Summary of Points Finalized 

1. Streamlining GST Registration Applications

The Council recommended a comprehensive circular and FAQs specifying documents and information required for registration, amendments to FORM GST REG-01 with prescribed-document drop-downs, and a more user-friendly GST portal interface. The measures are intended to reduce queries and rejections and expedite processing.

2. Rationalization of Amendments to GST Registration

The Council recommended amendment to Rule 19 of the CGST Rules, 2017, for automatic acceptance of amendments to registration particulars, except Principal Place of Business (PPoB). For taxpayers registered under Rule 14A, amendments including PPoB particulars would be accepted automatically.

3. Simplification of GST Registration Cancellation

The Council recommended phased automatic acceptance of FORM GST REG-16 applications after pending returns are filed and dues paid. It also recommended changes to Rules 21, 21A and 22 and insertion of Rule 23A for system-based cancellation and revocation linked to non-filing of returns or non-furnishing of bank account details and subsequent compliance.

4. Simplified Registration for Small Sellers through ECOs

The Council recommended insertion of Rule 14B to enable eligible small suppliers of goods selling through electronic commerce operators to obtain automatic registration in States/UTs where they have no physical presence, by declaring an ECO warehouse as their PPoB, subject to conditions. The proposed facility applies where monthly ITC passed on does not exceed ₹2.5 lakh, excluding stock transfers between distinct persons.

5. Alternate Mechanism for Correcting Liability and ITC in Returns

The Council recommended enhancements to GSTR-1, GSTR-1A and IFF; electronic statements for reverse-charge tax and ITC and for ITC reversal/reclaim; mechanisms to correct liability and ITC in GSTR-3B to align with GSTR-1/1A/IFF and GSTR-2B; changes to DRC-03 to capture underlying invoice details; and IMS functionality to accept, reject or keep inward-supply documents pending. The proposed mechanism may apply from the April 2027 return, following time-bound stakeholder consultation.

6. Faster, System-Based Processing of Refunds

The Council recommended phased automation of refunds. Phase 1 includes automatic sanction of the full eligible excess electronic cash ledger balance, reduction of the acknowledgement/deficiency memo period from 15 to 10 days with deemed acknowledgement if not issued, and automatic provisional sanction of 90% of eligible zero-rated and inverted-duty-structure refunds based on system risk evaluation. Phase 2 provides for system-based acknowledgement and automated sanction of eligible zero-rated refunds after adjustment of pending dues. Changes to RFD-01, Rule 89(4)(C), Section 54(14) and Section 115 were also recommended.

7. Reforms Relating to Demand Notices, Adjudication and Appeals

The Council recommended a circular with comprehensive guidelines on quality and timely issuance of demand notices and orders, invocation of fraud-related grounds on merits, and observance of natural justice, including personal hearings. Proposed amendments to Sections 73, 74 and 74A include a ₹10,000 minimum threshold for notices, deemed treatment of penalty as a charge in specified voluntary-payment cases, reduced 5% penalty in specified non-fraud cases where dues are paid within 30 days under Section 73 or 60 days under Section 74A, and removal of the minimum ₹10,000 penalty in non-fraud cases.

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

The Council recommended reducing the maximum general penalty under Section 125 of the CGST Act from ₹25,000 to ₹10,000. It also recommended a maximum pre-deposit cap of ₹40 crore (₹20 crore CGST and ₹20 crore SGST/UTGST) under Sections 107(6) and 112(8), respectively, for appeals involving only penalty and no tax demand.

9. Refund of Accumulated ITC on Capital Goods and Input Services

The Council recommended amendments to Section 54(3) and the CGST Rules to allow refund of accumulated ITC on capital goods for zero-rated supplies and on input services and capital goods for inverted-duty-structure refunds. Input-service ITC refunds for inverted duty structure would apply to credit availed on or after 1 November 2026. Capital-goods ITC refunds would be spread over 60 months and apply to credit availed on or after 1 April 2027.

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

The Council recommended removing restrictions on ITC, among other items, for 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.

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

The Council recommended removing the distinct-person condition from the definition of export of services, issuing a circular on receipt of export consideration in foreign exchange or permitted Indian rupees, omitting Section 13(3)(a) of the IGST Act so the default place-of-supply rule applies to specified services involving goods made physically available, and clarifying zero-rating for goods delivered to overseas buyers in SEZs/FTWZs where payment is received in permitted foreign exchange or Indian rupees.

12. Rationalization of Arrest and Prosecution Provisions

The Council recommended omission of Section 69 of the CGST Act to withdraw GST arrest powers. It also recommended raising the prosecution threshold from ₹1 crore to ₹5 crore, omitting specified offence language in Section 132(1), limiting clause (c) to fraudulent ITC availment without receipt of goods/services or without an invoice/bill, and rationalizing punishments for offences under Section 132.

13. Rationalization of E-Way Bill Interception and Detention

The Council recommended amendments to Sections 68, 129 and 130. Interception would require specific intelligence and authorization by an officer not below Joint Commissioner rank. Inspection and detention/seizure would generally be permitted where the supplier or recipient is located/registered in the intercepting State, with exceptions where no e-way bill or origin/destination documents exist. Confiscation under Section 130 would not apply to goods/conveyances in transit.

