57th GST Council Meeting: A Comprehensive Analysis of Proposed GST Law Reforms

Overview

The 57th GST Council Meeting convened in New Delhi on 8 October 2026, chaired by the Union Finance Minister, marked a decisive shift in how India's GST framework is administered. Unlike earlier meetings that focused heavily on rate rationalisation, this session was almost entirely devoted to procedural reforms, systemic improvements, and the gradual transition from officer-driven decision-making to technology-powered compliance processing.

The breadth of recommendations is remarkable — covering arrest powers, automated refunds, input tax credit availability, prosecution thresholds, notice quality, interception of goods, export of services, SEZ transactions, and relief measures for smaller assessees. This article walks through each major recommendation in detail, together with the legal and practical context that prompted it.

Important Note: These are recommendations of the GST Council and will require formal amendments to the CGST Act 2017, IGST Act 2017, and relevant Rules before they become operative. Until such amendments are notified, the existing statutory provisions continue to apply.

Why This Meeting Stands Apart

Most GST Council meetings generate interest primarily around rate changes. The 57th meeting is different in character. Each recommendation carries a backstory — some emerge from court rulings that went against the department, some respond to trade grievances accumulated over years, and some correct schemes that did not deliver intended outcomes in practice.

Understanding the reason behind each change makes the amendment more meaningful and helps assessees prepare for what the reformed compliance landscape will look like.

1. Abolition of Arrest Powers and Narrowing of Prosecution Scope

What Is Proposed

  • Section 69 of the CGST Act 2017, which confers the power of arrest on GST officers, is proposed to be omitted entirely.
  • The monetary threshold for initiating prosecution under Section 132 is recommended to be raised from Rs. 1 crore to Rs. 5 crore.
  • In Section 132(1), clause (i) is proposed to be omitted.
  • The words "evades tax" will be removed from clause (e), and the words "or in any other manner deals with" will be removed from clause (h).
  • Clause (c) will be restricted to cover only fraudulent availment of ITC without receipt of goods or services, or without an invoice.
  • Punishments under the section are also proposed to be rationalised.

Background and Context

Arrest under GST has remained a contentious issue since the law came into force. In Radhika Agarwal v. Union of India, the Hon'ble Supreme Court upheld the constitutional validity of Section 69 and Section 70. However, the Court expressed clear discomfort with a prevalent field practice — assessees were being compelled to make tax payments during search and investigation proceedings under the implicit or explicit threat of arrest. The Court categorically held that such payments must be genuinely voluntary, and that the power of arrest cannot be deployed as a shortcut for tax recovery.

Media reporting ahead of the meeting revealed that GST authorities recorded 887 arrests across financial years 2021-22 through 2024-25. The Supreme Court's message was to exercise arrest powers with restraint and selectivity. The 57th Council has gone a step further by recommending that the power be withdrawn altogether. Intentional and documented fraud will still attract prosecution, but the power of physical arrest during the course of investigation would cease to exist if the recommendation is implemented.

2. Automated Refund Processing

What Is Proposed

Phase 1:

  • Refund of excess balance in the electronic cash ledger will be sanctioned entirely by the system, without officer intervention.
  • The timeframe for issuing an acknowledgement or deficiency memo will be reduced from 15 days to 10 days. Failure to act within this window will result in deemed acknowledgement.
  • For zero-rated supplies and inverted duty structure refunds, 90% of the claimed amount will be provisionally sanctioned by the system itself, based on its own risk evaluation parameters.

Phase 2:

  • Even the acknowledgement step will be automated.
  • Zero-rated refunds will be sanctioned in full by the system after netting off any pending dues.

Background and Context

The 56th GST Council had already recommended amendments to Section 54 and Rule 91 to enable provisional sanction of 90% of refund claims based on system-identified risk parameters. However, the final sanctioning authority remained with the proper officer, who retained the discretion to withhold provisional refunds by recording reasons.

Field experience showed that this hybrid approach produced uneven outcomes. Certain State jurisdictions demanded documents beyond the prescribed list, and the treatment of refund claims varied significantly from one State to another. Industry feedback pointed strongly toward system-generated refunds for assessees classified as low-risk, which has now been translated into the Phase 1 and Phase 2 framework described above.

  • Rule 89(4)(C) currently limits the turnover of zero-rated supply of goods to 1.5 times the value of comparable goods supplied domestically. This restriction, introduced in March 2020 to prevent inflated export valuations, is proposed to be removed entirely.
  • An explanation to Section 54(14) will clarify that the Rs. 1,000 minimum refund threshold applies to the aggregate of CGST, SGST, and IGST, and not separately to each tax head.

3. Refund of ITC on Input Services and Capital Goods

What Is Proposed