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PM Modi Welcomes New Round of GST Reforms: What the 57th GST Council Recommended

Modi welcomed the 57th GST Council's process reforms: arrest powers, penalties, refund timing, input tax credit and exports. Here is what is recommended and what is not yet law.
From TheFinanceBase Team5 min to read
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Prime Minister Narendra Modi has welcomed a new package of GST recommendations from the 57th meeting of the GST Council, held on 8 October 2026. The package is mainly about how GST is administered: registration, refunds, penalties, prosecution, input tax credit, export treatment and the movement of goods. These are Council recommendations. Most of them are not yet law, and the Council’s earlier 56th-meeting changes on tax rates are a separate matter.

What Modi said and what it means

In a statement published by the Prime Minister’s Office through PIB on 8 October 2026, Modi said he welcomed the new round of GST reforms and that the Council’s recommendations on removing arrest provisions, greater decriminalisation and simpler procedures would have a “very positive impact.” He set out four aims: faster decisions, lower compliance costs, automated refunds and trust-based administration.

The statement is a political endorsement, not a legal change. Whether any measure takes effect depends on the Finance Ministry and the Centre and states acting on the Council’s recommendations, typically through amendments to the CGST Act and rules, notifications, or administrative instructions.

Recommendation or law already in force?

The 57th-meeting package is described by the Finance Ministry in its PIB release of 8 October 2026 as focused mainly on processes and trade facilitation. This is different from the 56th meeting, whose reforms centred on rate rationalisation. Readers should treat every item below as one of three things:

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  • Recommended: the Council has recommended it, and the change still needs statutory or administrative steps.
  • Approved in principle: the Council has agreed to the idea, but the detailed conditions are not settled in the release.
  • Arising from earlier recommendations: the release refers back to a measure from the 56th meeting, such as automatic registration under rule 14A.

None of the release’s measures should be read as already operative on the strength of the press statement alone.

Enforcement: arrest powers and prosecution

The most-discussed proposal is the removal of GST arrest powers. The Council recommended omitting section 69 of the CGST Act. Section 69 is the provision that gives officers power to arrest a person for GST offences. Alongside this, the Council recommended:

  • raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore;
  • narrowing or rationalising specified offences and their punishments.

Because these are recommendations, officers have not lost their arrest powers as a result of this release. Any change would need to pass through the statutory process before it applies to a case.

Penalty for general contraventions

The Council also recommended lowering the maximum general penalty under section 125 of the CGST Act from ₹25,000 to ₹10,000.

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Item Current figure in the release Council recommendation Status
Arrest powers (section 69) In force Omit section 69 Recommended; not yet law
Prosecution threshold ₹1 crore ₹5 crore Recommended; not yet law
Maximum general penalty (section 125) ₹25,000 ₹10,000 Recommended; not yet law

Refunds: timing depends on the type of credit

The Council recommended more automation in refunds, less manual intervention, and a wider refund of accumulated input tax credit. Refund eligibility is not a single date. The release sets different start points for different credit types, and both apply to specific refund categories rather than all refunds.

Credit type Refund category Eligibility start stated in the release Payout structure
Input-services credit Inverted-duty-structure refunds Credit availed on or after 1 November 2026 Not stated in the release
Capital-goods credit Zero-rated supplies and inverted-duty-structure refunds Credit availed on or after 1 April 2027 Spread over 60 months

Two points matter for working capital planning. First, the dates refer to when the credit was availed, not when the refund claim is filed. Second, the release does not describe these as blanket immediate refunds. A business with older accumulated credit will need to check whether its credit falls within the stated date and category.

Input tax credit: blocked items proposed for removal

The Council proposed removing restrictions on input tax credit for several categories that are currently blocked. These are:

  • outdoor catering;
  • health and life insurance;
  • telecommunication towers;
  • pipelines laid outside factory premises;
  • free samples;
  • goods destroyed or written off due to expiry, as required by law.

This is a list of proposals. A business cannot yet rely on any of these as a claim under current law. Each change will depend on the statutory amendment and the conditions attached to it, which the release does not spell out in full.

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Registration and compliance

The Council recommended streamlining registration processing and simplifying further compliance steps. The release also refers to automatic registration under rule 14A, a measure arising from the 56th-meeting recommendations. Under that process, applicants who do not intend to pass on input tax credit exceeding ₹2.5 lakh per month may be registered automatically.

The threshold is an eligibility condition, not a general entitlement. Applicants who expect to pass on more than ₹2.5 lakh of credit per month do not qualify on this basis, and the release does not say how the rule 14A process will be applied in every case.

Goods in transit

The Council recommended that a conveyance carrying goods may be intercepted only on specific intelligence and only with authorisation from an officer not below the rank of Joint Commissioner. This is a restriction on routine checks of vehicles in transit. Transporters and consignors should note that the proposal depends on the rules being amended to match it.

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Exports of services

The package proposes two changes to services-export treatment:

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  • removing a distinct-person condition for export-of-services status;
  • revising place-of-supply treatment for certain services where the recipient makes goods available to the supplier.

The stated purpose is to make export-related refunds and treatment easier. These changes apply to specific cases. The release does not establish that all cross-border services qualify, and exporters should check each service against the final provisions once they are issued.

Small businesses and e-commerce sellers

The Council approved in principle an optional scheme for small consumer-facing businesses with turnover up to ₹5 crore. It also recommended simplified GST registration for small sellers on e-commerce platforms. The release does not set out the detailed conditions of either measure, so no eligibility rules should be assumed beyond the turnover ceiling.

What to watch next

For most readers, the practical step is to track the notifications and amendments that follow the Council’s recommendations. The change most likely to affect businesses soon is the refund timing, because the 1 November 2026 date is only a few weeks away. Businesses with inverted-duty-structure credits should review their accumulated input-services credit now. Whether the 1 November 2026 and 1 April 2027 dates are formally notified in the same form will only be known once the amendments are issued.

Taxpayers facing an audit, notice or a question about a specific credit should continue to follow current law and seek advice from a qualified tax professional. Recommendations should not be used as the basis for a filing decision until the relevant provisions are in force.

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Source: Prime Minister’s Office and Ministry of Finance, Government of India, PIB releases dated 8 October 2026.

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