Case Study : 57th GST Council Notifications and Circulars Explained – Key Changes, Compliance Updates and Business Impact

57th GST Council: Notifications and Circulars Explained – Key Changes, Compliance Updates and Business Impact

Introduction

The 57th GST Council meeting, held on 8 October 2026, introduced several important changes to India's Goods and Services Tax (GST) framework. Following the meeting, the Central Board of Indirect Taxes and Customs (CBIC) issued a series of notifications and circulars to implement the Council's recommendations and clarify various provisions of GST law.

These developments are particularly important for businesses, exporters, manufacturers, service providers, tax professionals and GST practitioners. The changes cover multiple areas, including post-supply discounts, input tax credit (ITC), GST refunds, registration procedures, e-invoicing, reverse charge mechanisms, demand proceedings and GST compliance requirements.

Most of the notified changes are scheduled to take effect from 1 November 2026, while certain amendments will become applicable from December 2026, January 2027 and April 2027.

One of the most significant aspects of this update is the government's effort to simplify compliance procedures, reduce unnecessary litigation, improve refund processing and establish greater clarity around GST administration.

However, not every recommendation made during the 57th GST Council meeting has been implemented yet. Some proposals still require amendments to the CGST and IGST Acts.

In this article, we explain the important GST notifications and circulars issued after the 57th GST Council meeting, what has changed under the revised framework, and how these developments may affect businesses and taxpayers.

Understanding the 57th GST Council's Notifications and Circulars

Following the 57th GST Council meeting, CBIC issued several notifications and circulars on 26, 27 and 28 October 2026.

These documents serve different purposes within the GST framework.

Notifications primarily bring legislative amendments into force, modify existing rules, introduce changes to tax rates or prescribe new compliance requirements.

Circulars, on the other hand, provide administrative clarification and guidance to tax authorities and taxpayers on how particular GST provisions should be interpreted and implemented.

The latest changes broadly cover five important areas:

• Amendments to the CGST Act and CGST Rules.
• Changes in GST rates and reverse charge provisions.
• Simplification of registration and refund procedures.
• Clarifications concerning ITC, exports and GST compliance.
• Improvements in demand proceedings, adjudication and appeals.

Understanding the distinction between these notifications and circulars is important because businesses must identify which changes directly affect their tax liabilities and which ones influence their compliance procedures or legal position.

1. Major Amendments to the CGST Act Under Notification 03/2026

Notification No. 03/2026-Central Tax, dated 26 October 2026, brings Sections 153 to 155 of the Finance Act, 2026 into force from 1 November 2026.

These provisions amend Sections 15, 34 and 54 of the CGST Act, introducing important changes to valuation, credit notes and refund eligibility.

Post-Supply Discounts: Greater Flexibility for Businesses

One of the most important changes concerns the treatment of post-supply discounts under Section 15(3)(b) of the CGST Act.

Previously, businesses could reduce the taxable value of a supply through a post-supply discount only if certain conditions were satisfied. The discount had to be established through an agreement made before or at the time of supply and linked to specific invoices.

This created practical difficulties for businesses offering year-end incentives, volume-based rebates and other commercial discounts after completing a sale.

Under the amended provision, these two earlier conditions have been removed. A post-supply discount can now reduce the value of supply when the supplier issues a credit note and the recipient reverses the corresponding input tax credit.

This is particularly relevant for businesses operating in the FMCG, pharmaceutical, retail and consumer durables sectors, where post-sale incentives and volume-based discount arrangements are common.

The amendment provides greater flexibility in structuring commercial discount schemes while ensuring that the corresponding ITC adjustment is properly accounted for.

Changes to Credit Notes Under Section 34

The amendment to Section 34(1) complements the revised treatment of post-supply discounts.

Earlier, issuing a GST credit note for a post-supply discount was closely linked to the conditions prescribed under Section 15(3)(b).

With the revised provision, suppliers can issue credit notes for eligible post-supply discounts under the updated framework.

This is expected to reduce documentation-related difficulties for businesses that regularly provide rebates and commercial incentives to their customers.

However, businesses should ensure that credit notes are properly recorded and that the recipient's corresponding ITC reversal is completed.

Faster Provisional Refunds for Inverted Duty Structure

Another important amendment relates to Section 54(6) of the CGST Act.

Previously, the 90% provisional refund mechanism was primarily available for zero-rated supplies, such as exports and supplies to Special Economic Zones.

