A S BANKA ADVISORS

The GST Council met for the 57th time in New Delhi on 8 October 2026, and the Ministry of Finance released its recommendations the same day (PIB Release ID 2320934). For founders, the list touches four things that matter in practice: how a GST dispute can escalate, how fast refunds come back, which input tax credits stay blocked, and how services billed to your own foreign branch are treated.

One point first. The release closes with a note that the recommendations “would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law”. Nothing below changes your compliance today. Each item applies from the date stated in the CBIC instrument or amendment that gives effect to it.

1. Disputes: arrest, prosecution and smaller notices

The Council recommended complete withdrawal of arrest powers under GST by omitting section 69 of the CGST Act, 2017, and raising the monetary threshold for prosecution from Rs 1 crore to Rs 5 crore. Under section 132(1), clause (c) would cover only fraudulent availment of ITC without receipt of goods or services or without an invoice or bill.

On demand proceedings, the recommended amendments to sections 73, 74 and 74A include:

• no show cause notice where the tax involved is less than Rs 10,000 (CGST + SGST + IGST + Cess), with pending notices and appeals below that amount to be decided as if the threshold had applied when the notice was issued;
• a reduced penalty of 5% in non-fraud cases where tax with interest is paid within 30 days (section 73) or 60 days (section 74A) of the adjudication order;
• removal of the minimum penalty of Rs 10,000 in non-fraud cases.

The maximum general penalty under section 125 would fall from Rs 25,000 to Rs 10,000, and the pre-deposit for an appeal against an order involving only penalty and no tax demand would be capped at Rs 40 crore (Rs 20 crore CGST and Rs 20 crore SGST/UTGST).

What it means for you: if your company has a pending small-value notice or a penalty-only appeal, list it now so it can be reviewed against the amendment when it is notified.

2. Refunds: system-based processing in two phases

For a services exporter claiming refunds on zero-rated supplies, this is the part that touches cash flow most directly. The Council also recommended a system-readable FORM GST RFD-01 without scanned uploads, and removal of the cap in rule 89(4)(C) that limits zero-rated turnover of goods to 1.5 times the value of like goods supplied domestically.

3. Input tax credit: refunds and blocked credits

Two dates are attached to the ITC refund recommendations under clause (ii) of the proviso to section 54(3):

• refund of accumulated ITC on input services in inverted duty cases, for ITC availed on input services on or after 1 November 2026;
• refund of ITC on capital goods for zero-rated supplies and inverted duty structure, spread over 60 months, for ITC availed on capital goods on or after 1 April 2027.

Separately, section 17(5) would be amended to remove the restrictions on ITC on, among other things, outdoor catering, health and life insurance, telecommunication towers, pipelines laid outside factory premises, free samples, and goods destroyed or written off on expiry of shelf life as required by law. Rule 86A would give a taxpayer the right to object to blocking of its electronic credit ledger and to a personal hearing before the officer decides.

What it means for you: group health insurance for employees is a common cost for startups. Until section 17(5) is amended, the credit position stays as it is today.

4. Cross-border: foreign branches, IP and imported services

This is the part of the release most relevant to Indian companies that bill overseas:

• Your own foreign office or branch: omission of section 2(6)(v) of the IGST Act, 2017, removing the condition that the supplier and recipient of services are not establishments of a distinct person, for a supply to qualify as an export of services.
• Services on goods provided by the recipient: omission of section 13(3)(a) of the IGST Act, so place of supply follows the default rule in section 13(2), the location of the recipient.
• Intellectual property: transfer of title in IPRs, temporary or permanent, to be treated uniformly as a supply of services under Schedule II.
• Imported services: e-invoicing extended to import of services and to reverse charge supplies from unregistered persons, for taxpayers with aggregate annual turnover of Rs 5 crore and above.

The Council also recommended a circular to clarify issues on receipt of payment in foreign exchange or Indian Rupees, as permissible, for export of goods and services.

What it means for you: if your Indian entity bills a foreign branch of the same company, do not change invoicing or refund claims on the strength of the release. Track the IGST amendment and apply it from the date it states.

Your checklist

1. Keep applying the current CGST Act, IGST Act, rules and notifications until each instrument is issued.
2. List pending show cause notices and appeals below Rs 10,000, and penalty-only appeals with large pre-deposits.
3. Track input services ITC in inverted duty cases from 1 November 2026, and capital goods ITC from 1 April 2027.
4. If you bill a foreign branch or transfer IP across borders, review the position once the IGST and Schedule II amendments are notified.
5. If your turnover is Rs 5 crore or more and you import services, plan for e-invoicing on those supplies once it is notified.

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Source: Press Information Bureau, Ministry of Finance, Recommendations of the 57th Meeting of the GST Council, Release ID 2320934, 8 October 2026, pib.gov.in

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A S Banka Advisors Private Limited. This article is for general information and is not legal advice.