Overview: At its 57th meeting on 8 October 2026, the GST Council recommended process reforms after GST 2.0 rate rationalisation. Proposals cover refunds, ITC, registration, exports and enforcement across IT services, manufacturing, e-commerce, employers, agriculture and logistics. Businesses should prepare, but follow current rules until implementation.
Introduction
Businesses need to prepare for the next phase of GST compliance. The latest GST Council recommendations could affect how companies claim refunds, manage input tax credit, register across states and document transactions. From exporters and manufacturers to online sellers and transporters, understanding these proposed changes now can help businesses avoid compliance gaps and plan ahead. Here is how the recommendations could affect key sectors.
Sector-Wise Impact of GST 2.0 Reforms
| Sector | GST Council Recommendation | Compliance Change |
|---|---|---|
| IT, ITeS and GCCs | Services via an Indian company’s own overseas branch could qualify as exports, subject to conditions. Certain testing, repair, certification, research and processing of foreign-owned goods in India could also qualify, even if the goods remain here. Export-payment rules would align with RBI requirements. | Review contracts, invoices, payment evidence and refund eligibility. |
| Manufacturing and exporters | Refunds are proposed for inverted-duty input-service ITC from 1 November 2026 and eligible plant-and-machinery ITC for zero-rated/inverted-duty supplies from 1 April 2027, spread over 60 months. | Check eligibility and maintain credit and refund records. |
| Employers, hotels and service aggregators | ITC restrictions are proposed to ease for employer-paid health and life insurance, outdoor catering, telecom towers, pipelines outside factories, free samples and goods destroyed or written off on expiry where legally required. ITC would also be allowed for specified services bought and resupplied in the same line of business, including hotel accommodation up to ₹7,500 per night, restaurant/catering, passenger transport, beauty and healthcare, cosmetic/plastic surgery and fitness services, subject to conditions. | Retain invoices and eligibility evidence; eligible credits may reduce tax costs. |
| E-commerce and small sellers | Eligible small suppliers of goods could use an e-commerce operator’s warehouse as their principal place of business in states/UTs where they lack premises, subject to conditions and a ₹2.5 lakh monthly ITC pass-through limit, excluding specified stock transfers. Platform tax liability for notified services would be clarified regardless of business model. The Hindu BusinessLine separately reported a uniform 5% rate without ITC for specified e-commerce deliveries; check the final notification for scope. | Sellers could expand interstate with fewer premises; platforms should review registration and delivery arrangements. |
| Pharmaceuticals and agriculture | ITC is proposed for free samples and goods destroyed after expiry where required by law. Exemptions were recommended for warehousing seeds meant for sowing and specified coffee-curing services supplied to cultivators. | Retain destruction records and verify exemptions before changing invoices. |
| Logistics and transport | Goods vehicles could be intercepted only on specific intelligence with authorisation from an officer of Joint Commissioner rank or above. Routine transit-state interception would be restricted and confiscation provisions would not apply to goods and conveyances in transit. Missing e-way bills or origin/destination documents can still trigger inspection, detention or seizure. | Maintain required e-way bills and origin/destination documents; documentation duties remain. |
Cross-Sector Compliance Changes
Refund acknowledgement would fall from 15 to 10 days; without acknowledgement or a deficiency memo within that period, a claim would be deemed acknowledged. A risk-based system would provisionally sanction 90% of eligible zero-rated and inverted-duty refunds within three working days after acknowledgement. Excess electronic cash-ledger balances would be refunded automatically.
Registration reforms would standardise documents, guide portal filing, automate amendments (subject to principal-place-of-business exceptions) and simplify cancellation after pending returns and dues are cleared. Return changes would reconcile GSTR-1/1A/IFF with GSTR-3B and add an electronic statement for reverse-charge tax paid and ITC claimed. E-invoicing would extend to specified domestic reverse-charge supplies from unregistered persons and imported services for taxpayers with annual turnover of ₹5 crore or more. Return-reconciliation changes are proposed from the April 2027 return.
Eligible taxpayers with turnover up to ₹5 crore in the preceding financial year could receive late-fee relief for a delayed return if filed by the end of the month in which it was due. An optional Annual Return Quarterly Payment scheme received in-principle approval for eligible businesses making only B2C supplies.
The Council recommended withdrawing GST officers’ arrest powers under Section 69, raising the prosecution threshold from ₹1 crore to ₹5 crore and cutting the maximum general penalty from ₹25,000 to ₹10,000. Notices would not be issued for tax below ₹10,000, including relevant pending notices and appeals. A ₹40 crore combined pre-deposit cap (₹20 crore each for CGST and SGST/UTGST) was proposed for penalty-only appeals. Taxpayers could object to ITC blocking and seek a personal hearing. Genuine-buyer ITC when suppliers default, and ITC on motor vehicles, remain under review.
Separately, the Centre announced a proposed faceless CGST assessment framework for taxpayers under multiple CGST jurisdictions; this is not a GST Council recommendation.
Why This Matters
The next phase of GST reform shifts attention from tax rates to how businesses register, claim credits, obtain refunds and maintain records. Faster refunds may free working capital, while clearer export treatment could reduce uncertainty for service providers. However, businesses will still need accurate invoices, reconciled returns and evidence supporting their tax positions.
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Businesses can use professional support to review their GST documentation, organise ITC and refund records, and assess the compliance requirements relevant to their sector.
FAQs
No broad GST rate-slab revision was announced. The meeting focused primarily on process reforms, refunds, ITC, registration and enforcement.
Eligible exporters could benefit from expanded refund eligibility and clearer treatment of certain cross-border services. They must still satisfy the applicable export, payment, documentation and refund conditions.
Not necessarily. The Council’s recommendations require the relevant legal and administrative measures. Businesses should continue following the current rules until the applicable changes are formally implemented.
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