The amendment extends this mechanism to refunds of unutilised input tax credit arising from an inverted duty structure.

An inverted duty structure occurs when the GST rate on inputs is higher than the GST rate applicable to the final output supply. As a result, businesses accumulate input tax credit that cannot be fully utilised against their output tax liability.

The extension of provisional refunds is particularly beneficial for manufacturers operating in sectors where such credit accumulation is common.

It can help businesses access a larger portion of their eligible refunds without waiting for the entire refund claim to undergo the conventional sanction process.

Removal of the Minimum Refund Threshold for Certain Exporters

Section 54(14) has also been amended.

Previously, refund claims below ₹1,000 were generally not payable. The revised provision removes this minimum threshold for small refunds relating to goods exported with payment of tax.

This is particularly beneficial for small exporters who may otherwise lose eligibility to receive relatively small IGST refunds.

The amendment helps ensure that eligible export-related refunds are not denied merely because the amount falls below the earlier minimum limit.

2. E-Invoicing Requirements to Expand from January 2027

Notification No. 04/2026-Central Tax introduces an important expansion of the e-invoicing framework.

Previously, taxpayers covered under the applicable e-invoicing threshold were required to generate Invoice Reference Numbers (IRNs) primarily for B2B supplies and exports.

From 1 January 2027, the requirements will also cover self-invoices relating to reverse charge purchases from unregistered persons and imports of services.

The e-invoicing schema, INV-01 version 1.2, introduces two additional supply categories:

• RCMDOM: Domestic reverse charge transactions.
• RCMIMP: Reverse charge transactions relating to imports of services.

This change is intended to improve the reporting and matching of reverse charge transactions within the GST system.

For businesses covered by the applicable e-invoicing requirements, this means their accounting and ERP systems will need to accommodate the new transaction categories before the implementation date.

Businesses should review their existing invoicing processes, identify transactions involving reverse charge and coordinate with their technology teams to ensure that the revised requirements are implemented on time.

3. Major Changes Under the CGST Amendment Rules, 2026

Notification No. 05/2026-Central Tax introduces the CGST (Amendment) Rules, 2026.

The notification contains 67 amendment clauses and covers several areas, including registration, refunds, input tax credit, returns and other procedural requirements.

Some of these amendments represent significant changes in how businesses interact with GST authorities and complete their routine compliance activities.

Easier GST Registration Through E-Commerce Warehouses

A significant change has been introduced through the new Rule 14B.

Previously, a seller registered in one State who wanted to store goods in an e-commerce operator's warehouse in another State generally needed to obtain a separate GST registration there.

This often involved arranging a physical business address, submitting additional documents and responding to registration-related queries.

The new Rule 14B provides a simplified registration mechanism for eligible sellers.

A seller registered in its home State can now register in another State by declaring the warehouse of a TCS-collecting e-commerce operator as its principal place of business.

The facility is subject to certain conditions:

• The goods must be supplied through the relevant e-commerce operator.
• Monthly B2B output tax liability must not exceed ₹2.5 lakh.
• The e-commerce operator must provide consent within seven working days.
• Verification must take place in the seller's home State.
• The operator must appoint an authorised representative in each relevant State.

This amendment can make interstate inventory management easier for eligible small online sellers.

It reduces the need to independently maintain physical business premises in every State where their goods are stored.

Faster Amendments to GST Registration Details

The amended Rule 19 introduces defined timelines for processing applications to amend GST registration details.

Previously, businesses could experience delays because there was no fixed timeline within which officers were required to process registration amendment applications.

Under the revised provision, taxpayers must apply through Form REG-14 within 15 days of the relevant change.

For core amendments, the officer is required to act within 15 days or within seven working days after receiving the taxpayer's reply, as applicable.

If the officer does not act within the prescribed period, the amendment is deemed approved.

Additionally, changes relating to the business name and partners are applied across registrations associated with the same PAN.

From 1 December 2026, eligible Rule 14A registrants can also amend their principal place of business themselves.

This change is expected to reduce administrative delays and help businesses update their registration details more efficiently.

Simplified GST Registration Cancellation

The amended Rule 20 also introduces a more structured process for voluntary cancellation of GST registration.

Taxpayers must apply through Form REG-16 within 30 days of the relevant event.

In eligible cases, where returns and dues are clear and the prescribed B2B liability condition is satisfied, the GST portal can automatically cancel the registration.

