India's GST Council proposes automatic refunds and an end to tax arrests

India's GST Council proposes automatic refunds and an end to tax arrests

8 October 2026: India's GST Council, chaired by Finance Minister Nirmala Sitharaman, has recommended a package that removes the power to arrest taxpayers, raises the prosecution threshold fivefold and sends about 90% of eligible refund claims through automatic, risk-based processing. The 57th meeting, held in New Delhi, kept the existing rate structure. Prime Minister Narendra Modi welcomed the changes in a post on X, saying the focus was "faster decisions" and lower compliance costs.

Not yet independently verified. The GST Council's own press release for this meeting was not yet on gstcouncil.gov.in when we checked, so the figures come from press reports of the recommendations. Nothing takes effect until the changes are notified. We will update this when it can be confirmed, and remove this note.

The enforcement changes are the largest. The prosecution threshold would rise from ₹1 crore to ₹5 crore, the minimum punishment for GST offences would go, leaving courts to choose a fine, imprisonment or both, and the general penalty where no specific one applies would fall from ₹25,000 to ₹10,000.

On process, the acknowledgement period for refund applications drops from 15 days to 10. Low-risk registration applications are expected to be approved automatically within three working days, and the Council proposed more automation for amendments too. For smaller taxpayers it approved in principle an optional scheme for businesses with turnover up to ₹5 crore that supply only to consumers: file returns annually, pay tax quarterly.

IT and engineering firms should read the place-of-supply recommendation closely. Research, testing, certification and engineering services done in India on goods owned by an overseas customer can fail to qualify as exports when the prototype or sample sits in India, which leaves the tax position uncertain. Nasscom, the industry body, says the change should help engineering R&D firms, global capability centres and deep-tech start-ups. It also welcomed a proposal to give export treatment to services supplied through an overseas branch, which currently fails because both entities belong to the same person, subject to the other export conditions. Nasscom also backed extending inverted-duty refunds to input services and making plant and machinery eligible for refund.

These are recommendations. The changes must be notified before any of them applies, and the reports give no effective dates. Firms invoicing overseas customers for work on physical samples are the ones whose contracts and refund claims could change first.

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Sources

• Business Today: PM Modi welcomes new GST reforms (57th GST Council meeting), 8 October 2026
• Business Today: GST relief for overseas R&D, Nasscom on the new place-of-supply rules, 8 October 2026