57th GST Council Meeting (8 October 2026): Recommendations on Arrest, Penalties, Refunds, ITC and Registration

The 57th GST Council meeting was held on 8 October 2026 in New Delhi under the chairpersonship of Union Finance Minister Nirmala Sitharaman. Where the 56th meeting in 2025 was about rate cuts, this one was about process: arrest and prosecution, penalties, refunds, input tax credit (ITC), registration and return mismatches.

This guide is written from the official press release issued by the Ministry of Finance through PIB on 8 October 2026 (Release ID 2320934), also published on the GST Council website, and from the CBIC notifications and circulars issued on 26 October 2026. The release itself says the decisions "would be given effect through the relevant circulars/notifications/law amendments which alone shall have the force of law". Each section below says whether an item is now notified or is still a recommendation.

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57th GST Council Meeting at a Glance

Arrest, Prosecution and Penalties

These are the headline items, and they matter most to small businesses that worry about a mismatch turning into a criminal case.

Arrest power to be withdrawn

The Council recommended complete withdrawal of arrest powers under GST by omitting section 69 of the CGST Act, 2017. Section 69 is the provision that lets the Commissioner authorise arrest for specified offences under section 132.

Prosecution only for larger cases

To retain deterrence against fraud while moving to a "trust-based" regime, the Council recommended:

1. Raising the monetary threshold for prosecution from Rs 1 crore to Rs 5 crore.
2. Omitting clause (i) of section 132(1), deleting the words "evades tax" in clause (e), and deleting "or in any other manner deals with" in clause (h).
3. Limiting clause (c) of section 132(1) to fraudulent availment of ITC without receipt of goods or services, or without an invoice or bill.
4. Rationalising the punishment for various offences under section 132.

Lower penalties and fewer small notices

The Council also recommended a statutory provision so that notices and appeals below Rs 10,000 that are pending on the day the threshold takes effect are decided as if the threshold had already applied when the notice was issued. Where full tax, interest and penalty are paid voluntarily within the specified time, the penalty would be deemed a "charge".

For appeals against orders that involve only penalty and no tax demand, the Council recommended capping the pre-deposit at Rs 40 crore (Rs 20 crore CGST and Rs 20 crore SGST/UTGST) before the Appellate Authority and the GST Appellate Tribunal, through amendments to the provisos to sections 107(6) and 112(8).

The Council also asked for a circular with guidelines for officers on the quality and timing of demand notices and orders, invoking fraud or suppression only on the merits of each case, and holding personal hearings. CBIC issued Circular 258/04/2026-GST on demand, adjudication and appeal orders on 26 October 2026. If you have a notice open today, our guide to replying to a DRC-01 show cause notice explains the current process.

Faster Refunds

The Council recommended amending section 54 of the CGST Act and the CGST Rules so refunds of excess cash ledger balance, zero-rated supplies and inverted duty structure are processed by the system in two phases.

Phase 1

• Full refund of excess balance in the electronic cash ledger sanctioned automatically, without an officer.
• Time limit for acknowledgement or deficiency memo cut from 15 days to 10 days, with deemed acknowledgement if the officer does not act within 10 days.
• For zero-rated supplies and inverted duty structure, 90% of the claim sanctioned provisionally and automatically by the system, based on its risk evaluation.

Phase 2

• System-based acknowledgement after the system verifies the application.
• For zero-rated supplies, automated sanction of the full refund after adjusting pending dues, based on risk evaluation.

The release did not give dates for either phase. Other refund changes recommended:

• Form GST RFD-01 to capture details in a system-readable format, with no scanned document uploads for zero-rated and inverted duty claims.
• Removing the cap in rule 89(4)(C) that limits zero-rated turnover of goods to 1.5 times the value of like goods supplied domestically.
• Clarifying in section 54(14) that the Rs 1,000 minimum refund applies to CGST, SGST/UTGST and IGST taken together.
• Making section 115 a standalone provision on the interest rate for refund of appeal pre-deposits, with a clarifying circular.