Other cases are subject to a 15-day deemed approval mechanism.

The revised rules also introduce Forms REG-34 to REG-37 to establish a procedure through which officers can determine an earlier cancellation date.

This is particularly relevant for businesses that have discontinued operations, closed a branch or no longer require a particular GST registration.

Automatic Suspension and Restoration of GST Registration

The amended Rules 21, 21A, 22 and 23A introduce changes to the suspension, cancellation and revocation of GST registration.

From 1 April 2027, specified non-filing defaults can trigger automatic suspension of registration through the GST portal.

Taxpayers will receive an intimation in Form REG-31.

If the taxpayer files all pending returns or provides the required bank details within 30 days, the suspension can be revoked from the original date.

Where the default is not corrected, the registration may be deemed cancelled through Form REG-38.

Taxpayers can apply for revocation through Form REG-21 within 180 days. Under the revised process, revocation is deemed approved once the required pending returns, tax, interest and late fees are paid.

The overall objective is to make registration restoration more dependent on actual compliance rather than lengthy administrative procedures.

4. Faster GST Refund Processing and Improved ITC Refund Rules

Refund processing is another area where the 57th GST Council's recommendations introduce significant procedural improvements.

For businesses, particularly exporters and manufacturers, delayed GST refunds can create working capital challenges.

The amended CGST Rules attempt to address this issue through shorter processing timelines and greater automation.

Shorter Refund Acknowledgement Timeline

Under the amended Rule 90, the GST officer has 10 days to acknowledge a refund application through Form RFD-02 or issue a deficiency memo through Form RFD-03.

Previously, the prescribed period was 15 days.

If neither action is taken within the revised period, the application is deemed acknowledged, and the 60-day timeline under Section 54(7) starts from the date of filing.

This creates greater certainty for refund applicants and reduces the possibility of applications remaining unacknowledged for extended periods.

Faster Provisional Refunds Through Automation

Rule 91 introduces an important change in the processing of provisional refunds.

Previously, provisional refund orders were issued by officers, and the time taken to process applications could vary considerably.

Under the amended framework, the GST portal generates the provisional refund order in Form RFD-04 within three working days of acknowledgement, based on system-driven risk evaluation.

The payment order in Form RFD-05 is also generated through the portal.

For eligible low-risk refund claims, this can significantly reduce the time required to receive provisional refunds.

This is particularly important for exporters and businesses dealing with inverted duty structures, where accumulated ITC can affect working capital.

Automated Final Refund Sanction

The amended Rule 92 introduces a new sub-rule (1B).

It allows the GST portal to generate the final refund sanction order in Form RFD-06, including details of any amount adjusted against outstanding demands.

This is expected to reduce additional delays between provisional refund processing and final sanction.

Input Services Now Included in the Inverted Duty Refund Formula

One of the most significant changes concerns Rule 89(5).

Previously, the Net ITC calculation for refunds arising from an inverted duty structure excluded input services.

This created difficulties for manufacturers and businesses that incurred substantial GST on services used in their operations.

Under the revised provision, eligible ITC on input services availed on or after 1 November 2026 will be included in the Net ITC calculation.

From 1 April 2027, eligible capital goods credit will also be included in the refund formula.

However, capital goods credit will be spread over 60 months at 1/60th per month.

The same treatment is also incorporated into the Rule 89(4) formula for zero-rated supplies made under a Letter of Undertaking (LUT).

This change is particularly relevant to sectors such as textiles, fertilisers and manufacturing, where input services and capital investments can contribute significantly to accumulated ITC.

Removal of the Export Turnover Cap

The amendment to Rule 89(4)(C) removes the earlier cap on the turnover of zero-rated supplies of goods for refund calculations.

Previously, the value considered for export turnover was restricted to 1.5 times the value of like goods supplied domestically.

Removing this cap can benefit exporters whose export prices are significantly higher than their domestic selling prices.

The change helps prevent eligible refund calculations from being restricted by the earlier turnover limitation.

Changes to ITC Ledger Debit Order

The amended Rule 89(3) also introduces a prescribed sequence for debiting credit from the electronic credit ledger when processing refunds.

The revised order requires the refund to be debited first from IGST credit, followed by equal debits from CGST and SGST/UTGST credit.

If there is insufficient balance under one of the relevant heads, the shortfall is adjusted against the other.

This creates a more predictable approach to refund processing and reduces the possibility of refund applications being rejected because of incorrect ledger debit allocation.