14. GST Treatment of Transfer of Intellectual Property Rights

The Council recommended amendment to Schedule II of the CGST Act to treat temporary or permanent transfer of title in intellectual property rights uniformly as a supply of services.

15. Opportunity of Hearing before Blocking ITC under Rule 86A

The Council recommended amendment to Rule 86A of the CGST Rules to allow taxpayers to object to blocking of an amount in the electronic credit ledger and receive a personal hearing before the proper officer decides the objection.

16. Late-Fee Relief for Small Taxpayers

The Council recommended waiver of late fee for delayed returns under Section 39(1) for taxpayers with preceding-year annual turnover up to ₹5 crore, provided the return is filed by the end of the month in which it was due.

17. Clarifications through Circulars

The Council recommended circulars on the ISD mechanism; ITC availment by banking companies, financial institutions and NBFCs opting for Section 17(4); issues relating to appeal pre-deposits; ITC on demonstration vehicles in specified situations; and the effect of omission of Rule 96(10) from 23 October 2017 in line with the Supreme Court decision.

18. Optional Annual Return Quarterly Payment Scheme and Other Compliance Changes

The Council approved in principle a concept note for an optional Annual Return Quarterly Payment (ARQP) scheme for taxpayers with turnover up to ₹5 crore engaged exclusively in B2C supplies. It also recommended amendments to Sections 16, 37 and 39 to align return and ITC time limits; clarification of ECO tax liability under Section 9(5); a validation clause for notices held invalid because they cover multiple financial years; and e-invoicing for specified domestic RCM supplies from unregistered persons and import of services for taxpayers with turnover of ₹5 crore or more.

19. GST Appellate Tribunal – Alignment with Tribunal Reforms

The Council approved amendments to the CGST Act and GSTAT (Appointment and Conditions of Service of President and Members) Rules, 2023, to 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. Changes and Clarifications Relating to GST Rates on Goods

1. Classification of sublimation paper under heading 4809, with past cases to be regularised on an “as is where is” basis.

2. Clarification that GST rate-schedule entries for toys cover all categories of toys under heading 9503, including dolls and puzzles, and are not restricted to tricycles, scooters and pedal cars.

3. Seaweed-extract-based bio-stimulants registered under Schedule VI to the Fertiliser Control Order, 1985, to be classified under heading 3101 as fertilisers; past cases to be regularised on an “as is where is” basis.

4. Under the GST margin scheme for second-hand vehicles, ITC on other inputs and input services (such as spares, repairs, technology services, rent and advertising) is permitted; the restriction applies to tax paid on procured second-hand vehicles.

5. Specified plastic, electrical/electronic and tyre waste/scrap and used cooking oil supplied by an unregistered person to a registered person to be brought under RCM. TDS at 2% is introduced for specified waste/scrap supplied in registered-to-registered B2B transactions.

6. Nil GST rate for psyllium (Isabgol) seeds, whether fresh, chilled, frozen or dried.

7. GST treatment of retreaded tractor tyres to be aligned with the rate applicable to new tractor tyres.

8. Compensation Cess exemption for 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. Changes and Clarifications Relating to GST Rates on Services

1. 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 cost is included in the consideration.

2. Delivery services other than courier and postal supplied through an ECO to be covered under Section 9(5), where the supplier is not liable for registration under Section 22(1), at 5% without ITC. A 5% rate without ITC is also proposed for delivery services relating to goods supplied/ordered through an ECO. The specified GTA exemption for transportation to unregistered persons would not apply where goods are supplied/ordered through an ECO.

3. Clarification of GST treatment of statutory and ancillary recoveries, including registration charges, road tax, insurance and FASTag charges, incurred by a lessor and recovered from a lessee in motor-vehicle leasing transactions.

4. Limited ITC in the same line of business for restaurant/outdoor catering services, hotel accommodation up to ₹7,500 per unit per day, and gym/fitness services, in a manner similar to specified passenger transport, tour operator and motor-vehicle renting services.

5. GST exemption for passenger transportation by helicopter on a seat-sharing basis from/to airports or helipads in north-eastern States, Sikkim and Bagdogra, West Bengal.

6. GST exemption for storage or warehousing of seeds meant for sowing.

7. GST exemption for agricultural support services of curing coffee provided by coffee curers to cultivators.

8. GST exemption for services provided by the Seamen’s Provident Fund Organisation to persons governed by the Seamen’s Provident Fund Act, 1966.

9. A self-certification mechanism by the head of an institution/organisation undertaking R&D services to certify that the activity is research and development and not consultancy, for determining exemption eligibility under Entry 44A of Notification No. 12/2017-Central Tax (Rate).

10. GST exemption for import of services by an Indian establishment of a foreign shipping company from a related person or its establishment outside India, when made without consideration; past cases to be regularised on an “as is where is” basis.

11. GST exemption for the Government’s grant of exclusive right, licence and authority to a concessionaire to demand, collect and appropriate toll fees for highway projects under the Toll Operate Transfer model.

12. A special procedure for valuation and time of payment of GST on operation and maintenance services provided by concessionaires to the concessioning authority for highway projects under the TOT model.

13. Clarification 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” in Notification No. 12/2017-Central Tax (Rate).