The GST Council met in New Delhi on 8 October 2026, chaired by Union Finance Minister Nirmala Sitharaman. Its 57th meeting was less about tax rates and more about how GST is run: registration, returns, refunds, notices and enforcement.
For a small business, most of the changes cut paperwork, speed up money owed to you and lower the risk of harsh action over small mistakes. A few, like the new return matching rules from April 2027, will ask for cleaner books.
Recommendations, not law yet.
Every change below needs a notification, a circular or an amendment to the CGST or IGST Act before it applies. Until then, the current rules stay in force. We will update this post as notifications come out.
₹5 crore
New prosecution threshold, up from ₹1 crore
90%
Of export and inverted duty refunds sanctioned provisionally by the system
₹10,000
Tax amount below which no show cause notice is issued
Source: PIB, Recommendations of the 57th Meeting of the GST Council, 8 October 2026
Part 1 · At a glance
57th GST Council meeting at a glance
The decisions most likely to affect small and mid-sized businesses, and when each one is expected to apply.
Area | What the Council recommended | When |
|---|---|---|
Arrest and prosecution | Section 69 arrest powers withdrawn. Prosecution threshold raised from ₹1 crore to ₹5 crore. | Needs Act amendment |
Notices and penalties | No show cause notice below ₹10,000. Maximum general penalty cut from ₹25,000 to ₹10,000. | Needs Act amendment |
Refunds | Automatic refund of excess cash balance. 90% provisional refund for exports and inverted duty cases. | To be notified |
Accumulated ITC refund | Inverted duty refunds to include input services. Capital goods ITC refunded over 60 months. | ITC from 1 Nov 2026 / 1 Apr 2027 |
Blocked ITC | Six credits under Section 17(5) opened up, including insurance, outdoor catering and free samples. | Needs Act amendment |
Returns | New rules to match GSTR-3B with GSTR-1 and GSTR-2B. Formal IMS rules. A separate RCM statement. | From April 2027 return |
Late fees | Waiver for turnover up to ₹5 crore if the return is filed within the month it was due. | To be notified |
Registration | New Rule 14B for small e-commerce sellers. Most amendments and cancellations approved automatically. | To be notified |
E-invoicing | Extended to RCM purchases from unregistered persons and import of services, at ₹5 crore and above. | To be notified |
E-way bills | Vehicles stopped only on specific intelligence. No interception in transit states. | Needs Act amendment |
8 October 2026
Council recommends
The 57th meeting agrees the changes.
Law changes
CGST / IGST Act amended
Arrests, prosecution, penalties, blocked ITC, e-way bill checks.
Rule changes
Notifications and circulars
Rules, rates, refunds, returns and registration procedures.
Then
Change applies
From the date in the notification or amendment.
Figure 1.
How a Council recommendation becomes a rule you must follow. Until the last step, the old rule still applies.
Part 2 · Enforcement
What changes for GST notices, penalties and arrests?
Enforcement moves toward fraud and away from small paperwork slips.
The Council recommended withdrawing arrest powers completely by omitting Section 69, raising the prosecution threshold from ₹1 crore to ₹5 crore, and issuing no show cause notice where the tax involved is below ₹10,000. Penalties in non-fraud cases also come down.
Section 69 arrest powers to be removed
Section 69 of the CGST Act lets a Commissioner order an arrest for serious offences. The Council recommended omitting the section, which would withdraw arrest powers under GST entirely.
Prosecution threshold raised from ₹1 crore to ₹5 crore
Prosecution under Section 132 would apply only above ₹5 crore. The offences are narrowed too. The ITC offence would cover only credit taken without receiving the goods or services, or without an invoice.
No notice below ₹10,000, and lower penalties
₹10,000 floor. No show cause notice under Sections 73, 74 or 74A where the tax (CGST + SGST + IGST + cess) is below ₹10,000. Pending cases below this amount would be decided as if the rule already applied.
5% penalty. In non-fraud cases, the penalty drops to 5% if you pay the tax and interest within 30 days of the order (60 days for Section 74A cases).
No minimum penalty. The ₹10,000 minimum penalty in non-fraud cases is removed.
Lower general penalty. The maximum penalty under Section 125 falls from ₹25,000 to ₹10,000.
Voluntary payment counts. If you pay the full tax, interest and penalty on your own within the time limit, the penalty is treated as a charge, not a penalty order.
