57th GST Council Meeting Decisions (8 October 2026): Arrest Power Removed, ₹5 Crore Prosecution Limit, Faster Refunds & ITC Relief

Updated 8 October 2026. The 57th GST Council meeting was held today, 8 October 2026, at Bharat Mandapam, New Delhi, under the chairpersonship of Finance Minister Nirmala Sitharaman. After being moved twice (from 12 September to 7 October, and then to 8 October), the meeting delivered what the Finance Minister had promised: no change in GST rates, and a large package of process reforms covering arrest and prosecution, refunds, input tax credit, registration, returns, notices and e-way bills.

Below is a clear, section-wise summary of the Council's recommendations based on the official PIB press release issued after the meeting, with dates of applicability wherever announced, and what each change means for your business.

57th GST Council meeting at a glance

1. Arrest powers removed and prosecution rationalised

This is the most significant change since GST began, and it moves GST firmly towards a trust-based regime.

• No arrest under GST: the Council recommended complete withdrawal of arrest powers by omitting section 69 of the CGST Act. The Finance Minister clarified that the power of arrest has been taken out of a tax officer's hands, while prosecution remains available where there is genuine criminality.
• Prosecution only above ₹5 crore: the monetary threshold for prosecution is raised from ₹1 crore to ₹5 crore.
• Minimum punishment removed: courts will decide whether a case deserves a fine, imprisonment or both. Punishment amounts under section 132 will also be rationalised.
• Section 132 narrowed: clause (i) of section 132(1) is to be omitted; the words "evades tax" in clause (e) and "or in any other manner deals with" in clause (h) are to be deleted; and clause (c) will cover only fraudulent availment of ITC without receipt of goods or services, or without an invoice or bill.

Practical point: these changes need amendments to the CGST Act and the State GST Acts. Until the amended law is notified, section 69 and the existing section 132 continue to apply, subject to the safeguards laid down by the courts and CBIC instructions.

2. Notices, penalties and appeals

• ₹10,000 threshold for notices: no show cause notice will be issued under sections 73, 74 or 74A where the tax involved (CGST + SGST + IGST + Cess) is below ₹10,000. Notices and appeals below ₹10,000 that are pending when the provision comes into force will be decided as if the threshold had applied when the notice was issued.
• General penalty reduced: the maximum general penalty under section 125 comes down from ₹25,000 to ₹10,000.
• Lower penalty in non-fraud cases: a reduced penalty of 5% where tax and interest are paid within 30 days (section 73) or 60 days (section 74A) of the adjudication order. The minimum penalty of ₹10,000 in non-fraud cases is to be removed.
• Voluntary payment: where the full tax is paid voluntarily with interest and penalty within the time allowed, the penalty will be deemed a "charge".
• Cap on pre-deposit: for appeals against penalty-only orders, pre-deposit will be capped at ₹40 crore (₹20 crore CGST + ₹20 crore SGST) before the Appellate Authority and the GSTAT.
• Quality of SCNs and orders: a circular will lay down guidelines on the quality and timing of notices and orders, invoking fraud or suppression only on merits, and personal hearings.
• Rule 86A hearing: taxpayers will be able to object to blocking of the electronic credit ledger and get a personal hearing before a decision.
• Multi-year notices: a validation clause is proposed for notices that courts have held invalid because they covered several financial years.

3. Faster, automated refunds

Phase 1:

• Refund of excess balance in the electronic cash ledger will be sanctioned automatically by the system.
• Time for acknowledgement or deficiency memo cut from 15 days to 10 days, with deemed acknowledgement if the officer does not act.
• For zero-rated supplies and inverted duty structure, 90% of the claim will be sanctioned provisionally by the system on a risk basis.

Phase 2: automated acknowledgement and automated sanction of the full refund for zero-rated supplies, after adjusting pending dues.

Other refund changes: RFD-01 in a system-readable format without scanned documents; removal of the 1.5 times cap on zero-rated turnover of goods under rule 89(4)(C); the ₹1,000 minimum refund to apply to CGST, SGST and IGST together; and clarity on interest on refund of pre-deposit.

4. Input tax credit: refunds widened and blocked credits opened

• Inverted duty refund on input services: available for ITC availed on input services on or after 1 November 2026. FMCG, pharma and similar sectors with high service inputs benefit most.
• Refund of ITC on capital goods: for zero-rated supplies and inverted duty, spread over 60 months, for ITC availed on or after 1 April 2027.
• Section 17(5) relaxed: the Council recommended removing restrictions on ITC on, among others, outdoor catering, health and life insurance, telecommunication towers, pipelines laid outside factory premises, free samples, and goods destroyed or written off on expiry of shelf life as required by law.
• Same line of business: limited ITC will be allowed for restaurant/outdoor catering, hotel accommodation up to ₹7,500 per unit per day, and gym/fitness services, when supplied in the same line of business.
• Circulars promised on ISD distribution, ITC for banks and NBFCs under section 17(4), pre-deposits, and ITC on demonstration vehicles.

As reported, the wider issue of ITC denial when the supplier does not pay tax has been sent to a committee, with any decision to apply from 1 April 2027.

