Overview: The Finance Ministry is scheduled to invite public comments on draft GST return rules, revised forms and a related circular through MyGov from November 1st to 30th, 2026. The proposals follow the 57th GST Council meeting on the 8th October and address mismatches in tax liability and input tax credit (ITC). The Council recommended applying the alternative correction mechanism from the April 2027 return period, subject to the required legal changes.
Introduction
A difference between sales reported in GSTR-1 and tax liability declared in GSTR-3B can lead to reconciliation work and GST notices. Similar problems arise when ITC claimed in GSTR-3B does not match the credit reflected in GSTR-2B. The government now plans to revise the return framework to address these issues.
The draft GST return changes will be opened for public consultation in November 2026. Businesses should use this opportunity to examine the proposed reporting and correction mechanisms and identify practical difficulties before the rules are finalised. For the wider policy context, see our GST Council reforms overview.
Why the GST Return Consultation Matters
CBIC Commissioner Gaurav Singh, as reported by Financial Express, has said that nearly 80% of GST notices arise from return mismatches. The government intends to reduce such notices and system-generated intimations by improving the alignment of tax liability and ITC across GST returns.
Consider a business that reports outward supplies in GSTR-1 but declares a different tax liability in GSTR-3B. The difference may require reconciliation and explanation. Likewise, a business claiming ITC without properly accounting for the credit reflected in GSTR-2B may face questions about the amount claimed.
These problems can consume time for accounts teams and delay the resolution of compliance issues. The proposed reforms aim to provide clearer mechanisms for reporting and correcting such differences. However, they will not remove the need to maintain accurate records or establish ITC eligibility.
Six Key Areas Covered by the Proposed GST Return Changes
The GST Council’s recommendations cover six important areas of return reporting and reconciliation, setting out the proposed amendments and mechanisms.
1. GSTR-1, GSTR-1A and GSTR-3B Mismatch Resolution
The Council recommended enhancements to GSTR-1, GSTR-1A and the Invoice Furnishing Facility (IFF) to improve reconciliation with GSTR-3B.
It also recommended inserting Rule 61(1A) in the CGST Rules to provide a mechanism for correcting tax liability reported in GSTR-3B so that it aligns with the liability details furnished through GSTR-1, GSTR-1A or IFF.
This is relevant to businesses that discover differences between their outward-supply records and the liability reported in their summary return. The final rules will determine how the correction mechanism operates and the conditions businesses must satisfy.
2. Electronic Statement for Reverse-Charge Transactions
Reverse-charge transactions require businesses to account for tax payable by the recipient and the corresponding ITC, where eligible. Errors in recording these transactions can create differences between tax payments and credit claimed.
The Council recommended inserting Rule 86D to introduce an Electronic Statement of Tax Paid on Reverse Charge Basis and Input Tax Credit Claimed on the GST portal.
The proposed statement is intended to support accurate reporting of reverse-charge liability and related ITC. Businesses dealing with imported services and other supplies liable to reverse charge should review how these transactions are recorded in their accounting systems.
3. Invoice Management System and GSTR-2B Reconciliation
The Invoice Management System (IMS) already exists on the GST portal. The Council’s recommendation concerns further rule-based provisions governing its operation and relationship with ITC reporting.
The proposed insertion of Rule 60(6A) would provide a statutory framework allowing recipients to accept, reject or keep eligible inward-supply documents pending for the purpose of generating GSTR-2B, subject to prescribed conditions. These include provisions governing the period for which a credit note may remain pending.
For businesses, the practical concern is whether supplier-uploaded documents match purchase records and whether the underlying transaction supports the ITC claim. Accounts teams should review these records regularly rather than wait until return filing to investigate differences.
The final rules will determine the detailed conditions governing these actions and their effect on ITC reporting.
4. Electronic Credit Reversal and Reclaim Statement
Businesses may need to reverse ITC in certain circumstances and reclaim it later when the applicable conditions are satisfied. Poor tracking can result in duplicate claims, missed reclaims or differences between internal records and filed returns.
The Council recommended inserting Rule 86C to introduce an Electronic Credit Reversal and Reclaim Statement on the GST portal. Its purpose is to facilitate accurate reporting of ITC reversed and subsequently reclaimed in GSTR-3B.
Businesses should maintain records showing why credit was reversed, the relevant transaction and the circumstances in which it becomes eligible for reclaim. A dedicated statement is intended to improve the tracking of these movements, although taxpayers will still need to verify the eligibility and accuracy of each claim.