A small, honest mistake should cost a small amount to fix.
For appeals against orders that only levy a penalty, with no tax demand, the pre-deposit would be capped at ₹40 crore (₹20 crore CGST and ₹20 crore SGST/UTGST).
Part 3 · Refunds
How will GST refunds get faster?
Refunds move from officers to the system, in two phases.
In the first phase, the GST system would refund excess cash ledger balance automatically and sanction 90% of export and inverted duty refunds provisionally. Officers would get 10 days instead of 15 to acknowledge a claim or raise a deficiency memo.
Phase 1
System-led refunds
Excess balance in your electronic cash ledger refunded in full, automatically
Acknowledgement or deficiency memo within 10 days, down from 15. If none is issued, the claim is treated as acknowledged
90% of zero-rated and inverted duty refunds sanctioned provisionally, based on system risk checks
Phase 2
Fully automated
Acknowledgement issued automatically after system verification
Zero-rated refunds sanctioned in full by the system, after adjusting any pending dues
Refunds of ITC on input services and capital goods
Businesses with an inverted duty structure could include ITC on input services in their refund, for ITC availed on or after 1 November 2026. Exporters and inverted duty cases could also get a refund of ITC on capital goods, spread over 60 months, for ITC availed on or after 1 April 2027.
Other refund fixes
Form RFD-01 would take system-readable data, so scanned documents are no longer needed for export and inverted duty claims.
The cap on zero-rated turnover of goods in Rule 89(4)(C), 1.5 times the domestic value of like goods, would be removed.
The ₹1,000 minimum refund would apply to the total across CGST, SGST/UTGST and IGST, not to each head separately.
Part 4 · Input tax credit and returns
What changes for input tax credit (ITC) and returns?
More credit opens up, and from April 2027 your returns must match more closely.
Six credits blocked under Section 17(5) would open up. From the return for April 2027, new rules would tie GSTR-3B more closely to GSTR-1 and GSTR-2B, and the Invoice Management System (IMS) would get formal rules.
Blocked credits under Section 17(5) that open up
Outdoor catering
Health and life insurance
Telecom towers
Pipelines laid outside factory premises
Free samples
Goods destroyed or written off because their legally required shelf life expired
Formal rules for the Invoice Management System
A new Rule 60(6A) would let you accept, reject or keep pending each supplier document in IMS, with accepted documents flowing into GSTR-2B. It would also limit how long a credit note can stay pending.
New statements and correction rules
Rule 86D. An electronic statement of tax paid under reverse charge and the ITC claimed on it.
Rule 86C. An Electronic Credit Reversal and Reclaim Statement.
Rules 61(1A) and 61(1B). A way to correct GSTR-3B so your liability matches GSTR-1, 1A or IFF, and your ITC matches GSTR-2B.
DRC-03. When you pay tax voluntarily, you would declare the invoices behind the payment.
These return changes start from the return for April 2027, after a public consultation.
Why this matters
From April 2027, a gap between your purchase register and GSTR-2B will be harder to carry forward. Reconciling every month is the habit to build now.
One more change helps when credit is stuck. If an officer blocks credit in your electronic credit ledger under Rule 86A, you would be able to object and get a personal hearing before a decision.
Part 5 · Small business relief
What relief do businesses up to ₹5 crore get?
A late fee waiver now, and a simpler payment scheme on the way.
If your turnover in the previous year was up to ₹5 crore, the late fee on a delayed return under Section 39(1), such as GSTR-3B, would be waived when you file by the end of the month in which it was due.
Late fee waiver for businesses up to ₹5 crore
Say your return is due on the 20th and you file on the 28th of the same month. Under the recommendation, you would pay no late fee. File in the next month and the usual late fee applies.
Annual Return, Quarterly Payment (ARQP)
The Council approved in principle an optional ARQP scheme for businesses with turnover up to ₹5 crore that sell only to unregistered buyers (B2C). It is at the concept stage, so the details will follow.
Part 6 · Registration
Rule 14B: easier GST registration for e-commerce sellers
Selling online into a state where you have no office gets simpler.
Small sellers who sell through an e-commerce operator in a state where they have no physical presence could register there by declaring the operator’s warehouse as their principal place of business. Registration would be automatic if the conditions are met.
