Highlights of 57th GST Council Meeting:

1. Simplification of GST Registration Process

• Issue a comprehensive circular and FAQs specifying the documents and information required for GST registration.

• Amend FORM GST REG-01 to include document-specific drop-down menus and improve the user interface of the GST portal.

• Simplify the application process to reduce queries, rejections and processing delays.

2. Amendments in Existing process of GST Registration

• Amend Rule 19 of the CGST Rules, 2017, to provide for automatic acceptance of amendments to registration particulars, except changes relating to the Principal Place of Business (PPoB).

• Allow automatic acceptance of all amendments, including PPoB changes, for taxpayers registered under Rule 14A.

3. Easiness in Cancellation of GST Cancellation

• Introduce phased, system-based acceptance of FORM GST REG-16 applications after filing pending returns and payment of outstanding dues.

• Amend Rules 21, 21A and 22 and introduce Rule 23A to streamline cancellation and revocation of registration.

• Link cancellation and revocation processes to compliance with return-filing and bank-account disclosure requirements.

4. Small Seller’s GST Registration through E-Commerce Operators

• Introduce Rule 14B to facilitate automatic registration of eligible small suppliers of goods selling through electronic commerce operators (ECOs).

• Permit an ECO warehouse to be declared as the Principal Place of Business in States/UTs where the supplier has no physical presence, subject to prescribed conditions.

• Restrict the facility to cases where monthly ITC passed on does not exceed ₹2.5 lakh, excluding stock transfers between distinct persons.

5. Correction of GST Returns

• Enhance GSTR-1, GSTR-1A and the Invoice Furnishing Facility (IFF) to facilitate corrections in outward supply details.

• Introduce electronic statements for reverse-charge tax and ITC, as well as ITC reversals and reclaims.

• Enable correction of tax liability and ITC in GSTR-3B to align with GSTR-1, GSTR-1A, IFF and GSTR-2B.

• Modify FORM GST DRC-03 to capture invoice-level details and enhance the Invoice Management System (IMS) to allow documents to be accepted, rejected or kept pending.

• The proposed mechanism may be implemented from the April 2027 return period, following time-bound stakeholder consultation.

6. Refund process speed up

• Phase 1: Automatically sanction the full eligible excess balance in the electronic cash ledger.

• Reduce the period for issuing refund acknowledgements or deficiency memos from 15 days to 10 days, with deemed acknowledgement if no communication is issued within the prescribed period.

• Introduce automatic provisional sanction of 90% of eligible refunds relating to zero-rated supplies and inverted duty structure, based on system-driven risk evaluation.

• Phase 2: Introduce system-based acknowledgements and automated sanction of eligible zero-rated refunds after adjustment of pending dues.

• Amend FORM GST RFD-01, Rule 89(4)(C), Section 54(14) and Section 115, as recommended.

7. Changes in Demand Notices, Adjudication and Appeals

• Issue comprehensive guidelines to ensure quality, consistency and timely issuance of demand notices and adjudication orders.

• Require fraud-related grounds to be invoked on merits and reinforce compliance with principles of natural justice, including personal hearings.

• Amend Sections 73, 74 and 74A to introduce a minimum threshold of ₹10,000 for notices.

• Provide for deemed treatment of penalty as a charge in specified voluntary-payment cases.

• Reduce the penalty to 5% in specified non-fraud cases where dues are paid within 30 days under Section 73 or 60 days under Section 74A.

• Remove the minimum ₹10,000 penalty in non-fraud cases.

8. Reduction of General Penalty and Cap on Appeal Pre-Deposit

• Reduce the maximum general penalty under Section 125 of the CGST Act from ₹25,000 to ₹10,000.

• Introduce a maximum pre-deposit cap of ₹40 crore for appeals involving only a penalty and no tax demand.

• The proposed cap comprises ₹20 crore under the CGST component and ₹20 crore under the SGST/UTGST component, under Sections 107(6) and 112(8), respectively.

9. Refund relaxation on ITC on Capital Goods and Input Services

• Amend Section 54(3) and the CGST Rules to permit refunds of accumulated ITC on capital goods relating to zero-rated supplies.