5. Registration made simpler

• Clear document list: a circular and FAQs on documents needed for registration, with drop-down options in REG-01 to reduce queries and rejections.
• Automatic amendments: amendments to all registration particulars except principal place of business will be accepted automatically. For rule 14A registrants, even PPoB changes will be automatic.
• Automatic cancellation: REG-16 applications will be accepted automatically once returns are filed and dues paid (in phases).
• System-based suo motu cancellation and revocation for non-filing of returns or bank details, with certain grounds for officer cancellation removed from rule 21.
• Small e-commerce sellers (new rule 14B): sellers supplying through e-commerce operators in States where they have no physical presence can declare the operator's warehouse as their place of business, with automatic registration, where ITC passed on is not more than ₹2.5 lakh a month.

6. Returns: fewer mismatches, fewer notices (from April 2027)

The Council approved an alternate mechanism to correct liability and ITC in returns so that GSTR-3B matches GSTR-1/1A/IFF and GSTR-2B. This includes new electronic statements for RCM and for ITC reversal and reclaim, rules for keeping credit notes pending on IMS, and invoice details in DRC-03. It will apply from the return for April 2027, after public consultation.

Also recommended: waiver of late fee for taxpayers with turnover up to ₹5 crore if the delayed return is filed by the end of the month in which it was due, and in-principle approval for an optional Annual Return Quarterly Payment (ARQP) scheme for B2C businesses with turnover up to ₹5 crore.

7. E-way bill and movement of goods

• Vehicles can be intercepted only on specific intelligence and with authorisation of an officer not below Joint Commissioner.
• Inspection, detention or seizure only where the supplier or recipient is in the State making the interception. No interception in transit States.
• Where there is no e-way bill or no document showing origin or destination, goods can still be checked in any State.
• Confiscation under section 130 will not apply to goods or vehicles in transit.

8. Exports and other changes

• Services to a foreign branch or office can qualify as export of services, as the "distinct person" condition is to be removed.
• Goods sold to an overseas buyer but delivered in an SEZ/FTWZ will be treated as supply to SEZ/FTWZ (zero-rated) if paid in foreign exchange or permitted INR.
• Transfer of title in IPR to be treated uniformly as a supply of services.
• E-invoicing to cover RCM purchases from unregistered persons and import of services for turnover of ₹5 crore and above.
• GSTAT provisions to be aligned with the Tribunals Reforms Act, 2026.

9. Rate clarifications (no change in slabs)

• Waste and scrap of plastics, e-waste, tyres and used cooking oil brought under RCM when supplied by unregistered persons, with 2% TDS on B2B supplies.
• Option of 5% GST (restricted ITC) for passenger transport and vehicle rental using electric vehicles.
• 5% without ITC on delivery services through e-commerce operators.
• Exemptions for seed storage, coffee curing, helicopter seat-sharing in the North-East, Sikkim and Bagdogra, and the Seamen's Provident Fund Organisation.
• Clarifications on toys (heading 9503), sublimation paper, seaweed bio-stimulants, ITC for second-hand vehicle dealers, Nil rate on isabgol seeds and re-treaded tractor tyres.

When will these changes apply?

Council decisions are recommendations. They take legal effect only when CBIC issues notifications or circulars, or Parliament and the State legislatures amend the GST Acts. The Finance Minister said the process reforms will be implemented from 1 April 2027, with specific dates such as 1 November 2026 for refund of ITC on input services under inverted duty. Arrest, prosecution, notice threshold and penalty changes need amendments to the CGST Act.

What should businesses do now?

1. Pending notices below ₹10,000: keep the record ready. Once the amendment is notified, such notices and appeals should be decided in line with the new threshold.
2. Inverted duty businesses: track ITC on input services separately from 1 November 2026 so that refund claims can include it.
3. Exporters: review service exports to foreign branches and SEZ/FTWZ deliveries. Past refund rejections on these grounds may need a fresh look.
4. Review blocked credits: map spend on insurance, catering, free samples and expired stock. ITC becomes available only from the date the amended section 17(5) is notified.
5. Do not stop compliance: until amendments are notified, the current law applies to arrest, prosecution, penalties and e-way bills.

Frequently asked questions

Did GST rates change in the 57th GST Council meeting?

No. The Finance Minister said no rate changes were made and that rate changes will now be taken up only once a year, effective from 1 April.

Can GST officers still arrest a person?

The Council has recommended omitting section 69. Until Parliament amends the CGST Act, the existing provision continues to apply.

What is the new prosecution limit under GST?

The Council recommended raising it from ₹1 crore to ₹5 crore. Below ₹5 crore, there will be no prosecution once the amendment is in force.

Will notices below ₹10,000 be withdrawn?

The Council recommended that pending notices and appeals below ₹10,000 be decided as if the threshold had applied from the start. The exact mechanism will come with the law amendment.

From when will input services be covered in inverted duty refunds?

For ITC availed on input services on or after 1 November 2026, subject to notification.

Need help with a GST notice, refund or ITC claim?

GST Folio handles GST registration, monthly returns, ITC reconciliation, refunds and replies to GST notices for businesses across India. Call or WhatsApp +91 80513 31315 or email gstfolio@zohomail.in.

Also read: what was expected from the 57th GST Council meeting. This article is based on the PIB press release on the recommendations of the 57th GST Council meeting dated 8 October 2026. Council decisions are recommendations and take legal effect only through CBIC notifications, circulars or amendments to the GST Acts. This is general information, not legal advice.