GST & Compliance
57th GST Council Meeting on 12 September 2026: Expected Reforms on ITC, Refunds and Registration
The meeting: date, context and why this one matters
| Detail | Position |
|---|---|
| Meeting | 57th meeting of the GST Council |
| Date | 12 September 2026, from 11 AM |
| Officers' meeting | 11 September 2026 |
| Venue | New Delhi |
| Chair | Union Finance Minister, with state finance ministers as members |
| Previous meeting | 56th, on 3 September 2025 — approved GST 2.0; notifications 17 September 2025; effective 22 September 2025 |
| Gap | Roughly one year — unusually long by the Council's own standards |
The year-long gap is the most useful fact in that table. The Council spent 2025 doing something structural — collapsing four slabs into 5% and 18% with a 40% demerit rate, exempting individual life and health insurance, and moving small cars, air conditioners and televisions down from 28% to 18%. It then stayed away for twelve months while that settled. A Council that reconvenes after a year of silence is not reconvening to fine-tune rates. It is reconvening because the plumbing — credit, refunds, registration — has become the binding constraint.
What is reported to be on the agenda
| Item | What it would mean | Status |
|---|---|---|
| Blocked ITC under Section 17(5) | Easing the bar on credit for motor vehicles, food and beverages, beauty and health services, club memberships, travel benefits | Reported |
| Construction & works contract credit | Rationalising blocked credit post-Safari Retreats and the Finance Act 2025 retrospective amendment | Reported |
| Supplier default protection | Legal and system changes so a genuine buyer does not lose credit because the seller did not pay | Reported |
| Inverted duty refunds | Faster, wider refund of credit accumulated where inputs are taxed higher than outputs | Reported |
| Multi-state ITC transfer | Allowing credit to move between a taxpayer's own GSTINs across states | Reported |
| Registration simplification | Extending fast, risk-based registration beyond the Rule 14A small-taxpayer scheme to larger businesses | Widely reported as the lead item |
| Automated cancellation / surrender | System-driven closure of registration without the current officer-dependent process | Reported |
| GSTAT stock-take | Review of how the Appellate Tribunal is functioning since it became operational | Reported |
| Centre and state revenue review | Assessment of the fiscal position a year after the GST 2.0 rate cuts | Reported |
| Fresh rate rationalisation | Industry asking; unclear whether the Council takes it up | Demand, not agenda |
1. Blocked credit under Section 17(5) — the biggest number on the table
Section 17(5) is the provision that denies input tax credit regardless of whether the expense is genuinely for business. Motor vehicles for passenger transport, food and beverages, outdoor catering, beauty treatment, health services, club and fitness memberships, travel benefits to employees, and — the expensive one — goods and services used in the construction of immovable property.
For a services business in Delhi NCR, the everyday cost of Section 17(5) is unglamorous but real: GST on the office cafeteria contract, on the company car, on the team offsite, on employee health cover. None of it is creditable. It sits in the P&L as a straight 5–18% uplift on those costs. For a company building a factory, a warehouse or a mall, the number is not an uplift on a cost line — it is a capital sum, often in crores.
The construction problem, and why a Council recommendation may not be enough
The construction limb has already been through the courts. In Safari Retreats, the Supreme Court read Section 17(5)(d) purposively and applied a functionality test — if a building is itself the apparatus by which the taxpayer supplies its output service, such as a mall let out on rent, it can qualify as "plant" and the credit bar need not apply. The review petition against that judgment was dismissed in May 2025.
The relief was then removed legislatively. The Finance Act, 2025 substituted the words "plant and machinery" for "plant or machinery" in Section 17(5)(d), with retrospective effect from 1 July 2017, which restores the wider bar and displaces the reading the Supreme Court had given.
Practical translation: if relief on the everyday Section 17(5) items comes through a notification or a circular, it could move quickly. If it touches the construction limb, expect the Council to signal intent on 12 September and the actual amendment to arrive with the next Finance Bill. Plan cash flows on the second timeline, not the first.