• Allow refunds of accumulated ITC on input services and capital goods in cases involving an inverted duty structure.

• Apply the proposed refund of input-service ITC under the inverted duty structure to credit availed on or after 1 November 2026.

• Spread the refund of capital-goods ITC over 60 months, with applicability to credit availed on or after 1 April 2027.

10. Relaxation of Blocked ITC under Section 17(5)

• Remove specified ITC restrictions relating to outdoor catering, health and life insurance, telecommunications towers and pipelines laid outside factory premises.

• Rationalise restrictions on ITC relating to free samples and goods destroyed or written off upon expiry of shelf life, where required by law.

• The proposed changes seek to reduce avoidable credit blockages and clarify ITC eligibility.

11. Reforms Relating to Export of Services and Zero-Rated Supplies

• Remove the distinct-person condition from the definition of export of services.

• Issue a circular clarifying the receipt of export consideration in foreign exchange or permitted Indian rupees.

• Omit Section 13(3)(a) of the IGST Act so that the default place-of-supply rule applies to specified services involving goods made physically available.

• Clarify the availability of zero-rating for goods delivered to overseas buyers in Special Economic Zones (SEZs) or Free Trade Warehousing Zones (FTWZs), where payment is received in permitted foreign exchange or Indian rupees.

12. Rationalisation of Arrest and Prosecution Provisions

• Recommend omission of Section 69 of the CGST Act to withdraw GST arrest powers.

• Raise the prosecution threshold from ₹1 crore to ₹5 crore.

• Omit specified offence-related language in Section 132(1) and limit clause (c) to fraudulent ITC availment without receipt of goods or services, or without an invoice or bill.

• Rationalise punishments prescribed for offences under Section 132.

13. Reforms in E-Way Bill provisions

• Amend Sections 68, 129 and 130 to regulate interception, inspection, detention and confiscation of goods in transit.

• Require specific intelligence and authorisation by an officer not below the rank of Joint Commissioner for interception.

• Generally permit inspection and detention or seizure where the supplier or recipient is located or registered in the intercepting State, subject to specified exceptions.

• Exclude goods and conveyances in transit from confiscation under Section 130.

14. Transfer of Intellectual Property Rights

• Amend Schedule II of the CGST Act to treat temporary and permanent transfers of title in intellectual property rights uniformly as a supply of services.

• The proposed change aims to provide consistency in the GST treatment of intellectual property transfers.

15. Hearing Before Blocking ITC

• Amend Rule 86A of the CGST Rules to enable taxpayers to object to the blocking of amounts in their electronic credit ledger.

• Provide an opportunity for a personal hearing before the proper officer decides on the objection.

• The proposed safeguard is intended to strengthen procedural fairness in ITC-blocking proceedings.

16. Relief for Small Taxpayers

• Recommend waiver of late fees for delayed returns under Section 39(1) for taxpayers whose preceding-year annual turnover does not exceed ₹5 crore.

• Make the relief conditional upon filing the return by the end of the month in which it was due.

17. Clarifications in the form of Circulars

• Issue clarifications on the Input Service Distributor (ISD) mechanism.

• Clarify ITC availment by banking companies, financial institutions and NBFCs opting for the mechanism under Section 17(4).

• Address issues relating to appeal pre-deposits and ITC on demonstration vehicles in specified circumstances.

• Clarify the effect of the omission of Rule 96(10) from 23 October 2017, in line with the Supreme Court's decision.

18. QRMP and Other filing procedures:

• Approve in principle an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with turnover up to ₹5 crore engaged exclusively in B2C supplies.

• Amend Sections 16, 37 and 39 to align return-filing and ITC-related time limits.

• Clarify the tax liability of ECOs under Section 9(5).

• Introduce a validation clause for notices held invalid because they cover multiple financial years.

• Extend e-invoicing requirements to specified domestic reverse-charge supplies received from unregistered persons and imports of services by taxpayers with turnover of ₹5 crore or more.

19. GSTAT Changes

• Amend the CGST Act and the GSTAT (Appointment and Conditions of Service of President and Members) Rules, 2023.

• Align GSTAT provisions with the Tribunals Reforms Act, 2026, and the National Tribunals Commission and Qualification, Selection and Conditions of Service of Chairpersons and Members of Tribunals Rules, 2026.

