GST Council Reforms 2026: A Practical Guide for MSMEs

Overview: The 57th GST Council meeting has recommended changes to simplify registration and return compliance for small businesses. The proposals include conditional late-fee relief for eligible taxpayers with turnover up to ₹5 crore, a simplified registration route for qualifying e-commerce sellers and an optional Annual Return Quarterly Payment (ARQP) scheme approved in principle for eligible B2C businesses. MSMEs should understand these proposals while continuing to follow existing GST requirements.

GST compliance becomes time-consuming for MSMEs when registration applications face queries, return figures do not match, or delayed filings attract late fees. The GST Council’s latest recommendations address several of these issues, with proposed changes to registration, return reconciliation and filing options for eligible small businesses. 

Here is what these proposals could mean for your business and what you should continue doing under the existing rules:

1. Conditional Late-Fee Relief

The Council has recommended waiving late fees on delayed returns under Section 39(1) of the Central Goods and Services Tax (CGST) Act, 2017, for taxpayers whose turnover in the preceding financial year did not exceed ₹5 crore.

The proposed waiver is subject to a filing deadline: the delayed return must be filed by the end of the month in which it was due. Businesses should check the applicable notification before assuming that outstanding late fees qualify for relief.

2. Proposed ARQP Scheme

The Council approved in principle an optional Annual Return Quarterly Payment (ARQP) scheme for businesses with aggregate turnover of up to ₹5 crore in the preceding financial year that make exclusively business-to-consumer (B2C) supplies to unregistered persons.

The proposal would allow eligible businesses to file an annual return while paying tax quarterly. The scheme is not yet an available filing option; businesses must wait for its final rules and implementation details.

3. Simpler Registration for E-commerce Sellers

The Council recommended a simplified registration mechanism for eligible suppliers of goods selling through e-commerce operators in states where they have no physical presence.

Under the proposed route, qualifying sellers could declare an e-commerce operator’s warehouse as their principal place of business in that state, subject to prescribed conditions, which include an input tax credit threshold of ₹2.5 lakh per month. This could make interstate expansion easier without requiring sellers to establish separate premises in every state.

4. Improved Return Reconciliation

Proposed changes to GSTR-1, GSTR-1A and GSTR-3B aim to reduce mismatches between reported tax liabilities and input tax credit (ITC). The revised mechanism is intended to take effect from the April 2027 return period.

Until then, businesses should continue reconciling invoices, accounting records, tax liabilities and ITC claims before filing returns.

What Should MSMEs Do Now?

• Review pending returns and registration details.
• Keep invoices and accounting records accurate.
• Monitor official notifications before changing filing practices.

SetIndiaBiz Support

SetIndiaBiz supports startups and MSMEs with GST registration, amendments, return filing, reconciliation and cancellation documentation. Let our team manage your GST compliance requirements while you focus on running and growing your business. To speak to our Executive visits setindiabiz.com today.