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57th GST Council recommendations: Reforms to simplify compliance, reduce penalties, speed up refunds, expand ITC benefits and ease registration procedures for taxpayers [Press release attached]

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11-Oct-2026 20:47:19

The GST Council has proposed significant reforms aimed at simplifying compliance and reducing penalties under the GST framework. A key recommendation is the removal of arrest powers by omitting Section 69 of the CGST Act, 2017, and raising the prosecution threshold from ₹1 crore to ₹5 crore. Additionally, the maximum general penalty under Section 125 is suggested to be reduced from ₹25,000 to ₹10,000.

The Council also aims to streamline GST registration processes through automation, allowing small sellers on e-commerce platforms to register in multiple states without a physical presence, subject to conditions and an ITC transfer limit of ₹2.5 lakh monthly. To address mismatches in tax returns, mechanisms for correcting discrepancies among GSTR-1, GSTR-1A, GSTR-3B, and GSTR-2B are proposed for April 2027 implementation.

Faster GST refunds are recommended, including automatic refunds for excess balances and provisional refunds for certain claims. The Council suggests expanding ITC refund eligibility for specific services and goods, reducing compliance burdens in tax disputes by setting thresholds for show-cause notices, and lowering penalties for non-fraud cases. Further, it proposes expanding ITC eligibility by removing restrictions on certain expenses and waiving late fees for small taxpayers under specific conditions.

Lastly, the Council recommends enhanced e-way bill inspection safeguards and has approved an optional Annual Return Quarterly Payment scheme for eligible taxpayers with a turnover up to ₹5 crore, primarily dealing with B2C transactions.

Key Pointers -

Extending e-invoicing to domestic supplies received from an unregistered person where the tax is payable under reverse charge mechanism, as well as to the import of services, for taxpayers having aggregate annual turnover of Rs. 5 crore and above.
The GST Council recommended the complete withdrawal of arrest powers under GST by omitting Section 69 of the CGST Act, 2017. It also proposed increasing the prosecution threshold from ₹1 crore to ₹5 crore and reducing the maximum general penalty under Section 125 from ₹25,000 to ₹10,000.
The GST Council recommended simplifying GST registration, amendment and cancellation procedures through system-based automation. Small sellers supplying goods through e-commerce platforms may obtain simplified registration in other States without establishing a physical place of business there, subject to prescribed conditions and an intended monthly ITC transfer limit of ₹2.5 lakh.
The GST Council proposed introducing mechanisms to correct mismatches between GSTR-1, GSTR-1A, GSTR-3B and GSTR-2B, including electronic statements for reverse charge payments and ITC reversals and reclaims. These changes are proposed to take effect from the April 2027 return period, subject to the recommended implementation process.
The GST Council recommended faster, automated GST refunds, including automatic refunds of excess electronic cash ledger balances and provisional refunds of 90% of eligible claims relating to zero-rated supplies and inverted duty structure. It also proposed expanding ITC refund eligibility for specified input services and capital goods, subject to prescribed conditions and effective dates.
The GST Council proposed reducing compliance burdens in tax disputes by introducing a ₹10,000 minimum threshold for show-cause notices and lowering penalties in specified non-fraud cases. It also recommended capping the appeal pre-deposit at ₹40 crore where the order involves only a penalty and no tax demand.
The GST Council recommended expanding ITC eligibility by removing certain restrictions on specified expenses, including outdoor catering, health and life insurance, subject to the proposed amendments. It also recommended waiving late fees for eligible taxpayers with annual turnover up to ₹5 crore in the preceding financial year, provided the delayed return is filed by the end of its due month.
The GST Council recommended tighter safeguards for e-way bill inspections, allowing interception based on specific intelligence and authorisation by an officer of at least Joint Commissioner rank. It also approved in principle an optional Annual Return Quarterly Payment (ARQP) scheme for eligible taxpayers with turnover up to ₹5 crore who exclusively make supplies to unregistered persons (B2C).