20. Clarifications on GST Rates on Goods

• Sublimation paper: Classify under heading 4809, with past cases to be regularised on an “as is where is” basis.

• Toys: Clarify that the relevant rate-schedule entries cover all categories of toys under heading 9503, including dolls and puzzles.

• Bio-stimulants: Classify seaweed-extract-based bio-stimulants registered under Schedule VI to the Fertiliser Control Order, 1985, under heading 3101 as fertilisers; regularise past cases on an “as is where is” basis.

• Second-hand vehicles: Permit ITC on other inputs and input services, including spares, repairs, technology services, rent and advertising, under the margin scheme. The restriction remains applicable to tax paid on procured second-hand vehicles.

• Specified waste and scrap: Introduce reverse charge mechanism (RCM) for specified plastic, electrical/electronic and tyre waste or scrap, and used cooking oil supplied by unregistered persons to registered persons. Introduce 2% TDS for specified waste and scrap supplied in registered-to-registered B2B transactions.

• Psyllium (Isabgol) seeds: Prescribe a nil GST rate, whether fresh, chilled, frozen or dried.

• Retreaded tractor tyres: Align their GST treatment with the rate applicable to new tractor tyres.

• Compensation Cess: Provide exemption for Canteen Stores Departments (CSDs) on two- and four-wheelers for 1 July 2017 to 30 September 2022, and for CSDs and Unit Run Canteens on aerated drinks for 1 July 2017 to 31 March 2022.

21. Clarifications on GST Rates on Services

• Electric vehicle passenger transport and rentals: Allow an option to pay GST at 5%, with restricted ITC, for passenger transport and rental of motor vehicles with operators using electric vehicles, where battery-charging costs are included in the consideration.

• Delivery services through ECOs: Bring delivery services other than courier and postal services, supplied through an ECO by suppliers not liable for registration under Section 22(1), under Section 9(5), at 5% without ITC. Also propose a 5% rate without ITC for delivery services relating to goods supplied or ordered through an ECO. The specified GTA exemption for transportation to unregistered persons would not apply where goods are supplied or ordered through an ECO.

• Motor-vehicle leasing: Clarify the GST treatment of statutory and ancillary recoveries, including registration charges, road tax, insurance and FASTag charges, incurred by lessors and recovered from lessees.

• ITC for specified services: Allow limited ITC within the same line of business for restaurant and outdoor catering services, hotel accommodation costing up to ₹7,500 per unit per day, and gym or fitness services, on lines similar to the treatment for specified passenger transport, tour operator and motor-vehicle renting services.

• Helicopter passenger transport: Exempt passenger transportation on a seat-sharing basis by helicopter to or from airports or helipads in the North-Eastern States, Sikkim and Bagdogra, West Bengal.

• Storage of seeds: Exempt storage or warehousing services for seeds meant for sowing.

• Coffee curing: Exempt agricultural support services involving the curing of coffee provided by coffee curers to cultivators.

• Seamen’s Provident Fund Organisation: Exempt services provided by the organisation to persons governed by the Seamen’s Provident Fund Act, 1966.

• Research and development services: Introduce self-certification by the head of an institution or organisation undertaking R&D services to establish that the activity constitutes research and development rather than consultancy, for determining exemption eligibility under Entry 44A of Notification No. 12/2017-Central Tax (Rate).

• Import of services by shipping companies: Exempt import of services without consideration by an Indian establishment of a foreign shipping company from a related person or its establishment outside India; regularise past cases on an “as is where is” basis.

• Highway toll concessions: Exempt the Government’s grant of exclusive rights, licence and authority to a concessionaire to demand, collect and appropriate toll fees under the Toll Operate Transfer (TOT) model.

• Highway operation and maintenance: Introduce a special procedure for determining valuation and the time of payment of GST on operation and maintenance services provided by concessionaires to the concessioning authority under the TOT model.

• Banking and fund transfers: Clarify that the notional amount treated as interest in bank books for notional inter-branch fund transfers under the Funds Transfer Pricing mechanism falls within the definition of “interest” under Notification No. 12/2017-Central Tax (Rate).