57th GST Council: arrest powers to go, wider ITC, faster refunds

First, the status

The GST Council met in New Delhi on 8 October 2026, chaired by the Union Finance & Corporate Affairs Minister. Everything below is a recommendation. It takes effect only when the CGST/IGST Acts are amended or the relevant notifications and circulars are issued — do not change your filings or credit claims yet. Where the Council suggested a date, we mention it.

1. Lighter enforcement, fewer small disputes

Arrest powers to be withdrawn — section 69 of the CGST Act to be omitted entirely.
Prosecution threshold raised from ₹1 crore to ₹5 crore, with several offences under section 132 narrowed and punishments rationalised.
Maximum general penalty under section 125 cut from ₹25,000 to ₹10,000.
No show cause notice below ₹10,000 (CGST + SGST + IGST + cess together). Notices and appeals below ₹10,000 that are still pending when the provision comes into force are to be decided as if the threshold had applied when the notice was issued.
5% penalty in non-fraud cases if tax and interest are paid within 30 days (section 73) or 60 days (section 74A) of the order; the ₹10,000 minimum penalty in non-fraud cases goes.
Pre-deposit capped at ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST) for appeals against penalty-only orders.
Objection and hearing on ITC blocking — rule 86A to let a taxpayer object to credit blocked in the electronic credit ledger and get a personal hearing before the officer decides on that objection.
A circular on the quality of notices and orders, including invoking fraud or suppression only on the merits of each case and holding personal hearings.
On the other side: a validation clause is proposed for notices that courts have held invalid because they covered multiple financial years.

2. More input tax credit

Section 17(5) relaxed — restrictions to be removed on credit for, among others, outdoor catering, health and life insurance, telecom towers, pipelines laid outside the factory, free samples, and goods destroyed or written off on expiry of shelf life as required by law.
Limited same-line-of-business credit extended to restaurant/outdoor catering, hotel accommodation up to ₹7,500 per unit per day, and gym/fitness services.
Second-hand vehicle dealers under the margin scheme may claim ITC on spares, repairs, rent, marketing and other inputs — the bar applies only to the vehicles bought.

3. Faster, automated refunds

Refund claims of excess cash ledger balance to be sanctioned automatically by the system.
Acknowledgement or deficiency memo within 10 days (from 15) — deemed acknowledged if the officer does not act.
90% provisional refund sanctioned automatically for zero-rated supplies and inverted duty structure, based on the system's risk evaluation. In a later second phase, full automated sanction is proposed for zero-rated claims, after adjusting pending dues and subject to the same risk evaluation.
Inverted duty refund on input services — for ITC availed on or after 1 November 2026.
Refund of ITC on capital goods (zero-rated and inverted duty), spread over 60 months — for ITC availed on or after 1 April 2027.
The 1.5× cap on zero-rated turnover of goods in rule 89(4)(C) to be removed; scanned documents dropped from RFD-01 for these claims.

4. Registration and returns

Registration amendments accepted automatically on the portal, except change of principal place of business — which too is automatic for those registered under the automatic route (rule 14A).
Cancellation on your own application (REG-16) to be accepted automatically once returns are filed and dues paid — at first only where ITC passed on has not exceeded ₹2.5 lakh in any month (or the final return GSTR-10 is filed in time), later for all. Separately, a system-based mechanism is proposed for cancellation for non-filing of returns or bank details, and revocation once the default is made good.
A comprehensive circular specifying the documents and information a registration application needs.
Small e-commerce sellers supplying goods through e-commerce operators in States where they have no physical presence, and passing on ITC of not more than ₹2.5 lakh a month, may register using the operator's warehouse as principal place of business (new rule 14B), subject to conditions.
Late fee waived on a delayed return under section 39(1) for taxpayers with turnover up to ₹5 crore in the preceding financial year, if the return is filed by the end of the month in which it was due.
A new mechanism to correct GSTR-1/GSTR-3B and ITC mismatches, proposed from the April 2027 return, after public consultation.
E-invoicing to extend to reverse-charge purchases from unregistered persons and to imports of services, for turnover of ₹5 crore and above.
In-principle approval of a concept note for an optional annual return, quarterly payment scheme for B2C-only businesses with turnover up to ₹5 crore — the scheme itself is yet to be designed.

5. Goods movement and exports

E-way bill interception only on specific intelligence with authorisation of an officer not below Joint Commissioner; detention or seizure only in the State where the supplier or recipient is located or registered, so no action in transit States. Exception: where no e-way bill has been generated or there is no document showing origin or destination, goods can be inspected, detained or seized anywhere. Confiscation will not apply to goods or vehicles in transit.
Export of services to your own foreign branch: the "distinct person" condition is to be removed — the other conditions for export of services continue to apply.
Goods sold to an overseas buyer but delivered in an SEZ/FTWZ to be treated as a supply to the SEZ/FTWZ (zero-rated), where payment is received in convertible foreign exchange, or in Indian rupees where RBI permits.

6. Rates and classification

Waste and scrap (plastic, e-waste, tyres, used cooking oil): reverse charge when bought from unregistered persons, and 2% TDS on B2B supplies.
Isabgol (psyllium seeds) — nil rate. Re-treaded tractor tyres aligned with new tractor tyres.
EV passenger transport and rentals with operator — optional 5% with restricted ITC, where the cost of battery charging is included in the price.
Delivery services through e-commerce operators — 5% without ITC.
Clarifications: sublimation paper under heading 4809; all toys under heading 9503 covered; seaweed-extract bio-stimulants as fertilisers (3101).
Law change: transfer of title in intellectual property, temporary or permanent, to be treated as a supply of services (Schedule II amendment).
Exemptions for storage of seeds for sowing, curing of coffee, helicopter seat-sharing in the North-East, and a few sector-specific services.

What to do now

Nothing changes today. Keep filing under current law until the amendments and notifications are issued.
Inverted duty businesses: track ITC on input services separately from 1 November 2026 — it may become refundable.
Small pending notices and appeals: list those below ₹10,000 — they may be closed once the provision is in force. Until then, keep replying and appealing on time.
Exporters with overseas branches and scrap buyers/sellers should review their contracts and billing ahead of the change.

Updated 9 October 2026 · Source: PIB press release "Recommendations of the 57th Meeting of the GST Council", 8 October 2026 · This note is general information, not professional advice for a specific case.