57th GST Council Meeting: Key Decisions and What They Mean

The 57th meeting of the GST Council, held on 8 October 2026 in New Delhi, made no change in GST rates. Its entire agenda was process reform: removal of arrest powers, a higher prosecution threshold, lower penalties, faster refunds, wider input tax credit (ITC), simpler registration and returns, and fewer roadside checks on goods in transit.

This was the first Council meeting in over a year, after the 56th meeting (September 2025) that moved GST to a 5% and 18% structure with a 40% rate for select demerit and luxury goods.

What are the key decisions at a glance?

Area	Decision
GST rates	No change; rates to be reviewed once a year in a rates-only meeting
Arrest	Power of arrest under GST to be removed
Prosecution	Threshold raised from ₹1 crore to ₹5 crore
General penalty	Reduced from ₹25,000 to ₹10,000
Notices	No notice where the amount involved is below ₹10,000
Refunds	Deemed acknowledgement in 10 days; refund order in 3 working days
ITC	Allowed on employee insurance, telecom towers, pipelines outside factory, free samples, destroyed expired stock
Inverted duty refund	Extended to input services (from 1 November 2026) and plant and machinery (from 1 April 2027)
Goods in transit	Stopped only on specific intelligence, and only by source or destination State
Deferred	Section 16(2) amendment (referred to a Group of Ministers) and Section 17(5) proposal on motor vehicles

What changes in penalties and prosecution?

• Arrest: The power of arrest is to be removed. At present, arrest is possible with Commissioner-level authorisation where evasion, fake ITC or wrongful refund exceeds ₹1 crore.
• Prosecution: The monetary threshold moves from ₹1 crore to ₹5 crore.
• Punishment: The minimum mandatory punishment is to go; fine, imprisonment or both will be left to the court's discretion.
• General penalty: For offences with no specific penalty, the amount drops from ₹25,000 to ₹10,000.
• Routine lapses: For late filing, clerical mistakes or delayed payment, the consequence will be tax, interest and a proportionate penalty, with no further action.

A common standard will also govern the issue and service of notices, pre-notice intimation, allegations of fraud, hearings and the writing of orders.

How will GST refunds become faster?

• Acknowledgement time drops from 15 to 10 days. If neither an acknowledgement nor a deficiency memo is issued in 10 days, the claim is deemed acknowledged.
• About 90% of claims will be sanctioned by the system on risk assessment, without officer intervention.
• The refund order will be issued within 3 working days of acknowledgement (now 7 days).
• Refund of excess cash ledger balance will be fully automatic.

Where will input tax credit now be allowed?

ITC is to be allowed on health and life insurance for employees, telecommunication towers, pipelines laid outside the factory, free samples, and stock written off on expiry where the law requires the goods to be destroyed. The last two settle long-running disputes in the FMCG and pharmaceutical sectors.

For businesses with an inverted duty structure, refund was so far limited to tax on input goods. Tax on input services will qualify for credit availed on or after 1 November 2026. The exclusion of plant and machinery is removed, with refund computed at 1/60th of the credit per month for credit availed on or after 1 April 2027.

A Committee of Officers will study, within three months, how to protect genuine buyers who hold a valid invoice, have received the goods and have paid the supplier in full. The related Section 16(2) amendment, which links the buyer's ITC to the seller's tax payment, has been deferred and referred to a Group of Ministers. The Section 17(5) proposal on ITC for motor vehicles has also been deferred.

What changes in registration and returns?

• Low-risk applicants, and those whose output tax on supplies to registered persons is up to ₹2.5 lakh a month, already get registration within 3 working days without officer involvement. About 61% of registrations now follow this route.
• Changes to trade name, directors or partners, and the address of an additional place of business will be accepted automatically.
• A supplier reducing a value already reported will correct it in the sales statement so it reaches the buyer. Earlier-period corrections, including a wrong buyer GSTIN, will be allowed.
• ITC will be settled through the Invoice Management System (IMS).
• An optional scheme for B2C-only suppliers with turnover up to ₹5 crore (annual return, quarterly tax payment) is approved in principle; the framework will come to the next meeting.

What changes for goods in transit and e-commerce sellers?

A vehicle may be stopped only on specific intelligence, with prior authorisation of an officer not below Joint Commissioner. Only the source and destination States may inspect, detain or seize goods. E-way bills remain mandatory and continue to be matched electronically.

Small sellers on e-commerce platforms may declare the operator's warehouse in another State as their principal place of business there, with consent given automatically through the system, while keeping a physical presence in a home State. For platform bookings, GST will depend on the service actually delivered.

What changes for exports and certain services?

• Services provided to a foreign customer through the Indian company's own overseas branch will qualify as exports.
• Testing, repair, certification, research or processing in India on goods of a foreign customer will qualify as export of services even if the goods stay in India.
• Where a service is bought and resold in the same line of business, such as hotel stays up to ₹7,500 per night booked through an agent, restaurant and catering services, and passenger transport, the credit chain will be allowed to continue, ending double taxation.

What should businesses do now?

1. Wait for notified text. Removal of arrest powers and the higher prosecution threshold need amendments to the CGST and State GST Acts; other changes will come through rules, notifications and circulars.
2. Map eligible ITC on employee insurance, free samples and destroyed expired stock, and keep destruction records in order before the changes flow into GST returns.
3. Inverted duty claimants should track input services credit from 1 November 2026 separately.
4. Service exporters should review overseas branch and foreign-owned goods arrangements.
5. Keep transit documents complete; electronic matching of e-way bills continues.

This article is based on the outcome of the 57th GST Council meeting announced on 8 October 2026. Details may change when the amendments and notifications are issued.

The information in this article reflects the law as on the date of publication and is for general guidance only.

CA. Kunal Darwani

Frequently asked questions