What CBIC has notified on refunds

Notification 05/2026-Central Tax puts most of Phase 1 into the CGST Rules. Unless a different date is shown, these apply from 1 November 2026:

The provisional refund is 90% of the claim under section 54(6). From 1 November 2026, section 54(6) also covers inverted duty refunds, because section 155 of the Finance Act, 2026 comes into force that day (Notification 03/2026-Central Tax). The same section removes the Rs 1,000 minimum refund in section 54(14) for goods exported with payment of tax. The separate Council proposal to apply the Rs 1,000 limit to CGST, SGST and IGST together has not been legislated.

Exporters can see the current filing steps in our GST refund guide for exporters under LUT.

Inverted duty refund on input services and capital goods

Until 31 October 2026, the inverted duty refund formula counts only ITC on inputs (goods). ITC on input services and capital goods stays stuck in the credit ledger. The Council recommended changing this:

Now notified in the rules. Notification 05/2026-Central Tax substitutes rule 89(5) from 1 November 2026 with this formula:

Maximum Refund Amount = (Turnover of inverted rated supply of goods and services × Net ITC ÷ Adjusted Total Turnover) − tax payable on such inverted rated supply of goods and services

"Net ITC" now means ITC on inputs plus ITC on eligible input services, plus ITC on capital goods attributable to the relevant period. "Eligible input services" means input services on which ITC was availed on or after 1 November 2026. The 2022 multiplier on the tax payable part (Net ITC ÷ ITC on inputs and input services) is gone from the new formula.

Capital goods come in from 1 April 2027. Rule 89(4) gets a new clause (G): ITC on capital goods availed on or after 1 April 2027 counts at 1/60 of the eligible ITC for each month of the relevant period, within 60 months from the month it was availed, less any reversals. From that date the RFD-01 also needs a declaration that the capital goods are still in the business and used for the relevant supplies.

The 1 November 2026 date is a cut-off for which ITC qualifies. Input service ITC availed before that date stays outside the formula. The Council had also recommended amending clause (ii) of the proviso to section 54(3) of the CGST Act; that Act amendment has not been made yet. Our inverted duty structure refund guide walks through filing.

Wider Input Tax Credit

The Council recommended amending section 17(5) of the CGST Act to remove the bar on ITC on, among other items:

• 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 release uses the words "inter-alia", so the final list will be known only from the amended Act. Until then, these remain blocked credits. See our explainer on blocked credits under section 17(5) for how the current list works.

Other ITC recommendations:

• Same line of business: limited ITC for restaurant and outdoor catering services, hotel accommodation up to Rs 7,500 per unit per day, and gym or fitness services, in the same way it is now available for passenger transport, tour operators and renting of motor vehicles.
• Second-hand vehicle dealers under the margin scheme: a clarification that ITC is allowed on spares, repairs, technology, rent, marketing and other inputs and services. The bar applies only to tax on the second-hand vehicles bought.
• Rule 86A (notified, from 1 April 2027): the officer will block a debit from the electronic credit ledger by an order in new Form DRC-26. The order lapses after one year unless lifted earlier. The taxpayer can object in Form DRC-27, and after a hearing the officer decides in Form DRC-28.
• ISD (notified): Circular 260/06/2026-GST clarifies ISD registration and distribution issues, and rules 36, 39, 54(1A) and 60 are amended so ISD credit covers input services attributable to one or more distinct persons.
• Circulars were also recommended on ITC for banks and NBFCs that opt for section 17(4) and on ITC on demonstration vehicles. These were not among the circulars issued on 26 October 2026.

Registration: Amendments, Cancellation and E-commerce Sellers

Automatic approval of amendments

Notified. A new rule 19 of the CGST Rules applies from 1 November 2026:

• A change in any particular other than the principal place of business (PPoB) is amended on submission of Form GST REG-14 and online validation on the portal. No officer approval.
• A PPoB change goes to the officer, who must approve (Form REG-15) or raise a query (Form REG-03) within 15 days. The applicant replies in Form REG-04 within 7 working days. If the officer does not act in time, the certificate is deemed amended.
• For taxpayers registered under rule 14A (the automatic route for those passing on ITC of up to Rs 2.5 lakh a month), PPoB changes are also amended on submission, from 1 December 2026.
• A change in legal name, partners, directors or similar persons applies to every registration on the same PAN. A change in constitution that changes the PAN still needs fresh registration.

