GST Council, 8 October 2026: what the 57th meeting means for small businesses and exporters

The 57th meeting of the GST Council, chaired by the Union Finance Minister, was held in New Delhi on 8 October 2026. Press reports had earlier given the date as 7 October. The official press release announces no general change in GST rates; its rate items are targeted. The meeting was mainly about process: registration, returns, refunds, notices, penalties and prosecution. The release runs to forty numbered items. This note picks out the ones that matter most to a proprietor, firm, company, exporter or freelancer in Mumbai and Thane.

1. Nothing has changed yet

The press release says the recommendations take effect only through circulars, notifications and amendments to the law, and that those instruments alone have the force of law. Some changes need only a notification or a circular. Others, such as withdrawing arrest powers, changing the penalty sections or extending refunds, need Parliament to amend the CGST or IGST Act, with matching changes in the State GST Acts. Until then the present law applies in full. In particular, every notice received today, however small, still needs a reply by its due date.

The release proposes dates for only a few items, and even these depend on the notifications or Act amendments being issued first:

• refunds of credit on input services in inverted-duty cases would cover credit taken on or after 1 November 2026, and refunds of credit on capital goods would cover credit taken on or after 1 April 2027;
• the revised return mechanism, after public consultation, may apply from the April 2027 return;
• the omission of rule 96(10) is to take effect from 23 October 2017 (see section 3).

2. Registration

The Council built on the three-day Rule 14A route introduced after its 56th meeting. That route is for applicants whose tax charged to registered customers (the credit they "pass on") will stay within ₹2.5 lakh a month. Our step-by-step registration guide explains how it works today. The recommendations are:

• A clear documents list. A comprehensive circular is to list the documents needed for registration, with FAQs. Form REG-01 is to get drop-down options for the prescribed documents, and the portal better navigation, tool-tips and guidance.
• Automatic amendments. Rule 19 is to be amended so that changes to registration details on the portal are accepted automatically, except a change of principal place of business. For Rule 14A registrations, a change of principal place of business would also be accepted automatically.
• Automatic cancellation on request, in two phases. In the first phase, an application to cancel (REG-16) would be accepted automatically once pending returns are filed and dues paid, if the taxpayer never passed on more than ₹2.5 lakh of credit in a month, or did so but files the final return (GSTR-10) on time. In the second phase, every cancellation application would be accepted automatically once pending returns are filed and dues paid, without the ₹2.5 lakh test, and REG-16 would carry the final-return details.
• System-based cancellation and revocation. Rules 21A and 22 are to be amended and a new Rule 23A inserted, so that the system can cancel a registration for not filing returns or not giving bank account details within a set time, and revoke the cancellation once the default is made good. Some grounds for cancellation in Rule 21 are also to be dropped.
• Small e-commerce sellers. A new Rule 14B would give automatic registration, subject to conditions, to small sellers of goods through e-commerce operators in a state where they have no physical presence. They could declare the operator's warehouse in that state as their principal place of business. The credit they pass on must stay within ₹2.5 lakh a month, not counting stock transfers between their own registrations.

3. Exporters, freelancers and refunds

Service exporters, freelancers billing overseas clients, goods exporters, and Indian branches of foreign companies should read this section carefully. "Zero-rated" claims are those for exports and supplies to SEZs; "inverted duty" claims arise where the tax on inputs is higher than the tax on the output.

