GST Council 57th Meeting: Major Reforms in ITC, Refunds, Enforcement, and Exports

• GST Council proposed major ITC rationalization: section 17(5) blocks to be removed for free samples, health/life insurance, outdoor catering, and telecom towers; used-vehicle dealers under the margin scheme may claim ITC on related inputs/services like rent, marketing, and repairs.
• Refund rules are being eased: refunds will be allowed on accumulated ITC relating to input services (from Nov 2026) and capital goods (from Apr 2027), with more automated system-based processing for zero-rated and inverted duty claims and removal of the 1.5x domestic value cap for zero-rated goods.
• Enforcement is being softened: arrest power under section 69 is withdrawn, prosecution threshold rises from INR 1 crore to INR 5 crore, SCN threshold is INR 10,000, and penalty-only appeal pre-deposit is capped at INR 40 crore.
• Export and cross-border rules are being widened: services to foreign branches of Indian entities and certain services on goods made available by foreign clients can qualify as exports/zero-rated supplies; goods billed to overseas buyers but delivered to SEZ/FTWZ in India may be treated as supplies to those zones if paid in convertible foreign exchange.
• E-commerce and sector-specific changes include GST liability shifting to ECOs for delivery services under section 9(5), a 5% GST rate for GTA services to unregistered end-customers without ITC, and reverse charge on scrap of plastics, electronics, and tyres supplied by unregistered persons.

Source: mondaq.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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