications. For exporters and manufacturers, faster access to eligible refunds could help release funds otherwise tied up in the GST system.

3. GST Refunds on Input Services Under Inverted Duty Structure

The Council recommended expanding the refund of accumulated Input Tax Credit (ITC) under the inverted duty structure. Under the proposal, accumulated ITC on input services would become eligible for refunds for credit availed on or after 1 November 2026.

An inverted duty structure occurs when the GST rate on inputs is higher than the rate on the final product. This can result in accumulated input tax credit that businesses cannot fully utilise against their output tax liability.

The proposed change could provide relief to eligible manufacturers and other affected businesses by reducing blocked working capital. Businesses should maintain proper purchase invoices, reconcile their ITC and monitor the applicable rules before claiming refunds.

4. Input Tax Credit on Employee Health and Life Insurance

The Council recommended removing specified restrictions on ITC under Section 17(5) of the CGST Act, including restrictions relating to employee health and life insurance.

This proposal could allow eligible businesses to claim credit for GST paid on qualifying insurance expenses, subject to the applicable provisions and implementation requirements. For employers, this may reduce the effective cost of providing group insurance benefits.

However, employers should not assume that every insurance premium automatically qualifies. The final legal provisions and conditions will determine the availability and extent of ITC.

5. Foreign Branch Transactions and Export of Services

The Council recommended changes to the definition of export of services under the Integrated Goods and Services Tax (IGST) Act. The proposed amendment would remove the existing condition that the supplier and recipient must not be establishments of the same person for a service to qualify as an export.

This could facilitate refund claims for Indian service providers supplying services to or through their foreign offices and branches. For IT companies, consultants and other service exporters, the recommendation could help clarify the GST treatment of cross-border operations.

Businesses involved in international transactions should review their contracts, invoices and supporting documentation in line with the final amendments.

6. GST Notices Below ₹10,000

To reduce unnecessary litigation and administrative work, the Council recommended a minimum threshold of ₹10,000 for issuing GST show-cause notices. The proposed threshold would cover the combined amount of CGST, SGST/UTGST, IGST and cess involved.

The Council also recommended that pending notices and appeals below this threshold be dealt with as though the minimum threshold had applied when the notice was issued, subject to the proposed statutory provision.

This measure could reduce the compliance burden for smaller tax disputes. It does not mean that taxpayers can ignore GST obligations or that all existing demands below ₹10,000 have already been cancelled. Taxpayers should continue responding to valid notices and obtain professional advice where required.

7. General GST Penalty Reduced from ₹25,000 to ₹10,000

The Council recommended reducing the maximum general penalty under Section 125 of the CGST Act from ₹25,000 to ₹10,000. This proposal is intended to make the penalty framework more proportionate.

The change relates to the specified general penalty provision. It should not be interpreted as a universal cap on every GST penalty, interest charge or tax demand. Businesses should still prioritise timely return filing, accurate invoicing, proper record-keeping and reconciliation of tax liabilities.

8. Prosecution Threshold Increased to ₹5 Crore

The Council recommended increasing the monetary threshold for prosecution under GST from ₹1 crore to ₹5 crore. The proposal forms part of wider recommendations to rationalise GST offences and punishment provisions.

For businesses, this could reduce criminal proceedings for certain cases involving lower amounts, while retaining enforcement against serious tax fraud and evasion. The proposed changes also include narrowing certain offence provisions, including provisions relating to fraudulent ITC claims.

Importantly, a higher prosecution threshold does not eliminate tax liability, interest or civil penalties. Businesses must continue meeting their statutory obligations.

9. Easier GST Registration for E-Commerce Sellers

The Council recommended a simplified registration mechanism for eligible small suppliers selling goods through electronic commerce operators (ECOs). Under the proposed mechanism, qualifying sellers could operate in states where they do not have a physical business presence without having to establish a separate place of business in every such state.

The recommendation includes specific conditions, such as declaring the e-commerce operator’s warehouse in the relevant state as the principal place of business and meeting the applicable ITC-related conditions.

This could help small sellers expand across India through online marketplaces while reducing the cost and complexity of multi-state operations. E-commerce sellers should check their eligibility and the final registration requirements before changing their existing registration arrangements.

10. Smoother Movement of Goods Across States

The Council recommended changes to GST provisions governing the interception, inspection and detention of goods in transit. Under the proposal, vehicles carrying goods could be intercepted only on the basis of specific intelligence and with authorisation from an officer not below the rank of Joint Commissioner.

Inspection and further action would generally be linked to whether the supplier or recipient is located or registered in the state where interception occurs. Transit-state restrictions would apply, subject to specified exceptions, including cases involving missing e-way bills or required documents.

These measures aim to reduce unnecessary stoppages and support smoother movement of goods. Transporters should continue carrying valid invoices, e-way bills and other required documents.

11. Standardised GST Notices and Demand Proceedings

The Council recommended issuing common guidelines for GST notices, adjudication orders and appeal orders. The proposed guidance would address the quality and timely issuance of notices, the proper application of fraud-related provisions and adherence to principles of natural justice, including personal hearings.

Standardised procedures could improve consistency in tax administration and make it easier for taxpayers to understand the allegations or demands raised against them. Maintaining organised documentation and responding to notices within the prescribed timelines will remain essential.

12. Additional Relief for Exporters and Businesses

The Council also recommended wider ITC refund eligibility relating to certain capital goods and input services. For eligible capital-goods ITC relating to zero-rated supplies and the inverted duty structure, the proposed refund mechanism would be spread over 60 months, covering qualifying credit availed on or after 1 April 2027.

These changes could help reduce the accumulation of unused credits and ease working capital constraints. Businesses should review the final provisions carefully before incorporating these proposals into their tax planning.

13. Optional Annual Return Quarterly Payment (ARQP) Scheme for Small Businesses

The Council approved in principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme. The proposed scheme is intended for taxpayers with aggregate turnover of up to ₹5 crore in the preceding financial year who are engaged exclusively in supplies to unregistered persons, or B2C supplies.

The proposal could simplify compliance for eligible small businesses by offering an alternative compliance arrangement. However, approval in principle does not mean the scheme is already operational. Businesses should wait for the final framework, eligibility conditions and implementation instructions.