5. Invoice Details in Form GST DRC-03
Form GST DRC-03 is used to make specified payments towards tax, interest, penalty and other amounts under the GST framework.
The Council recommended amending the form to capture details of the underlying invoice for which payment is made. This should improve the identification and reconciliation of payments with the relevant transactions.
Businesses should retain supporting records and ensure that payment details correspond with the underlying liability. The proposed amendment may improve traceability, but it does not automatically settle every dispute or prevent further departmental action.
6. Correction of ITC Reported in GSTR-3B
The Council also recommended inserting Rule 61(1B) to provide a mechanism for correcting ITC reported in GSTR-3B so that it aligns with the ITC made available in GSTR-2B.
This complements the proposed liability-correction mechanism and the other reconciliation measures. Businesses should compare their purchase registers, supplier-reported invoices, GSTR-2B and ITC claimed in GSTR-3B to identify recurring differences.
The Council further recommended issuing a circular clarifying ITC reporting and reversals in GSTR-3B in the context of IMS, the credit reversal and reclaim statement, and the reverse-charge statement.
GST Return Reform Timeline: November 2026 to April 2027
| Milestone | Expected timeline | What it means |
|---|---|---|
| Public consultation opens | November 1, 2026 | Draft rules, forms and the related circular are scheduled to be made available on MyGov. |
| Consultation closes | November 30, 2026 | Stakeholders can submit feedback through the prescribed process. |
| Proposed correction mechanism | April 2027 return period | The Council recommended implementation of the alternative mechanism for correcting liability and ITC, subject to the required legal changes. |
The November consultation and the proposed April 2027 implementation are separate stages. Publication of the draft documents will allow businesses to review the actual provisions rather than rely solely on the Council’s summary of its recommendations.
The final rules, amendments, notifications and portal changes will determine the applicable requirements.
What Businesses Should Do Before the New GST Return Rules Take Effect
Businesses do not need to wait until April 2027 to identify weaknesses in their existing reconciliation processes. A few practical steps can help accounts teams prepare.
- Review sales reconciliation: Compare sales records with GSTR-1 and the tax liability declared in GSTR-3B. Investigate differences before they become recurring compliance issues.
- Check ITC records: Compare purchase registers with GSTR-2B and the ITC claimed in GSTR-3B. Record the reasons for differences and verify the eligibility of the credit.
- Review reverse-charge transactions: Check that supplies liable to reverse charge are identified correctly and that tax payments and eligible ITC are recorded consistently.
- Track credit reversals and reclaims: Maintain supporting records for reversals and subsequent reclaims so that the same credit is not claimed twice.
- Review supplier invoices in IMS: Ensure that inward-supply documents are checked against purchase records and that discrepancies are followed up with suppliers.
- Submit practical feedback: Once the draft documents appear on MyGov, businesses and industry associations can identify provisions that may create operational difficulties and submit specific suggestions before the consultation closes.
Until the relevant amendments and notifications take effect, businesses should continue following the applicable GST requirements. They should not change their filing practices solely on the basis of the Council’s recommendations.
Setindiabiz Support
Setindiabiz supports businesses with GST compliance, return filing and reconciliation of sales, tax liability and input tax credit. These processes require accurate records and regular checks across accounting data, GST returns and supporting documents.
Businesses can review their existing reconciliation practices before the proposed changes take effect. Our experts support this work and help businesses assess the applicable changes once the final rules and notifications are issued.
FAQs
The Finance Ministry is scheduled to invite comments through MyGov from November 1 to November 30, 2026. Businesses should review the draft documents when published and submit feedback through the prescribed process.
The GST Council recommended that the alternative mechanism for correcting liability and ITC apply from the April 2027 return period, subject to the required legal changes.
Proposed Rule 86C covers the Electronic Credit Reversal and Reclaim Statement, intended to improve the reporting of ITC reversed and reclaimed in GSTR-3B. Proposed Rule 86D covers the electronic statement of tax paid under reverse charge and ITC claimed on such supplies.
No. The proposed changes aim to reduce notices and system-generated intimations caused by mismatches in liability and ITC. Businesses will still need to maintain accurate records, claim eligible credit and comply with other GST requirements.
Businesses can review their current processes and prepare for the proposed changes, but they should continue following the applicable rules until the relevant amendments, notifications and portal changes take effect.
The proposed GST return form changes aim to improve reconciliation of tax liability and ITC while providing clearer mechanisms for correcting reporting differences. The November 2026 consultation gives businesses an opportunity to identify practical difficulties before the framework is finalised.