2. Section 16(2)(c) — being punished for your supplier's default
This is the provision that generates more GST litigation than any other, and it is the one item on the reported agenda that would change daily life for a small business immediately.
Section 16(2)(c) makes a buyer's credit conditional on the supplier having actually paid the tax to the government. The buyer has paid the invoice, holds a tax invoice, has received the goods, and has no ability whatsoever to verify whether the seller deposited the money. Where the seller did not, the department recovers from the buyer — who is the only solvent party left. Every practitioner in Delhi has a file where a client is being asked to reverse credit on a vendor who has since disappeared.
Reports suggest the Council may look at legal and technology changes to protect bona fide recipients. What that could look like: a statutory safe harbour where the buyer has paid through banking channels and the invoice appears in GSTR-2B; a recovery sequence that requires the department to proceed against the supplier first; or system-level flagging that warns a buyer before the credit is claimed rather than three years later.
3. Refunds — the working-capital story GST 2.0 created
The rate restructuring of September 2025 had an arithmetic side effect that got very little attention at the time. When output rates fall to 5% but input rates stay at 18%, credit accumulates and cannot be used. That is the inverted duty structure, and the 2025 rate cuts widened it for a whole set of manufacturers who had not previously been in that position.
Two related items are reported to be on the table: refund of accumulated credit under inverted duty structures, and refund of unutilised credit on inter-state transfers.
Some of the machinery already exists. From 1 November 2025, provisional refunds of 90% are sanctioned on a system-run risk analysis, and the department's refund throughput has visibly improved — refunds in August 2026 were up 67.9% year on year. What the Council is reported to be considering is widening the categories that can claim at all, rather than speeding up categories that already can.
4. Registration simplification — the item most reports lead with
The current position: Rule 14A, introduced by Notification No. 18/2025 – Central Tax dated 31 October 2025 with effect from 1 November 2025, offers an optional simplified registration with automated approval in three working days. It is deliberately narrow.
| Rule 14A scheme | Position today |
|---|---|
| Eligibility | Monthly output tax liability (CGST + SGST/UTGST + IGST + cess) not exceeding ₹2.5 lakh |
| Approval | Electronic, within three working days, subject to system risk assessment |
| Aadhaar | Mandatory authentication of the primary authorised signatory and at least one promoter/partner |
| Exiting the scheme | FORM GST REG-32 to withdraw; officer issues REG-33; the same GSTIN converts to normal — no fresh registration |
| Excluded | Persons under Section 25(6D), those already holding a Rule 14A registration in the same State/UT, failed Aadhaar or PAN verification, pending cancellation proceedings |
The gap is obvious. A business with more than ₹2.5 lakh of monthly output tax — which is a business doing roughly ₹1.4 crore a month at 18% — goes back into the ordinary queue, with physical verification and officer discretion. Every practitioner has watched a straightforward application for a well-documented company take three to six weeks while a proprietor's application clears in three days. That inversion is what the reported agenda item is aimed at.
Alongside it, automated cancellation and surrender. Today, closing a GSTIN is harder than opening one: final returns, officer satisfaction, and files that sit for months. A system-driven closure would matter to anyone winding up a branch, exiting a state, or cleaning up dormant registrations before a transaction. If you are registering afresh in the meantime, our GST registration and South Delhi registration guide set out what the process looks like as it stands today.
5. Multi-state ITC transfer
A company with GSTINs in six states can be sitting on unusable credit in two of them and paying cash in the other four. The credit is the same taxpayer's money, held under the same PAN, and there is currently no route to move it. Reported deliberations on "seamless transfer of ITC across states for multi-state taxpayers" would address exactly this.
If it happens, it is a material and immediate cash release for anyone operating across state lines — retail chains, logistics operators, service companies with state-wise registrations, e-commerce sellers holding registrations for warehouse states. It is also, technically, one of the harder things on the list, because IGST settlement between states depends on credit staying where it arose. Treat it as the item with the highest value and the lowest probability of arriving fully formed.