Our REG-14 registration amendment guide covers the filing steps. GST practitioners get a matching rule 83C for amending enrolment in Form REG-14.

Circular 257/03/2026-GST sets out guidelines for officers handling new registration applications, and Form GST REG-01 has been substituted by the same rules notification.

Automatic cancellation on application

Notified. A new rule 20 applies from 1 November 2026:

• Apply in Form GST REG-16 within 30 days of the event that calls for cancellation (this limit does not apply on the death of a sole proprietor).
• Before applying, all returns due up to that date must be filed, and if GSTR-1 or IFF is filed for a period, GSTR-3B for that period too.
• The registration is suspended from the date of application until the cancellation is completed.
• The portal cancels automatically (Form REG-38) where returns are filed and dues paid, and either the output tax on supplies to registered persons never exceeded Rs 2.5 lakh in any month since registration, or the final return in Form GSTR-10 has been filed within the time set in the rule.
• Other applications go to the officer, who must decide within 15 days; otherwise the cancellation is deemed approved.

A new rule 21 (cancellation grounds) also applies now. From 1 April 2027, new rules 21A, 22 and 23A bring in system-based suspension, cancellation and revocation: the portal can suspend a registration (Form REG-31) for non-filing of returns or missing bank account details, deem it cancelled if not fixed within 30 days, and revoke the cancellation automatically once the returns are filed, if revocation is sought within 180 days. For the filing steps, see our GST registration cancellation and revocation guide and the GSTR-10 final return guide.

Small sellers on e-commerce platforms

Notified. A new rule 14B applies from 1 November 2026. A supplier of goods already registered in its home State can register in another State or UT where it has no physical presence by declaring the warehouse of an e-commerce operator that collects TCS under section 52 as its PPoB. Conditions:

• Output tax on supplies to registered persons (other than distinct persons on the same PAN) must not exceed Rs 2.5 lakh a month.
• The e-commerce operator must consent within 7 working days, or the application lapses.
• Aadhaar authentication is required, with verification and physical checks done in the home State.
• Only one rule 14B registration per State on the same PAN. Sellers on marketplaces can read about the operator's role in our guide to GST TCS by e-commerce operators under section 52.

Returns: Fixing GSTR-1 and GSTR-3B Mismatches from April 2027

Mismatches between GSTR-1, GSTR-2B and GSTR-3B are the main source of system intimations and demand notices for small businesses. The Council recommended a set of changes to be brought into force from the return for April 2027:

• Changes to GSTR-1, GSTR-1A and IFF for better reconciliation with GSTR-3B.
• New rule 86D: an "Electronic Statement of tax paid on Reverse charge basis and input tax credit claimed".
• New rule 86C: an "Electronic Credit Reversal and Reclaim Statement".
• New sub-rules 61(1A) and 61(1B) to correct liability and ITC in GSTR-3B so they align with GSTR-1/1A/IFF and GSTR-2B.
• New sub-rule 60(6A) to put the Invoice Management System (IMS) accept, reject or pending options into the rules, with conditions on how long a credit note can be kept pending.
• Form DRC-03 to capture the underlying invoice for which payment is made.

The proposed mechanism will first be placed in the public domain for time-bound consultation. Meanwhile, our GSTR-1 vs GSTR-3B mismatch reconciliation guide and IMS guide cover what to do today.

Late fee waiver for small taxpayers

The Council recommended waiving late fee on a delayed return under section 39(1) for taxpayers with annual turnover up to Rs 5 crore in the preceding financial year, if the delayed return is filed by the end of the month in which it was due. Example: if the GSTR-3B due on the 20th is filed on the 28th of the same month, no late fee would apply once this is notified. Until then, the current GST late fee and interest rules apply.