5. Changes to Input Tax Credit and Credit Blocking

The 57th GST Council's recommendations also address the procedures relating to input tax credit, particularly the blocking of credit under Rule 86A.

Greater Transparency in Blocking of ITC Under Rule 86A

Previously, GST officers could block the use of input tax credit in a taxpayer's electronic credit ledger under Rule 86A without a formal order being made available to the taxpayer.

In many cases, taxpayers became aware of the restriction only when they attempted to utilise their credit while filing returns.

The amended Rule 86A, effective from 1 April 2027, introduces a more structured process.

Blocking must be carried out through a formal order in Form DRC-26 on the GST portal.

The restriction will lapse after one year or earlier if it is lifted.

Taxpayers will also have the right to submit an objection through Form DRC-27.

After providing an opportunity for a hearing, the officer must either allow the debit or reject the objection through Form DRC-28.

This change improves procedural transparency and gives taxpayers a defined mechanism to challenge restrictions placed on their ITC.

Input Service Distributor Rules Clarified

The amended provisions also align the Input Service Distributor (ISD) rules with the amended Section 20 of the CGST Act.

The revised framework clarifies that CGST credit can be distributed as CGST and introduces an auto-drafted GSTR-6A.

The objective is to improve consistency between ISD returns and the corresponding credit information reflected in the recipients' GSTR-2B.

This can help businesses operating across multiple locations manage the distribution of common input service credit more efficiently.

6. Important GST Return and Compliance Changes

Apart from registration and refund-related amendments, the 57th GST Council has introduced changes to several GST return forms and filing timelines.

Revised GSTR-5 Due Date

The due date for filing GSTR-5 by non-resident taxable persons has been changed from the 20th to the 13th of the following month.

This aligns the filing timeline more closely with GSTR-1 and helps recipients receive the relevant credit information more promptly.

Extended Time for Filing GSTR-4 When Leaving the Composition Scheme

The due date for filing GSTR-4 when opting out of the composition scheme has been extended from 30 April to 30 June.

This provides small taxpayers with additional time to complete the relevant compliance requirements when transitioning out of the scheme.

Changes to Composition Scheme Reporting

The revised GSTR-4, CMP-08, CMP-02 and CMP-04 forms introduce separate reporting categories for goods, services and e-commerce services supplied under Section 9(5).

A separate category is also provided for taxpayers covered under Section 10(2A).

These changes aim to improve reporting accuracy and reduce discrepancies between the turnover declared by composition taxpayers and the information reported by e-commerce operators.

Annual Return Relaxations Extended

The relaxations concerning GSTR-9 and GSTR-9C have been extended from FY 2024-25 to FY 2025-26 onwards.

Businesses should review the applicable annual return instructions and ensure that their reporting processes reflect the updated requirements.

7. Important Changes to GST Demand Notices and Adjudication

The 57th GST Council's recommendations also introduce important procedural clarifications relating to GST demand notices, adjudication and appeals.

These changes are particularly relevant for businesses facing tax demands, show cause notices or disputes with GST authorities.

Greater Clarity in GST Demand Notices

The amended requirements relating to DRC-01A and DRC-07 introduce more detailed disclosure requirements.

From 1 April 2027, DRC-01A must identify the earlier proceeding that triggered the proposed demand. This may include proceedings involving DRC-01C, ASMT-10, audits, refunds or investigations.

The form must also explain the grounds supporting the proposed demand.

Additionally, DRC-07 must contain the relevant show cause notice number and date.

This helps taxpayers understand the origin of a demand and identify the specific proceedings or allegations they need to respond to.

Changes to Provisional Attachment Proceedings

The amended Rule 159 introduces changes to the handling of objections against provisional attachment orders.

Form DRC-22 will now contain Part A and Part B.

The officer must formally reject an objection rather than dealing with it informally.

This creates a more structured process and makes the decision easier to examine or challenge through the appropriate legal procedure.

8. New GST Rate Notifications and Their Impact

The 57th GST Council meeting also resulted in changes to GST rates applicable to selected goods and services.

These changes are implemented through the rate notifications issued on 27 October 2026 and generally take effect from 1 November 2026.

Changes to GST Rates on Selected Goods

Notification No. 02/2026-Central Tax (Rate) amends the existing goods rate schedule.