6. The revenue question sitting behind everything
The Council can only give away what it can afford. So the revenue review is not a separate agenda item — it is the constraint on all the others.
| Indicator | Position |
|---|---|
| Gross GST collections, August 2026 | ₹1,99,853 crore, up 14.8% year on year |
| Refunds, August 2026 | Up 67.9% year on year |
| FY26 GST collection growth | 5.6%, against 9.4% in FY25 (SBI Research) |
| Q1 FY27 collection growth | 1.5% headline; 8.4% excluding the compensation cess effect (SBI Research) |
| Compensation cess | Ended; states' share of demerit-goods revenue rose from about ₹19.74 to about ₹28.20 per ₹100 of intra-state supply (SBI Research) |
| SBI Research estimate | States gain roughly ₹1.43 lakh crore in FY27; combined state share of GST and basic excise rising to about ₹19.1 lakh crore from ₹17.7 lakh crore |
Read that table as the answer to "will rates go back up". A month printing close to ₹2 lakh crore at 14.8% growth, twelve months after the biggest rate cut in GST's history, is the government's own vindication of GST 2.0. Nobody reopens that. What a comfortable revenue position does buy is the room to concede procedural relief — credits, refunds, registration — which costs the exchequer far less than a rate change and buys far more goodwill.
The genuine tension is between the Centre and the states rather than between government and taxpayers. States lost the cess cushion, and a state finance minister asked to approve wider ITC relief is being asked to approve a permanent reduction in their own collections. That is why the reported agenda is heavy on process and light on anything that permanently narrows the base.
What we are telling clients to do before 12 September
- Build the Section 17(5) schedule now. Year-wise, head-wise: what credit you have written off on vehicles, canteen, staff welfare, travel, insurance, construction. If relief comes, the businesses that claim it are the ones that can quantify it in a week, not the ones that start reconstructing ledgers in November.
- Check Section 16(4) before you get excited. Relief announced in September 2026 does not automatically resurrect credit that has already become time-barred. Any older credit needs a view on whether it can still be taken at all — and that view should be formed now, not after an announcement creates a rush.
- File the refund claims you have been sitting on. Two-year limitation under Section 54, running today. Inverted duty and zero-rated claims especially. Our note on the Annexure-B JSON for GST refunds covers the filing mechanics that trip most applications up.
- Do not defer a registration. If you are eligible under Rule 14A you already have three-working-day approval. Waiting for a scheme that may not be notified until November is a self-inflicted delay.
- Do not act on the press release. The evening of 12 September will produce headlines that read like law. They are recommendations. The notification is the law, and on the 56th Council's timetable it came fourteen days later.
How Startup Advisory helps
From our Saket office we run GST advisory and litigation support for exporters, e-commerce sellers, manufacturers and service companies across Delhi NCR: Section 17(5) credit reviews and blocked-credit schedules, inverted duty and zero-rated refund filings, replies to supplier-default and ITC-mismatch notices, registration and multi-state GSTIN structuring, and monthly compliance under retainer. We will publish the decisions from the 57th Council on this page once the press release is out, and follow it with the notification analysis rather than the headline version.
See our GST advisory and GST registration services, and our Virtual CFO retainer where the credit and refund position needs monitoring month on month. Related reading: the Supreme Court on Section 74 notices, RCM on import of services, e-way bill changes in 2026 and the GST and TDS compliance calendar.
If you want your blocked-credit and refund position mapped before the Council meets, call 9311972982.
This article is general information and informed expectation, not legal or professional advice, and it is written before the meeting. The GST Council does not publish its agenda in advance; the items described as "reported" are drawn from press coverage of 29–30 August 2026 and from officials speaking without attribution, and may not be taken up, may be modified, or may be decided differently. Statements of existing law — Rule 14A and Notification No. 18/2025 – Central Tax dated 31 October 2025, the 56th Council decisions of 3 September 2025 notified on 17 September 2025 and effective 22 September 2025, the Finance Act 2025 amendment to Section 17(5)(d), and the collection figures cited — are as at 4 September 2026. Verify against the official press release, CBIC notifications and cbic.gov.in before acting on anything here.