• Branch-to-head-office exports. Today a supply is not an "export of services" if the Indian supplier and the foreign recipient are only establishments of the same legal person, such as an Indian branch and its foreign head office. The Council recommended deleting that condition (sub-clause (v) of section 2(6) of the IGST Act). An Indian subsidiary billing its foreign parent is a separate legal person and is not affected by this condition today.
• Payment in rupees. A circular is to clarify when export proceeds received in foreign exchange or, where permissible, in Indian rupees meet the export conditions for goods and services.
• Work on goods the customer provides. For services such as repair, testing or treatment on goods the customer makes available, section 13(3)(a) of the IGST Act currently places the supply where the work is done. That clause is to be omitted, so these services would follow the default rule in section 13(2), generally the recipient's location. Such work in India for an overseas customer could then qualify as an export if the other conditions are met. The change works both ways: an Indian business that has goods repaired or tested abroad could then owe IGST under reverse charge on that service.
• Goods delivered into an SEZ or FTWZ. Goods sold to an overseas buyer but delivered into an SEZ or free trade warehousing zone, and paid for in convertible foreign exchange or in rupees where RBI permits, are to be treated as supplies to the SEZ or FTWZ, and so zero-rated.
• Faster refunds, phase 1. Refund claims are to be acknowledged within 10 days instead of 15, with deemed acknowledgement if the officer does not respond. 90% of zero-rated and inverted-duty claims are to be provisionally sanctioned automatically, based on the system's risk evaluation. A claim for refund of the excess balance in the electronic cash ledger (GST already paid in cash on the portal) is to be sanctioned in full automatically.
• Faster refunds, phase 2. Acknowledgement is to become automatic after system checks, and zero-rated claims are to be sanctioned in full automatically, after adjusting any pending dues and based on risk evaluation.
• Less paperwork and fewer caps. Form RFD-01 is to capture data in a form the system can read, so scanned uploads would no longer be needed for zero-rated and inverted-duty claims. The ₹1,000 minimum for refunds would apply to the total of CGST, SGST/UTGST and IGST together. Rule 89(4)(C), which limits the turnover of zero-rated goods to 1.5 times the value of like goods supplied in India, is to be amended to remove that cap.
• Refund of more credits. Section 54(3) is to be amended so that refunds of accumulated credit cover capital goods for zero-rated supplies, and both input services and capital goods in inverted-duty cases. For input services this would apply to credit taken on or after 1 November 2026; for capital goods, to credit taken on or after 1 April 2027, with the refund spread over 60 months. Until the amendment, the present restrictions apply.
• Rule 96(10). This rule restricted refunds of IGST paid on exports by exporters who obtained inputs under certain concessional schemes. It was omitted from 8 October 2024 by Notification 20/2024-Central Tax. In line with a Supreme Court decision, the Council recommended that the omission take effect from 23 October 2017. Exporters affected in earlier years may wish to review their position once this is notified.

4. Notices, penalties, arrest and prosecution

• Proposed: no arrest by GST officers. The Council recommended withdrawing the arrest power completely by omitting section 69 of the CGST Act. Until the Acts are amended, section 69 continues to apply.
• Proposed: a higher prosecution limit. The release describes this as raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore. (Under section 132 as amended in 2023, the ₹1 crore figure applies to fake-invoice offences; most other offences already need more than ₹2 crore.) Clause (i) of section 132(1) is to be omitted, clauses (e) and (h) narrowed, and clause (c) limited to fraudulent credit taken without receiving goods or services, or without an invoice. Punishments are to be rationalised; the release gives no new figures.
• Proposed: no notices under ₹10,000. Show cause notices under sections 73, 74 and 74A are not to be issued where the tax involved, all heads together, is under ₹10,000. Pending notices and appeals below that amount are to be decided as if the limit had applied when they were issued. This would apply only once the Act is amended; until then, a notice below ₹10,000 must still be answered by its due date.
• Lower penalties where tax is paid. Where the full tax, interest and penalty are paid voluntarily within the time allowed, the penalty is to be treated as a "charge" rather than a penalty. In non-fraud cases, paying the tax and interest after the order would reduce the penalty to 5% of the tax: within 30 days of an order under section 73 (periods up to 2023-24) or 60 days under section 74A (2024-25 onwards). The ₹10,000 minimum penalty in non-fraud cases is to go. The maximum general penalty under section 125 is to fall from ₹25,000 to ₹10,000.
• Appeals on penalty-only orders. Where an order imposes only a penalty and no tax, the pre-deposit (the amount paid before an appeal is heard) is to be capped at ₹40 crore: ₹20 crore CGST plus ₹20 crore SGST/UTGST.
• Better notices and hearings. A circular is to set standards for notices and orders, covering quality, timeliness, alleging fraud only where the facts support it, and personal hearings. Where credit in the electronic credit ledger has been blocked under rule 86A, the taxpayer would be able to object and have a personal hearing before the officer decides on the objection.
• Goods in transit. Vehicles are to be intercepted only on specific intelligence, with the approval of an officer of at least Joint Commissioner rank. Goods are to be detained only by the state where the supplier or recipient is located or registered, not by a state they are passing through. That jurisdiction limit would not apply where there is no e-way bill or no document showing where the goods came from or are going. Confiscation under section 130 would not apply to goods or vehicles in transit.
• A validation clause. The Act is to be amended to validate notices that courts have set aside because they covered more than one financial year. Taxpayers who won on that ground should watch the wording of the amendment.

