- The GST Council proposed reforms to ease compliance for small businesses in 2026
- Return corrections will allow revisions in sales statements and earlier periods
- Refund claims will be acknowledged in 10 days with faster sanctioning and automation
The Goods and Services Tax Council's 57th meeting in 2026 focused on process reforms such as registration, returns, refunds, litigation. From faster refunds to lower penalties, the government has proposed a set of GST changes, which will potentially ease the burden on small businesses.
Here are the five key changes
Corrections in returns
Around 95,000 system generated notices are issued annually over differences between returns, but recovery against these amounts is only about 0.08% of the amount involved, with the differences largely attributed to data-entry errors.
Under the new system, if a seller reduces an amount already reported, the change will be made in the sales statement, allowing the revision to flow through to the buyer who had claimed the credit. Corrections will also be permitted for earlier periods, including instances where the buyer's registration number was entered incorrectly. Credit will be settled through the Invoice Management System (IMS).
Faster refunds
The time limit for acknowledging a refund claim will be reduced from 15 days to 10 days. If neither an acknowledgement nor a deficiency memo is issued within 10 days, the claim will be deemed acknowledged. The system will sanction 90% of the claim based on a risk assessment, with the order issued within three working days of acknowledgement, compared with the current seven-day timeline. Refunds of excess balances in the cash ledger will become fully automatic, without any officer involvement.
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Filing for the small taxpayers
An optional scheme has been approved in principle for the smallest taxpayers, under which taxpayers with turnover of up to Rs 5 crore who supply only to consumers can file returns once a year while paying tax quarterly. On average, 16.85 lakh of the 1.05 crore active taxpayers report only such supplies. Of these, 16.66 lakh, or 99%, have turnover below Rs 5 crore, and together account for less than 1% of the total GST liability reported. The detailed framework and required amendments will be placed before the GST Council at its next meeting.
Litigation
A common standard will now govern the entire process, including how notices are issued and served, how pre-notice intimations are provided, when fraud can be alleged, how hearings are conducted and how orders are drafted. Further, no notice will be issued for cases involving an amount below Rs 10,000.
Arrest, lower penalties
The power of arrest is being removed under GST, while the threshold for prosecution will be raised from Rs 1 crore to Rs 5 crore. The minimum punishment will also be removed, leaving the decision on whether to impose a fine, imprisonment or both to judicial discretion in each case. The general penalty, applicable where no specific penalty is prescribed, will be reduced from Rs 25,000 to Rs 10,000. Taxpayers who file returns late, make mistakes or delay payments will face recovery, interest and a proportionate penalty, with no further action beyond these measures.
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