The key changes include:

• Specified forms of psyllium seeds receive a nil GST rate.
• GST rates on retreaded tractor tyres are aligned with those applicable to new tractor tyres.
• Seaweed-based bio-stimulants registered under the Fertiliser Control Order are classified as fertilisers under heading 3101.

These changes are relevant to agricultural businesses, manufacturers and suppliers dealing with the affected products.

They also provide greater certainty regarding the classification and applicable tax treatment of specific agricultural inputs.

Lower GST Rate for Certain Electric Vehicle Transport Services

Notification No. 03/2026-Central Tax (Rate) introduces a 5% GST option for specified electric vehicle passenger transport and rental services.

This rate is available with restricted ITC where the cost of charging forms part of the consideration.

Credit is permitted on input services received from a supplier operating in the same line of business.

The change can benefit EV cab operators and rental businesses by providing a more suitable tax treatment for the specified services.

GST on Delivery Services Through E-Commerce Platforms

Another important rate-related change concerns delivery services supplied through e-commerce operators.

Previously, the relevant provisions primarily covered local delivery by unregistered persons under Section 9(5), while the tax treatment of certain platform-based delivery services created uncertainty.

The revised entry covers specified delivery services, other than postal and courier services, supplied through an e-commerce operator by persons who are not liable to register.

The applicable GST rate is 5% without ITC on inputs, with the e-commerce operator responsible for paying the tax under Section 9(5).

The clarification is relevant to online delivery platforms, businesses and service providers operating through e-commerce applications.

Clarification for Toll-Operate-Transfer Concessions

The revised provisions also address the tax treatment of concession rights and operation and maintenance services under Toll-Operate-Transfer arrangements.

An exemption has been provided for the concession right, along with a special valuation and payment procedure for operation and maintenance services.

This provides greater certainty for highway concessionaires and their lenders.

Exemptions for Agricultural and Regional Transport Services

The revised service rate notification also introduces exemptions for certain services.

These include storage of sowing seeds and coffee-curing support services supplied to cultivators.

Helicopter seat-sharing services at specified locations in the northeastern States, Sikkim and Bagdogra are also exempt.

These changes are intended to support agricultural activities and improve regional connectivity.

9. Reverse Charge Mechanism and TDS on Scrap Transactions

One of the important compliance developments under the 57th GST Council concerns the treatment of scrap transactions.

The changes affect suppliers and buyers dealing in used cooking oil, plastic scrap, tyre scrap, metal scrap and e-waste.

Expansion of Reverse Charge Mechanism

Notification No. 04/2026-Central Tax (Rate) expands the reverse charge mechanism to cover specified categories of scrap purchased by registered persons from unregistered suppliers.

The affected categories include:

• Used cooking oil under HSN 1518.
• Plastic scrap under HSN 3915.
• Tyre scrap under HSN 4004.
• E-waste under HSN 8549.

Under the revised provisions, the registered buyer becomes responsible for paying GST under the reverse charge mechanism.

This reduces the compliance burden on eligible small and unregistered scrap collectors while establishing a clearer tax reporting mechanism for registered buyers.

GST TDS on Additional Scrap Categories

Notification No. 07/2026-Central Tax also expands the scope of GST TDS.

Previously, the relevant TDS provision applied to specified metal scrap supplies made by registered suppliers to registered buyers.

From 1 November 2026, the scope also covers used cooking oil, plastic scrap, tyre scrap and e-waste supplied between registered persons.

Businesses involved in these transactions should review their accounting and ERP systems to ensure that the applicable RCM and TDS requirements are correctly identified.

It is particularly important to distinguish transactions based on the supplier's registration status and the applicable tax mechanism.

10. Major GST Circulars Issued by CBIC

Along with the notifications, CBIC issued several circulars between 26 and 28 October 2026.

These circulars provide important clarifications on registration, GST refunds, ITC, export proceeds, banking transactions and demand proceedings.

Circular 257/03/2026-GST: Simplification of GST Registration

Circular No. 257/03/2026-GST introduces an applicant-facing framework for GST registration.

Previously, applicants often faced difficulties because officers requested documents that were not specifically required under the GST rules.

These requests sometimes included Udyam certificates, additional explanations relating to residential business addresses and electricity bill amounts.

The new circular provides 51 frequently asked questions, constitution-wise document checklists and a list of acceptable premises documents.

It also clarifies that deficiencies should be communicated through Form REG-03 and should relate to genuine gaps in the application.

The processing timeline is seven working days where Aadhaar authentication is completed and 30 days otherwise, with a further seven working days after a reply.

