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 withdraws the power to arrest taxpayers, raises the prosecution threshold fivefold and lets the GST system sanction 90% of export and inverted-duty refund claims provisionally, with no officer involved, on the basis of its own risk checks. 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.

The enforcement changes are the largest. The prosecution threshold would rise from ₹1 crore to ₹5 crore, the punishments for offences under section 132 would be rationalised, the ₹10,000 minimum penalty in non-fraud cases would go, 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. Changes to registration details, other than the principal place of business, would be accepted automatically on the portal, and an acknowledgement not issued within 10 days would be deemed given. For smaller taxpayers it approved in principle a concept note for an optional Annual Return Quarterly Payment scheme for businesses with turnover up to ₹5 crore that supply only unregistered buyers: 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. The Council's release gives two dates: refunds of input tax on input services under an inverted duty structure would cover credit taken on or after 1 November 2026, and refunds of credit on capital goods, spread over 60 months, credit taken on or after 1 April 2027. Firms invoicing overseas customers for work on physical samples are the ones whose contracts and refund claims could change first.

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Related on TrustList:

• Australia bill adds start-up CGT concession and reworks R&D incentive
• Pakistan's FBR moves the 2026 tax return deadline to 31 October

Sources

• Press Information Bureau: Recommendations of the 57th meeting of the GST Council, 8 October 2026
• GST Council: Press release on the recommendations of the 57th meeting, 8 October 2026
• 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