Last updated: 8 October 2026. The 57th GST Council meeting, held in New Delhi on 8 October 2026, recommended withdrawing arrest powers under GST, raising the prosecution threshold to ₹5 crore, stopping show cause notices below ₹10,000 of tax, cutting the maximum general penalty under Section 125 to ₹10,000, waiving some late fees for small taxpayers and automating refunds. These are recommendations. Nothing in your compliance changes until the CGST Act, the rules or a notification is actually amended.
Applicability Note: This guide is based on GST provisions applicable as of 8 October 2026 and on the Ministry of Finance press release on the 57th Council meeting issued that evening. Always verify the current position on gst.gov.in or with a GST professional before taking action.
Who Should Care?
This guide applies to:
- Small businesses with turnover up to ₹5 crore, who are in line for late fee relief and a possible annual return scheme
- Anyone facing a GST notice, demand, appeal or blocked credit ledger
- Exporters and businesses with inverted duty refunds stuck for months
- E-commerce sellers and businesses that move goods across States
1. Nothing Changes Tomorrow: How These Recommendations Become Law
The GST Council recommends. The law changes only when the government acts on it. The release says so in its own closing note: the decisions "would be given effect through the relevant circulars/ notifications/ law amendments which alone shall have the force of law."
| Type of change | Examples | What it needs |
|---|---|---|
| CGST or IGST Act | Arrest, prosecution, notice threshold, penalties, pre-deposit, refunds, Section 17(5), e-way bill interception, export of services, registration cancellation | Amendment by Parliament, then a notification bringing it into force |
| CGST Rules, forms, rates | Rule 19, cancellation, Rule 14B, Rule 86A, rate items | CBIC notification |
| Clarifications | Registration documents, ISD, demo vehicles | CBIC circular |
Only three forward-looking items carry dates: the returns overhaul (April 2027 return), and two ITC cut-offs for refunds (1 November 2026 and 1 April 2027). Everything else is undated.
2. Arrest and Prosecution
The Council recommended withdrawing arrest powers under GST completely, by omitting Section 69 of the CGST Act. Today, Section 69(1) lets the Commissioner authorise an arrest for the serious offences in Section 132(1)(a) to (d).
On prosecution, the release puts the change as a monetary threshold raised "from ₹1 crore to ₹5 crore". Under the law today, the ₹1 crore entry point applies only to issuing an invoice without any supply (Section 132(1)(b)). Most other offences, including claiming ITC on such invoices, start at more than ₹2 crore. That narrowing came from section 156 of the Finance Act, 2023, in force from 1 October 2023 under Notification No. 28/2023-Central Tax dated 31 July 2023.
The Council also recommended omitting offence clause (i) of Section 132(1) (dealing in services in contravention of the Act), deleting "evades tax" from clause (e), narrowing clause (c) to fraudulent ITC taken without receiving goods or services or without an invoice, and rationalising punishments. The release says deterrence against fraud and evasion is retained.
3. Notices, Penalties and Appeals
| Issue | Law today | Recommended |
|---|---|---|
| Minimum tax before a show cause notice | Section 74A(1) proviso: no notice if the tax in a financial year is under ₹1,000. Section 73 has no minimum | No notice under Sections 73, 74 or 74A if the tax is under ₹10,000 (CGST + SGST + IGST + Cess) |
| Non-fraud penalty | 10% of tax or ₹10,000, whichever is higher (Section 73(9), Section 74A(5)(i)). ₹10,000 is the minimum | Minimum ₹10,000 removed in non-fraud cases |
| Paying after the order, non-fraud cases | Full penalty under the order | Penalty reduced to 5% if tax and interest are paid within 30 days (Section 73) or 60 days (Section 74A) of the adjudication order |
| General penalty, Section 125 of the CGST Act | Up to ₹25,000 | Up to ₹10,000 |
| Pre-deposit for appealing a penalty-only order | 10% of the penalty to the Appellate Authority (proviso to Section 107(6)) and a further 10% to the Tribunal (proviso to Section 112(8)), with no upper limit | Capped at ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST) |
The ₹10,000 notice threshold would also reach back: pending notices and appeals under ₹10,000 would be decided as if it had applied from the start. The ₹10,000 under Section 125 is the CGST Act figure; the SGST Act has its own matching provision, so it is not a combined total. Fraud cases keep their penalty equal to the tax (Section 74A(5)(ii)). Our Section 122 penalties guide covers the rest of the chapter.
Also recommended: a circular on the quality and timing of notices and orders, with fraud or suppression invoked only on the merits, and a right to object after credit is blocked under Rule 86A, with a personal hearing before the officer decides.