If the officer does not act within the prescribed timeline, deemed approval applies.

The circular also clarifies that bank details are not required at the initial registration application stage.

This provides applicants with a clearer understanding of the documentation required and reduces uncertainty during GST registration.

Circular 258/04/2026-GST: Demand, Adjudication and Appeals

This is one of the most important circulars for taxpayers involved in GST disputes.

Circular No. 258/04/2026-GST establishes detailed guidance for issuing show cause notices, conducting adjudication proceedings and deciding appeals.

A show cause notice must contain the taxpayer's details, relevant tax periods, factual allegations, applicable legal provisions, supporting evidence and quantified demand.

The circular also clarifies the treatment of fraud-related proceedings under Sections 74 and 74A(5)(ii).

Simply identifying unpaid tax is not sufficient to establish fraud or suppression. The notice must contain specific supporting material.

Where a demand involves multiple issues, the relevant components must be appropriately separated.

The circular further emphasises coordination between Central and State tax authorities under Section 6 to prevent parallel proceedings on the same issue.

Personal hearings are mandatory, and adjudication orders must properly address the taxpayer's submissions and cited judicial precedents.

Importantly, Section 75(7) restricts the confirmation of demands beyond the grounds specified in the show cause notice.

Penalty decisions must also contain proper reasoning.

The circular further clarifies that AI-generated material used in proceedings must be verified by the concerned officer.

For businesses facing GST disputes, these clarifications are important because they establish procedural expectations that tax authorities must follow.

Circular 259/05/2026-GST: Clarification on GST Appeal Pre-Deposits

Circular No. 259/05/2026-GST addresses several practical difficulties concerning pre-deposits and their refunds.

The circular clarifies how taxpayers should declare the admitted and disputed portions of a demand in appeal applications.

For appeals before the GST Appellate Tribunal, the additional pre-deposit is 10% of the amount confirmed by the first appellate authority that remains disputed, in addition to the first appellate deposit.

The circular also clarifies that taxpayers can claim a refund of the pre-deposit through Form RFD-01 under the category "on account of order".

A separate direction in the appellate order is not required for claiming this refund.

Another important clarification is that the department's intention to file a further appeal is not, by itself, a valid reason to withhold the refund. A stay granted by the Tribunal or a court is required.

Interest under Section 115 is calculated from the actual date on which each pre-deposit payment was made.

These clarifications are particularly relevant for businesses involved in GST litigation and appellate proceedings.

Circular 260/06/2026-GST: Input Service Distributor Clarifications

Circular No. 260/06/2026-GST addresses practical questions relating to Input Service Distributor registrations and distribution of input service credit.

It clarifies that multiple ISD registrations can exist within the same State.

The ISD is responsible for distributing the credit, while the recipient registrations are responsible for determining eligibility and making any required reversals under Sections 16 and 17.

The circular also clarifies that credit should be distributed in the month in which the ISD receives the invoice in GSTR-6A.

Documents issued under Rule 54(1A) are not treated as outward supplies and are excluded from turnover and Net ITC calculations for refund purposes.

This provides greater clarity for companies with multiple GST registrations and centralised service procurement arrangements.

Circular 261/07/2026-GST: Clarifications for Banks and NBFCs

Circular No. 261/07/2026-GST provides guidance on the application of the 50% ITC restriction under Section 17(4).

It addresses situations where banks and NBFCs operate through registrations engaged in different activities.

The circular clarifies that registrations not involved in deposits or lending activities, such as bullion trading registrations, are outside the scope of Section 17(4).

It also explains how eligible registrations should apply the relevant ITC mechanism and report reversals in GSTR-3B, including situations involving the Invoice Management System (IMS).

The clarification provides greater consistency for financial institutions dealing with multiple GST registrations and different business activities.

Circular 262/08/2026-GST: Input Tax Credit on Demo Vehicles

The circular withdraws the earlier clarification under Circular 231/25/2024 concerning the denial of ITC on demo vehicles in certain dealer-agency arrangements.

The revised position clarifies that ITC on demo vehicles is not blocked under Section 17(5)(a) because these vehicles facilitate the further supply of similar vehicles.

The clarification applies irrespective of the dealership model.

This is particularly relevant for authorised automobile dealers that maintain demo vehicles as part of their sales and customer demonstration activities.

Circular 263/09/2026-GST: Receipt of Export Proceeds

Circular No. 263/09/2026-GST provides important clarification on the receipt of consideration for export of services.