Other compliance changes

• Sections 16, 37 and 39 to be aligned with the section 16(4) time limit for ITC.
• E-invoicing (notified, from 1 January 2027): Notification 04/2026-Central Tax extends e-invoicing to supplies received from unregistered persons on reverse charge and to import of services, for taxpayers already covered by e-invoicing.
• Section 9(5) clarified so e-commerce operators pay tax on notified services whatever their business model.
• A validation clause for notices that courts have struck down for covering multiple financial years.
• Circulars issued: 258/04/2026-GST (guidelines on demand, adjudication and appeal orders) and 259/05/2026-GST (how pre-deposit under sections 107(6) and 112(8) is paid). The Rs 40 crore pre-deposit cap for penalty-only appeals needs an Act amendment and is not law yet.

ARQP: a new optional scheme for B2C businesses

The Council approved in principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with aggregate turnover of up to Rs 5 crore in the preceding financial year who supply only to unregistered persons (B2C). Shops, restaurants and other consumer-facing businesses should watch for the detailed scheme. Nothing has been notified yet.

E-way Bill and Movement of Goods

The Council recommended amending sections 68, 129 and 130 of the CGST Act so that:

1. A vehicle carrying goods can be intercepted only on specific intelligence and with authorisation from an officer not below Joint Commissioner.
2. Inspection, detention or seizure can happen only where the supplier or recipient is located or registered in that State. No interception in transit States.
3. Where no e-way bill has been generated, or there is no document showing origin or destination, goods can be inspected, detained or seized in any State.
4. Confiscation under section 130 will not apply to goods or vehicles in transit.

Transporters should keep generating e-way bills correctly. Point 3 means a missing e-way bill still allows action anywhere. Our step-by-step e-way bill guide covers generation.

Exports of Services and Goods

• Branch-to-branch exports: omit section 2(6)(v) of the IGST Act, so services supplied to a foreign office or branch of the same entity can qualify as export of services.
• Goods made available by a foreign client: omit section 13(3)(a) of the IGST Act, so place of supply follows the default rule (location of the recipient). This helps Indian service providers working on goods sent by foreign customers.
• Delivery in an SEZ or FTWZ: an explanation in section 16(1) of the IGST Act treats goods sold to an overseas buyer but delivered in an SEZ or FTWZ, with payment in convertible foreign exchange (or rupees where RBI permits), as a supply to the SEZ/FTWZ.
• A circular on receiving export payment in foreign exchange or Indian rupees.
• Transfer of title in IPRs, temporary or permanent, to be treated uniformly as a supply of services under Schedule II of the CGST Act.

Rate and Exemption Changes

The release lists several rate clarifications and exemptions. None is in force until the rate notifications are issued.

Goods

Services

What Small Businesses Should Do Now

1. Apply the notified rule changes from 1 November 2026: the new refund timelines, the inverted duty formula, automatic non-PPoB amendments and the 30-day limit for cancellation applications. Everything else, including the Rs 25,000 general penalty, section 69 and current GST rates, stays as it is.
2. Tag input service invoices from 1 November 2026 if you claim inverted duty refunds. ITC on them, availed from that date, now counts in Net ITC.
3. Track blocked ITC items such as health insurance and outdoor catering separately, so you can claim credit once section 17(5) is amended (subject to the final wording and its start date).
4. Clean up GSTR-1, GSTR-2B and GSTR-3B mismatches now. The new correction mechanism starts only with the April 2027 return.
5. B2C businesses up to Rs 5 crore should follow the ARQP scheme as it is notified.

Tax Garden will update this post as CBIC issues further notifications and as Parliament amends the Act.

Sources: Ministry of Finance, "Recommendations of the 57th Meeting of the GST Council", PIB Release ID 2320934, 8 October 2026 (also published on gstcouncil.gov.in); CBIC Notifications 03/2026, 04/2026 and 05/2026-Central Tax and Circulars 257/03/2026 to 260/06/2026-GST, all dated 26 October 2026 (taxinformation.cbic.gov.in); Finance Act, 2026 (No. 4 of 2026), sections 153 to 155.