GST Council Approves Sweeping Reforms for Businesses
India's Goods and Services Tax (GST) Council, following its 57th meeting on October 8, 2026, has greenlit a comprehensive package of process reforms aimed at significantly easing compliance for businesses nationwide. Finance Minister Nirmala Sitharaman announced that these measures address 99% of outstanding issues under the "next-gen GST reforms," emphasizing a shift towards a trust-based tax administration.
Key Compliance Simplifications
The approved reforms focus heavily on streamlining various aspects of GST compliance. Businesses can expect faster processing for registrations, returns, and refunds. Specifically, 90% of GST returns are projected to be cleared within 13 days of filing, with acknowledgments issued within 10 days. Furthermore, 90% of refunds will be sanctioned within three days of receiving acknowledgment, a welcome change for managing working capital.
Automated processes will now handle changes in business registration details and cancellations, reducing manual intervention. Taxpayers will also see notices for amounts below Rs 10,000 withdrawn, with a new circular offering comprehensive guidelines to tax officers for issuing demand notices, adjudication orders, and appeals.
Reduced Penalties and Enhanced Trust
In a significant move to foster a trust-based environment, the GST Council has reduced the maximum general penalty under Section 125 of the CGST Act from Rs 25,000 to Rs 10,000. Crucially, the arrest powers of tax officers under the GST system have been removed, and the monetary threshold for prosecution has been substantially raised from Rs 1 crore to Rs 5 crore. These changes are expected to provide much-needed certainty and relief to businesses.
Input Tax Credit (ITC) Expansions
Effective November 1, 2026, businesses will be able to claim refunds of accumulated input tax credit on input services for cases involving inverted duty structures. The Council also proposed amendments to allow ITC availment on various supplies, including outdoor catering, health and life insurance, telecommunication towers, pipelines outside factory premises, and free samples or goods destroyed/written off due to shelf-life expiry, as required by law.
Future Reforms and Expert Reactions
Looking ahead, the GST Council gave in-principle approval for an optional Annual Return Quarterly Payment (ARQP) scheme. This scheme is designed for taxpayers with an aggregate turnover of Rs 5 crore or less in the preceding financial year, engaged exclusively in supplies to unregistered persons, and is expected to be finalized in a subsequent meeting.
A committee of officers has also been formed to review proposals regarding ITC for motor vehicles with seating capacities of 13 or more persons and to address challenges faced by honest taxpayers in claiming ITC under Section 16(2)(c) due to non-payment by others in the supply chain. This committee's report is anticipated within three months, with potential implementation by April 1, 2027.
Experts have largely welcomed these reforms. Abhishek Jain, Indirect Tax National Head and Partner at KPMG in India, noted a clear shift towards trust-based tax administration and greater ease of doing business. Sohrab Bararia, Partner at Grant Thornton, highlighted the refund-related measures as a significant relief for businesses struggling with working capital delays.