One item runs the other way: a validation clause for notices that courts struck down because each covered several financial years. If yours was quashed on that ground, talk to your adviser once the text is out.
4. Late Fee Relief for Small Taxpayers
The Council recommended waiving the late fee on a delayed return under Section 39(1) of the CGST Act for taxpayers with "an annual turnover up to Rs. 5 crore in the preceding financial year", if the return is filed by the end of the month in which it was due. Section 39(1) is the monthly or quarterly GSTR-3B. The recommendation does not cover GSTR-1, GSTR-4 or GSTR-9.
Once notified, a GSTR-3B due on 20 November and filed on 28 November would carry no late fee for an eligible taxpayer. Until then, today's late fee applies. Interest is separate and unchanged.
5. Refunds: Automation in Two Phases
Phase 1, as recommended:
- Refunds of excess balance in the electronic cash ledger sanctioned in full by the system, with no officer involved.
- For other refund claims, the window for an acknowledgement or deficiency memo cut from 15 days (Rule 90(2)) to 10 days. If the officer does not act in time, the system deems the claim acknowledged.
- For zero-rated supplies and inverted duty claims, 90% sanctioned provisionally by the system, based on its own risk evaluation.
A later phase, with no date given, would have the system acknowledge claims and sanction zero-rated refunds in full after adjusting pending dues.
Also recommended: no scanned uploads on RFD-01 for zero-rated and inverted duty claims, removal of the Rule 89(4)(C) cap of 1.5 times the value of like goods supplied domestically, and the ₹1,000 minimum refund in Section 54(14) read on the total of CGST, SGST/UTGST and IGST.
The bigger change is what gets refunded. Today, clause (ii) of the proviso to Section 54(3) covers credit that piles up because the rate on inputs is higher than on the output. The Council recommended amending that clause and the CGST Rules so that refunds also cover:
- Input services in inverted duty refunds, for ITC availed on or after 1 November 2026
- Capital goods in zero-rated and inverted duty refunds, spread over 60 months, for ITC availed on or after 1 April 2027
Both dates are cut-offs for when the ITC was availed, not dates the refund starts; the refund waits for the amendment. Our inverted duty refund guide explains the current formula.
6. More Input Tax Credit
The Council recommended amending Section 17(5) to remove the block on ITC for, among other things, outdoor catering, health and life insurance, telecommunication towers, pipelines laid outside the factory, free samples, and goods destroyed or written off when their shelf life expires as required by law. Goods lost, stolen or given as gifts are not on the list, so treat them as still blocked.
It also recommended allowing limited ITC in the same line of business for restaurant and outdoor catering services, hotel accommodation with a value up to ₹7,500 per unit per day, and gym or fitness services. That would match what passenger transport, tour operators and motor vehicle renting already get.
Until notified, the current Section 17(5) applies. Do not claim these credits yet.
7. Registration
- Rule 19 would be amended so the portal accepts changes to all registration details automatically, except the principal place of business. If you registered under Rule 14A, even a change of principal place of business would be accepted automatically.
- REG-16 cancellation applications would be accepted automatically once all pending returns are filed and dues paid. In Phase 1 this applies if you never passed on ITC above ₹2.5 lakh in any month, or if you did and filed GSTR-10 in time. In Phase 2 (no date given) it applies to every application.
- Officers would have fewer grounds for cancellation under Rule 21. Cancellation for unfiled returns or missing bank details, and its revocation, would become system-based (Rules 21A, 22 and a new Rule 23A).
- A new Rule 14B would cover small suppliers of goods through e-commerce operators in States where they have no physical presence, who pass on ITC of not more than ₹2.5 lakh a month (stock transfers excluded). They could declare the operator's warehouse as their principal place of business, with registration granted automatically, subject to certain conditions.
8. Returns: A New Correction Mechanism, Possibly from April 2027
To cut mismatch notices, the Council recommended better reconciliation between GSTR-1/1A/IFF and GSTR-3B, rules for two electronic statements already on the portal (Rule 86C for ITC reversed and reclaimed, live since the August 2023 return period; Rule 86D for reverse charge liability and ITC, live since August 2024), new Rule 61 sub-rules to correct liability and ITC in GSTR-3B, invoice details on DRC-03, and a rule for IMS covering how long a credit note can stay pending.
The release says these "may be brought into force from the return of April, 2027", after a time-bound public consultation, and the Finance Minister can modify them based on feedback. Treat April 2027 as a target, not a fixed date.