5. Returns, credits and late fees

• Late fee waiver. For taxpayers with turnover up to ₹5 crore in the previous year, the late fee for the return under section 39(1) (GSTR-3B) is to be waived if it is filed by the end of the month in which it was due. The release does not mention interest; interest under section 50 on late payment continues to apply, and the release does not cover the late fee on GSTR-1.
• Fewer blocked credits. Section 17(5) is to be amended so that credit would no longer be blocked on items including outdoor catering, health and life insurance, telecom towers, pipelines outside the factory, free samples, and goods destroyed or written off when a legally required shelf life expires. The release lists these items "inter alia", so the full list will be known only from the amendment. Until then every restriction in section 17(5), including on gifts, continues to apply.
• A revised return mechanism, possibly from April 2027. GSTR-3B is to be aligned with GSTR-1/1A/IFF for tax and with GSTR-2B for credit. Recipients would be able to accept, reject or keep pending invoices and other documents, including credit notes, in the Invoice Management System, with a time limit for pending credit notes. New rules 86C and 86D would put the credit-reversal and reverse-charge statements on a statutory footing. The mechanism is to be published for a time-bound public consultation first.
• More e-invoicing. For taxpayers with aggregate turnover of ₹5 crore and above, e-invoicing is to cover purchases from unregistered persons taxed under reverse charge, and imports of services.
• Transfers of intellectual property. A transfer of title in intellectual property, whether temporary or permanent, is to be treated uniformly as a supply of services. This is relevant to software developers, designers and writers who assign copyright to clients.
• Optional annual return for small B2C businesses. The Council approved in principle a concept note on an optional "annual return, quarterly payment" scheme for businesses with turnover up to ₹5 crore that supply only to unregistered customers. This is a concept, not a scheme yet.

6. Rates: a few targeted changes

The rate recommendations take effect only when the rate notifications are issued; until then, present rates apply. The main ones are:

• psyllium (isabgol) seeds to nil;
• delivery services (other than courier and postal) supplied through an e-commerce operator by persons not required to register, at 5% without credit, and the exemption for goods transport to unregistered persons not to apply where the goods were supplied or ordered through an operator;
• an optional 5% rate with restricted credit for electric-vehicle passenger transport and rental with operator, where battery charging is included in the price;
• reverse charge on waste and scrap of plastics, e-waste, tyres and used cooking oil bought from unregistered suppliers, with TDS of 2% on such supplies between registered persons;
• limited credit within the same line of business for restaurants and outdoor catering, hotel rooms up to ₹7,500 per unit per day, and gyms and fitness centres;
• exemptions for seed warehousing, coffee curing and certain helicopter seat-sharing services, and several classification clarifications.

Our GST rate finder shows the rates in force, and we aim to update it once these changes are notified.

7. What to do now

• Keep filing and replying as normal. Until the amendments are made, the present deadlines, late fees and notice procedures apply.
• Exporters: keep refund claims and bank realisation records in order, so that claims are ready if and when faster processing is introduced. Keep records of input-service credit from 1 November 2026 in case it becomes refundable. If you are an Indian branch billing your own head office abroad, note the proposed change, but there is no basis yet to change your invoicing.
• Sellers of goods on e-commerce platforms who want to keep stock in a platform's warehouse in another state should watch for Rule 14B.
• Businesses with unused registrations should find cancellation easier once these changes are notified, but filing all pending returns remains the condition. Filing those returns now also reduces the risk of cancellation, both under the present rules and under the proposed system-based route.

Questions we are asked

I have a GST notice for less than ₹10,000. Can I ignore it? No. The ₹10,000 limit is a recommendation. Until the Act is amended, reply by the due date. If the amendment covers pending matters as recommended, the notice may then be decided under the new rule.

Have GST rates changed? Not generally. A handful of specific goods and services are affected, and only once the rate notifications are issued.

When will these changes come in? The release does not say for most items. Rule and form changes can come by notification; changes to the Acts need legislation. We aim to update this note as the instruments are issued, so please check the date at the top before relying on it.

This note is for general information only. It summarises the GST Council's recommendations as published on 8 October 2026, states the position as on 8 October 2026, and is not legal, tax or professional advice. Recommendations take effect only when notified or enacted, and the final instruments may differ; please confirm the current position before acting.

I. H. Khan and Associates
Tax, GST and business setup advisors — Mumbai and Thane. Contact us to discuss your situation.

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