Full Breakdown
GST Council Approves Sweeping Process Reforms
By Drooid · · How we work
Core Decisions of the 57th GST Council
On October 8, 2026, the Goods and Services Tax (GST) Council—chaired by Union Finance Minister Nirmala Sitharaman—adopted reforms that shift the regime from rate-setting to day-to-day administration. The council removed the power of GST officers to arrest taxpayers, raised the criminal prosecution threshold from INR1 crore to INR5 crore, and cut the general penalty from INR25,000 to INR10,000. Refund processing will be accelerated: acknowledgement periods shrink from 15 to 10 days, 90 % of eligible claims will be sanctioned automatically after a risk check, and refund orders will be issued within three working days. The refund pool is expanded to include input services from 1 Nov 2026 and plant-and-machinery credits from 1 Apr 2027. Additional measures simplify GST registration, allow small e-commerce sellers to use a platform’s warehouse as their principal place of business, and restrict physical checks of goods in transit to the origin and destination states. A Committee of Officers will study protection for genuine buyers who have paid full tax on invoices; its report is due within three months.
Background & Context
GST was introduced on 1 July 2017 and turned nine years old on 1 July 2026. After the major rate rationalisation in September 2025, the council’s agenda moved to “GST 2.0” – a focus on administrative bottlenecks, technology-driven compliance and de-criminalisation of routine disputes. Officials indicated that the tax base has stabilised, with revenue collections steady, allowing attention to procedural reforms.
Data & Statistics
- Taxable supply rose 25.8 % to INR50.58 lakh crore a month.
- GST revenue grew 11 % in FY 2026-27.
- Effective tax rate on domestic supplies fell to 13.13 % from 14.55 %.
Why It Matters / Impact
Faster, risk-based refunds unlock working capital for exporters and firms operating under an inverted duty structure, especially in pharmaceuticals, FMCG and textiles. Removing arrest powers and raising the prosecution threshold signals a shift toward a “trust-based” tax administration, reducing litigation risk for SMEs. Expanded input-tax-credit on health and life insurance, telecom towers, pipelines, free samples and certain services lowers the effective cost of doing business. Simplified e-commerce registration and limited transit inspections are expected to ease logistics for nationwide sellers.
Official Statements & Responses
The Ministry of Finance noted that the GST rate structure is now settled and will be reviewed only once a year.
Conflicting Reports & Gaps
The proposal to allow ITC on motor-vehicle purchases was deferred pending further examination, leaving uncertainty for businesses that rely on such assets. Details on the exact algorithm for risk-based refund sanctioning and the timeline for the optional annual-return scheme for taxpayers with turnover up to INR5 crore have not been disclosed.
What’s Next
- The expanded refund provisions and the higher prosecution threshold are slated to take effect on 1 Apr 2027.
- The Committee of Officers on protecting genuine buyers must submit its report within three months, after which the council will consider implementation.
- Rate-related matters will be discussed only at an annual GST-rates meeting, with any changes to become effective from the subsequent fiscal year’s 1 Apr.
These reforms mark the second phase of GST 2.0, moving the Indian indirect tax system toward greater automation, reduced compliance friction, and a more proportionate enforcement posture.