Previously, refund applications could face difficulties where export proceeds were received through certain rupee accounts, adjusted against import payables or retained partly as commission by reinsurance brokers.

The circular clarifies that receipt through repatriable INR accounts can satisfy the relevant requirement under Section 2(6)(iv) of the IGST Act.

It also recognises eligible set-offs against import payables under RBI directions and net retention by reinsurance brokers.

The circular provides additional clarity for stockbrokers receiving payments from FPIs, NRIs and OCIs through specified accounts.

However, NRO receipts must be routed through a repatriable account.

It also clarifies the applicable realisation period under Rule 96B by linking it to the relevant FEMA period, including permitted extensions.

These changes are particularly important for IT companies, financial service providers, reinsurance brokers and other service exporters.

Circular 264/10/2026-GST: Retrospective Omission of Rule 96(10)

Circular No. 264/10/2026-GST addresses the consequences of the omission of Rule 96(10).

Previously, Rule 96(10) restricted certain exporters who had imported goods under specified exemptions from exporting on payment of IGST and claiming a refund.

Although the provision was omitted in October 2024, disputes relating to earlier periods continued.

Following the Supreme Court's decision in Goodluck India dated 6 August 2026, the circular clarifies that the omission applies retrospectively from 23 October 2017.

Pending proceedings relating to Rule 96(10) are to be dealt with accordingly.

The same treatment applies to Rules 89(4A) and 89(4B).

This is an important development for exporters facing recovery proceedings relating to earlier IGST refund claims.

Circular 265/11/2026-GST: Clarification on Classification of Goods

This circular provides clarification on the classification and applicable GST rates for certain goods.

For sublimation paper, the circular clarifies classification under heading 4809 at 18%, rather than heading 4810. Past disputes are regularised on an as-is-where-is basis.

For toys, the clarification confirms that the relevant entries under heading 9503 cover all toys, including dolls, scale models and puzzles.

Non-electronic toys attract 5% GST, while electronic toys attract 18%.

The circular also addresses ITC eligibility for second-hand motor vehicle dealers operating under the margin scheme and clarifies the classification of registered seaweed-based bio-stimulants under heading 3101.

These clarifications help businesses avoid unnecessary disputes over product classification and tax rates.

Circular 266/12/2026-GST: Clarifications on Services

Circular No. 266/12/2026-GST addresses several service-related GST issues.

One important clarification concerns research and development services.

The head of a research institution can self-certify whether a service constitutes research and development rather than consultancy for the purpose of the relevant exemption.

The circular also addresses the GST treatment of foreign shipping establishments, motor vehicle leasing, banking transactions, NBFC co-lending fees and specified services provided by the Special Purpose Finance Organisation.

For motor vehicle leasing, it clarifies that registration charges, road tax, insurance, FASTag and similar recoveries from the lessee form part of the composite leasing supply and are taxed at the applicable leasing rate.

It also clarifies that notional interest recorded under a fund transfer pricing mechanism by banks is treated as interest and is exempt.

However, fees charged between NBFC co-lenders are taxable.

These clarifications provide sector-specific guidance and help businesses understand the applicable GST treatment of their services.

11. GST Council Recommendations That Are Still Awaiting Implementation

Although the 57th GST Council meeting recommended several important reforms, some proposals have not yet been notified.

According to the position as of 29 October 2026, these recommendations require amendments to the CGST or IGST Acts and are expected to be addressed through a future Finance Bill or a separate amendment Act.

Some of the important pending proposals include:

Changes to arrest and prosecution provisions: The proposed omission of Section 69 and an increase in the prosecution threshold to ₹5 crore are still awaiting legislative implementation.

Relief for small GST demands: The proposal to avoid issuing show cause notices where the combined tax amount is below ₹10,000, along with the treatment of pending small cases, is yet to be implemented.

Reduction in general penalties: The proposed reduction of the general penalty under Section 125 to ₹10,000 and the introduction of a 5% penalty for early payment in non-fraud cases remain pending.

Pre-deposit relief in penalty-only appeals: A proposed cap of ₹40 crore on pre-deposits in penalty-only appeals is also awaiting implementation.

Relaxation of blocked ITC provisions: Proposed changes to Section 17(5) relating to employee health and life insurance, outdoor catering, telecom towers, pipelines, free samples and expired stock require legislative amendments.