9. E-Way Bills and Goods in Transit
The Council recommended amendments to Sections 68, 129 and 130 so that, among other things:
- a vehicle can be intercepted only on specific intelligence, with authorisation from an officer not below Joint Commissioner
- inspection, detention or seizure can happen only in the State where the supplier or recipient is located or registered, with no interception in transit States
- goods moving with no e-way bill, or with no document showing origin or destination, can still be inspected, detained or seized anywhere
- confiscation under Section 130 would not apply to goods or vehicles in transit
Until then, the detention process in our Section 129 guide still applies.
10. Exports and Other Rate Changes
For exporters of services, the Council recommended omitting the condition that the supplier and recipient must not be establishments of a distinct person (Section 2(6)(v) of the IGST Act). That would let Indian offices claim export benefits on services to their own foreign branches. It also recommended omitting Section 13(3)(a) of the IGST Act, so services on goods made physically available by the recipient follow the recipient's location, and treating delivery to an overseas buyer in an SEZ or FTWZ as a supply to the SEZ or FTWZ, where payment comes in foreign exchange or permitted rupees. See also our intermediary services guide.
Among the rate and scope items, all still recommendations:
- Plastic waste and scrap, e-waste, tyre scrap and used cooking oil supplied by an unregistered person to a registered person come under reverse charge. The supplier must register once it crosses the threshold, and the recipient pays tax under reverse charge even if the supplier is below it. Registered-to-registered supplies of these items would carry TDS at 2%.
- E-invoicing extended to reverse charge purchases from unregistered persons and to import of services, for taxpayers with "aggregate annual turnover of Rs. 5 crore and above".
- An option of 5% with restricted ITC for passenger transport and vehicle rental with operators using electric vehicles, where charging cost is included.
11. A Possible Annual Return Scheme for B2C Businesses
The Council approved in principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme. It would be open to taxpayers with aggregate turnover of ₹5 crore or less in the preceding financial year who supply exclusively to unregistered persons (B2C). There is no scheme yet: no rules, no form, no date.
12. What to Do Now
- Keep filing and paying on the current dates. The October 2026 GST calendar is unchanged: GSTR-3B for monthly filers is due Tuesday, 20 October 2026.
- If you have a pending notice or appeal under ₹10,000, or a penalty-only appeal with a large pre-deposit, flag it with your adviser and watch for the amendment text.
- Inverted duty refund claimants: track ITC on input services availed from 1 November 2026 separately. Exporters and inverted duty claimants: do the same for capital goods from 1 April 2027.
- Watch for the FAQs the release says are being issued, and for CBIC notifications.
Key Takeaways
- The 57th GST Council met on 8 October 2026. Everything it decided is a recommendation until notified or enacted.
- Recommended: no arrest powers under GST (Section 69 omitted) and a prosecution threshold of ₹5 crore.
- Recommended: no show cause notice below ₹10,000 of tax, no ₹10,000 minimum penalty in non-fraud cases, and a 5% penalty in non-fraud cases if tax and interest are paid soon after the order.
- Recommended: no late fee on a delayed GSTR-3B for taxpayers with annual turnover up to ₹5 crore who file by the end of the due month.
- Refund automation is in two phases. Inverted duty refunds of input services credit cover ITC availed from 1 November 2026, and capital goods credit (over 60 months, zero-rated and inverted duty) covers ITC availed from 1 April 2027.
- The returns overhaul may start from the April 2027 return, after public consultation.
Frequently Asked Questions
When was the 57th GST Council meeting held?
On 8 October 2026 in New Delhi, chaired by Union Finance Minister Nirmala Sitharaman.
Has GST arrest power been removed?
Not yet. The Council recommended omitting Section 69 of the CGST Act. That needs an amendment passed by Parliament, so Section 69 stays in force until the amendment is enacted and notified.
Will I still get a GST notice for less than ₹10,000?
For now, yes. Section 73 (FY 2023-24 and earlier) has no minimum, and Section 74A stops notices only where the year's tax is under ₹1,000. The Council recommended a ₹10,000 threshold under Sections 73, 74 and 74A. Once it is in force, notices and appeals below that amount that are still pending would be decided as if the threshold had applied from the start.
Is the GST late fee waived for small businesses from now?
No. The waiver for taxpayers with annual turnover up to ₹5 crore who file GSTR-3B by the end of the due month is a recommendation. Late fees apply as usual until it is notified.
⚠️ For informational purposes only.
Have a question about how the 57th Council recommendations affect your business? Ask our GST experts → gstconsultancy.com