Who qualifies under Rule 14B
You pass on ITC of up to ₹2.5 lakh a month, not counting stock transfers between your own registrations
You supply through an e-commerce operator
You have no physical presence in that state or union territory
Faster amendments and cancellations
Most changes to registration details would be approved automatically, except a change of principal place of business. For taxpayers on the Rule 14A automatic route, even that change would be automatic.
Voluntary cancellation in Form REG-16 would be accepted automatically once pending returns are filed and dues paid, in two phases. A clearer document checklist and drop-down boxes in Form REG-01 should also cut rejections of new applications.
Part 7 · E-invoicing and e-way bills
What changes for e-invoicing and e-way bills?
E-invoicing covers more documents, and vehicle checks get tighter rules.
For businesses with annual turnover of ₹5 crore and above, e-invoicing would extend to purchases from unregistered persons where you pay tax under reverse charge, and to import of services. Vehicle stops for e-way bill checks would need specific intelligence.
E-invoicing extended to RCM purchases and imported services
The ₹5 crore e-invoicing limit itself does not change. What changes is scope: if you are already above it, plan for more documents to pass through the Invoice Registration Portal once this is notified.
Stricter conditions for e-way bill checks and vehicle stops
Specific intelligence only. A vehicle could be stopped only on specific intelligence, authorised by a Joint Commissioner or a higher officer.
No checks in transit states. Inspection and detention would happen only in a state where the supplier or recipient is registered.
One exception. Goods with no e-way bill, or no documents showing origin and destination, could still be checked anywhere.
No confiscation in transit. Section 130 confiscation would not apply to goods or vehicles in transit.
Part 8 · Rates
GST rate changes from the 57th meeting
Few rate changes this time. These are the ones most likely to touch small businesses.
Goods or service | Change |
|---|---|
Psyllium seeds (isabgol) | NIL GST, whether fresh, chilled, frozen or dried |
Re-treaded tractor tyres | Rate aligned with new tractor tyres |
Waste and scrap from unregistered suppliers | Plastic, e-waste, tyre waste and used cooking oil come under reverse charge, and 2% TDS is introduced |
Second-hand vehicle dealers (margin scheme) | ITC allowed on inputs and services other than the vehicles bought |
EV passenger transport and rental with operator | Option to pay 5% with restricted ITC, where charging is included in the price |
Delivery through e-commerce operators | 5% without ITC for delivery by suppliers not required to register, and for delivery of goods ordered through an e-commerce operator |
Restaurants, outdoor catering, hotels up to ₹7,500 a night, gyms | Limited ITC allowed for services from the same line of business |
Storage of sowing seeds, coffee curing for growers | Exempt |
Helicopter seat-sharing to and from the North East, Sikkim and Bagdogra | Exempt |
Part 9 · Timeline
When will these changes apply?
Only three dates are fixed so far. Everything else applies from its notification.
8 Oct 2026
Council recommends
57th meeting in New Delhi
1 Nov 2026
Input services ITC
ITC from this date counts for inverted duty refunds
1 Apr 2027
Capital goods ITC
ITC from this date refundable over 60 months
April 2027 return
New return matching
GSTR-3B matched to GSTR-1 and GSTR-2B, formal IMS rules
Figure 2.
The dates the Council has fixed. Arrest, prosecution, penalty, late fee and registration changes apply from their own notification or Act amendment.
Part 10 · What to do now
What should small businesses do now?
A short checklist to work through this month.
Keep following the current rules.
Nothing changes until it is notified. Do not stop filing or paying on the strength of a recommendation.
File within the due month.
If your turnover is up to ₹5 crore, filing by the end of the due month is exactly what the late fee waiver rewards.
Reconcile purchases with GSTR-2B every month.
The April 2027 matching rules will make old gaps harder to carry. Start clean now.
Track input services ITC from 1 November 2026.
If you have an inverted duty structure, this ITC will count towards your refund.
List expenses blocked under Section 17(5).
Insurance, outdoor catering and free samples may become claimable once the change is notified.
Selling online in other states?
Watch for Rule 14B before renting space just for GST registration.
The 57th Council meeting points in one direction: less friction for businesses that keep clean records, and tighter matching for everyone else. The sooner your invoices, purchases and returns line up, the more of these changes work in your favour.
Sources and further reading
Recommendations of the 57th Meeting of the GST Council — Press Information Bureau, Ministry of Finance, 8 October 2026
Indirect Tax Alert: Recommendations of 57th GST Council Meeting — BDO India, 9 October 2026
