Opinion | GST Council turns from rates to relief: no arrests, fewer notices, faster refunds

Last year the GST Council cut tax rates. This year it has focused on how GST works day to day. The 57th meeting, held in New Delhi on Thursday under the chairpersonship of Union Finance Minister Nirmala Sitharaman, recommended changes to registration, returns, refunds, notices and the checking of goods on the road. The Chief Minister of Jammu & Kashmir was among those who attended.

No arrests, and a higher bar for prosecution

The Council has recommended deleting Section 69 of the CGST Act, which means tax officers will no longer have the power to arrest under GST. The amount of tax evasion needed to start a criminal case will rise from ₹1 crore to ₹5 crore. The offence of wrongly taking input tax credit will be limited to taking credit without actually receiving the goods or services, or without an invoice. Punishments under Section 132 will also be rationalised. Put simply, honest mistakes will be treated as tax matters, not crimes, while fake-invoice fraud remains punishable.

Fewer notices, smaller penalties

No show cause notice will be issued if the total tax involved is less than ₹10,000 (CGST, SGST, IGST and cess together). Pending notices and appeals below this amount will be decided as if this limit had always applied.

In non-fraud cases, if the taxpayer pays the tax and interest within 30 days of the order (Section 73) or 60 days (Section 74A), the penalty will be only 5%.

The minimum penalty of ₹10,000 in non-fraud cases will go, and the maximum general penalty under Section 125 will fall from ₹25,000 to ₹10,000.

Where an order imposes only a penalty and no tax, the pre-deposit for filing an appeal will be capped at ₹40 crore (₹20 crore each under CGST and SGST).

For officers, a circular will lay down standards for notices and orders: proper quality, timely issue, invoking fraud or suppression only when the facts support it, and holding personal hearings. Officers should also note a proposed validation clause that will protect notices which courts struck down only because they covered more than one financial year.

Faster refunds

Refunds will move to a largely automatic system. Any extra balance in the electronic cash ledger will be refunded in full by the system. Officers will have 10 days, instead of 15, to acknowledge a refund claim or point out deficiencies; if they do nothing, the claim is treated as acknowledged. For exports and inverted duty structure cases, 90% will be paid provisionally by the system after a risk check. In a later phase, export refunds will be sanctioned in full automatically. Scanned documents will no longer be needed, and the cap linking export turnover to 1.5 times the value of similar domestic sales will be removed.

More input tax credit

Credit will now be allowed on several items that are blocked today: outdoor catering, health and life insurance, telecom towers, pipelines outside the factory, free samples, and goods destroyed after expiry where the law requires it. Businesses with an inverted duty structure will get refunds of credit on input services availed on or after 1 November 2026, and on capital goods availed on or after 1 April 2027 (spread over 60 months). Where an officer blocks credit in the ledger under Rule 86A, the taxpayer will be able to file an objection and be heard.

Easier registration

A circular will list the documents needed for registration, and the form will have drop-down boxes so that both sides know what is required. Changes to registration details, other than the principal place of business, will be accepted automatically. Cancellation will become automatic once all returns are filed and dues paid. Small online sellers will be able to register in another State by declaring the e-commerce company’s warehouse there as their place of business, provided they pass on credit of no more than ₹2.5 lakh a month.

Smoother movement of goods

A truck carrying goods can be stopped only on specific intelligence and with the approval of an officer not below the rank of Joint Commissioner. Goods can be detained or seized only in the State where the supplier or buyer is located, not in States the truck is merely passing through. The exception is a vehicle with no e-way bill or no documents showing where the goods are coming from or going to; such goods can be checked anywhere. Confiscation will not apply to goods in transit.

Relief for small taxpayers

Taxpayers with a turnover up to ₹5 crore will get a full waiver of late fee if a delayed return is filed by the end of the month in which it was due. The Council also approved, in principle, an optional scheme for businesses up to ₹5 crore that sell only to consumers: one annual return with quarterly tax payment. From the April 2027 return, new tools will help correct mismatches in tax and credit before notices are generated.

Boost for exporters

Services supplied to an Indian company’s own branch abroad will be able to qualify as exports. Work done in India on goods sent by foreign clients, such as repair or testing, will also count as an export. Goods sold to a foreign buyer but delivered in an SEZ or free trade warehousing zone will be treated as zero-rated.

Rates and clarifications

No general rate change was made, but there are targeted changes. Psyllium (Isabgol) seeds will carry nil GST. Waste and scrap of plastic, electronics and tyres, and used cooking oil, will come under reverse charge when sold by unregistered persons, with 2% TDS on sales between registered persons. Dealers in used vehicles under the margin scheme can take credit on all their expenses except the vehicles themselves. Passenger transport and rental using electric vehicles get an option of 5% GST. Exemptions have been recommended for helicopter seat-sharing in the North-East, Sikkim and Bagdogra, for storage of seeds, and for coffee curing.

What should you do now?

Tax officers should continue to apply the existing law until amendments are notified, but should follow the spirit of fair and reasoned orders. Taxpayers should keep filing on time and keep records of input services from 1 November 2026, which will matter for future refunds. Tax professionals should watch for CBIC and State notifications and review clients’ pending small-value notices and blocked credits. These reforms, once notified, will reduce disputes and improve cash flow for businesses.

The writer is a JKAS officer serving as State Taxes Officer, Circle Budgam. Views are personal and based on the PIB press release of 8 October 2026.