Changes affecting export of services: The proposed removal of the distinct-establishment condition under Section 2(6)(v) and omission of Section 13(3)(a) of the IGST Act are yet to be implemented.

E-commerce operator liability: A proposed clarification concerning e-commerce operator liability under Section 9(5), irrespective of the business model, is also pending.

Revised return-correction mechanism: A revised mechanism for correcting GST returns from the April 2027 return period has been proposed and is currently subject to public consultation.

Annual Return with Quarterly Payment: The proposal for an annual return with quarterly tax payments for B2C-only taxpayers with turnover up to ₹5 crore has received in-principle approval, but the detailed framework is still awaited.

It is important for taxpayers not to treat these recommendations as implemented legal provisions until the required notifications or legislative amendments are formally issued.

12. Important GST Compliance Dates Businesses Should Know

The amendments introduced after the 57th GST Council meeting have different implementation dates. Businesses should plan their compliance activities accordingly.

1 November 2026

This is the primary implementation date for most of the announced changes.

The key provisions taking effect include amendments relating to post-supply discounts, credit notes, provisional refunds, GST rate changes, reverse charge on specified scrap transactions, GST TDS expansion and most of the CGST Amendment Rules.

The inclusion of input services in the inverted duty refund formula also begins from this date.

1 December 2026

The revised RFD-01 and REG-16 forms become applicable.

Eligible Rule 14A registrants can also amend their principal place of business through the revised self-service mechanism.

1 January 2027

The expanded e-invoicing requirements become applicable to covered self-invoices relating to domestic reverse charge purchases and imports of services.

Businesses should ensure their accounting and invoicing systems are updated before this date.

1 April 2027

Several additional procedural changes take effect.

These include the inclusion of capital goods credit in refund formulas, the revised ITC blocking and objection procedure under Rule 86A, automatic suspension and restoration procedures for GST registrations, and revised DRC-01A and DRC-07 requirements.

Businesses should monitor the implementation of these provisions and review their internal compliance procedures well in advance.

13. What Should Businesses Do After the 57th GST Council Updates?

The changes introduced through the latest notifications and circulars are not limited to tax rates. They also affect accounting processes, refund claims, ITC management, GST registrations and dispute resolution.

Businesses should take a proactive approach to understanding how these changes apply to their operations.

Here are some important steps to consider:

Review existing discount and credit note arrangements.

Businesses offering year-end incentives, volume rebates and other post-supply discounts should review their commercial agreements, credit note processes and ITC reconciliation procedures.

Evaluate pending and future refund claims.

Exporters and manufacturers operating under an inverted duty structure should review their refund eligibility, particularly the revised treatment of input services and capital goods credit.

Update ERP and e-invoicing systems.

Businesses covered by the expanded e-invoicing requirements should coordinate with their accounting and technology teams to incorporate the new reverse charge transaction categories.

Review GST registration details.

Businesses operating across multiple States, particularly those using e-commerce warehouses, should evaluate whether the revised registration provisions can simplify their existing arrangements.

Reassess ITC management procedures.

Companies should review their ITC reconciliation, ISD distribution and credit-blocking procedures to ensure that their systems reflect the amended rules.

Examine ongoing GST litigation.

Taxpayers facing show cause notices, demand proceedings or appeals should review the latest clarifications concerning adjudication, pre-deposits and procedural requirements.

Do not implement pending recommendations prematurely.

Businesses should distinguish between recommendations announced by the GST Council and provisions that have actually been brought into force through the required legal instruments.

Conclusion

The 57th GST Council meeting represents an important development in the evolution of India's GST framework.

The notifications and circulars issued following the meeting introduce changes that go beyond tax rate adjustments. They address several long-standing operational and compliance challenges, including delayed refunds, complicated registration procedures, post-supply discount treatment, ITC restrictions and uncertainty in GST litigation.

For businesses, the most immediate priorities are understanding the amendments effective from 1 November 2026, preparing for the upcoming e-invoicing requirements and reviewing their refund and ITC processes.

The latest circulars also provide important clarity on demand proceedings, appeals, export-related refunds and industry-specific tax treatments.

However, taxpayers should remember that some of the Council's recommendations are still awaiting legislative implementation. The applicability of each provision must therefore be assessed based on the relevant notification, circular and effective date.

Given the number of changes introduced, obtaining the right professional guidance can help businesses understand their obligations, minimise compliance risks and make informed decisions under the revised GST framework.