The 57th GST Council meeting was held on 8 October 2026 at Bharat Mandapam, New Delhi, chaired by the Union Finance Minister. The headline: the Council has recommended omitting Section 69 of the CGST Act, which gives GST officers the power to arrest.
Arrest is only one item on a long list. For most businesses, the changes to penalties, input tax credit, refunds and registration will matter more day to day. Here is what was recommended, what it means in practice, and when it might apply.
These are recommendations, not law yet. Most need an amendment to the CGST Act, the rules, or a notification before they take effect. The Finance Minister indicated that most process reforms are targeted from 1 April 2027. Until then, the current law applies.
1. Arrest, prosecution and penalties
| Item | Now | Recommended |
|---|---|---|
| Power to arrest (Section 69) | Available for specified offences | Section omitted |
| Prosecution threshold | ₹1 crore | ₹5 crore; below this, only demand, interest and penalty |
| General penalty (Section 125) | Up to ₹25,000 | Up to ₹10,000 |
| Show cause notice | Any amount | None if tax is below ₹10,000 (all taxes and cess combined) |
| Penalty in non-fraud cases when tax and interest are paid after the order | 10% of tax or ₹10,000, whichever is higher | 5%, if paid within 30 days (Section 73) or 60 days (Section 74A) of the order; ₹10,000 minimum removed |
| Pre-deposit for penalty-only appeals | Percentage of penalty, no upper limit | Capped at ₹40 crore (₹20 crore CGST + ₹20 crore SGST) |
- Prosecution narrowed. Section 132 is to be cut down. Fake-ITC prosecution would cover only credit taken without actual goods or services, or without an invoice.
- Pending small cases. Notices and appeals below ₹10,000 that are already pending would be decided as if the new threshold had applied from the start.
- Officer guidelines. A circular is planned on the quality of notices, timelines, when fraud provisions can be invoked, and natural justice.
This follows the income-tax side, where arrest was removed from tax recovery earlier this year. See our note on CBDT Notification 120/2026.
2. Input tax credit
Blocked credits under Section 17(5) are to be opened up for:
- Health and life insurance for employees
- Outdoor catering
- Telecom towers, and pipelines laid outside the factory
- Free samples
- Goods written off or destroyed on expiry of shelf life required by law
Credit on restaurant and outdoor catering, hotel stays up to ₹7,500 per unit per day, and gym and fitness services would be allowed in limited cases, mainly where the business is in the same line.
- Rule 86A hearing. Before an officer blocks your electronic credit ledger, you can object and ask for a personal hearing. Today credit is often blocked first and explained later.
- Supplier default (Section 16(2)(c)): no decision yet. A committee of officers is to report within three months, with any change targeted from 1 April 2027. Until then, the Supreme Court's Bhandari Scrap Traders ruling stands: a buyer can lose credit if the supplier doesn't pay.
3. Refunds
- Inverted duty refund on input services: allowed for credit availed on or after 1 November 2026. Today, only goods-related credit counts.
- Capital goods credit: refundable over 60 months in export and inverted duty cases, for credit availed on or after 1 April 2027.
- 90% provisional refund for exports and inverted duty claims, sanctioned automatically after the system's risk check.
- Excess cash ledger balance refunded automatically.
- Acknowledgement or deficiency memo within 10 days instead of 15, with deemed acknowledgement after that.
- The 1.5-times cap on export turnover in Rule 89(4)(C) is removed, and refund forms will be machine-readable, so scanned documents won't be needed.
4. Registration, e-way bills and exports
- Amendments auto-approved: most changes to registration details will be accepted automatically. Change of principal place of business still needs approval, except for small taxpayers under Rule 14A.
- E-commerce sellers: a new Rule 14B would let small sellers selling into another state through a platform register using the operator's warehouse as their principal place of business.
- System-based cancellation and revocation once returns are filed and dues paid, introduced in two phases.
- Vehicle interception: only on specific intelligence, with approval from an officer not below Joint Commissioner, and only in the state of the supplier or recipient. No confiscation of goods merely in transit through another state. Goods moving without an e-way bill or documents can still be checked anywhere.
- Exports of services: services to your own foreign branch could qualify as exports, and the place-of-supply rule for services on goods from foreign clients is to be simplified.
5. Small taxpayers
- Late fee waiver: no late fee for businesses with prior-year turnover up to ₹5 crore, if the return is filed by the end of the month in which it was due.
- Annual return, quarterly payment (in-principle): an optional scheme for B2C-only businesses with turnover up to ₹5 crore. Details are still to come.
- E-invoicing extended to reverse-charge purchases from unregistered persons and to import of services, for turnover of ₹5 crore and above.
What didn't change
No GST rates were changed. The Council also indicated that rate changes will be taken up once a year, effective 1 April. A few clarifications were approved, including 2% TDS on certain B2B scrap supplies and an optional 5% rate for EV passenger transport.
What it means for your business
- Don't change your compliance yet. Section 69, the current penalties and the current ITC blocks apply until the amendments are notified.
- Review employee insurance and catering costs. Credit on these may open up once the law changes. Keep invoices with your GSTIN so you can claim it when allowed.
- Exporters and inverted duty businesses: track input service credit from 1 November 2026 separately. It may become refundable.
- Small cases: if you have a pending notice or appeal under ₹10,000, keep it alive. It may be decided in your favour once the threshold is notified.
- Keep GSTR-2B reconciliation monthly. Supplier-default risk is unchanged for now.
Our view
For years, GST compliance has been built around the fear of a notice. This list moves it toward trust: no arrest, fewer small notices, lower penalties for genuine mistakes, faster refunds. How much it helps will depend on how quickly the amendments are passed, and on how officers apply them on the ground.
How Vitt-Marg helps
We track each recommendation as it becomes law and update our clients' GST processes when it does: credit claims, refund applications, and replies to notices. For monthly returns and reconciliation, see our GST return filing service in Noida.
General information, current as of October 2026, not advice for a specific case. GST and income-tax rules change often — check with us before acting on it.