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Pursuant to the recommendations of the 57th GST Council meeting, the Central Board of Indirect Taxes and Customs (‘CBIC’) has introduced amendments to various rules and Forms through Notification No. 05/2026-Central Tax dated 26 October 206. The amendments cover provisions relating to refunds, ISD, e-way bill, blocking of ITC and other compliance-related forms, with the objective of simplifying and automating GST process.
The amendments shall come into force from 1 November 2026, except for certain provisions effective from 1 December 2026 and 1 April 2027.
Substantive changes include amendments in refund rules, to provide for refund of input services in case of inverted tax structure from November 2026, as also refund of capital goods proposed for inverted tax structure and exports under LUT from April 2026 over a period of 60 months. Further, restriction relating to 1.5 times value for exports has been sought to be deleted.
While the amendments are proposed from prospective effect, it needs to be seen as to whether some of these amendments will have retrospective effect, especially considering litigation in the past and Government’s intention not to restrict benefits, which reflects in the amendment made in rules.
Refund – Key amendments to Rule 89, 90, 91, 92 of the CGST Rules
LKS comments
ITC refund is proposed to be permitted for input services for inverted tax structure from November 2026, and for capital goods (including for exports) from April 2027, as per GST Council meeting decision. Accordingly, the amendments relating to the inclusion of eligible input services under Rule 89(5) (where the credit has been availed on or after 1 November 2026) and ITC on capital goods under Rule 89(4) and Rule 89(5) (where the credit has been availed on or after 1 April 2027) have been made, are substantive changes for the taxpayers.
The revised refund formula addresses, to some extent, the credit blockage faced by capital-intensive and service-intensive businesses.
That said, certain interpretational issues continue to remain. For instance, there is no clarity on the treatment of ITC on input services availed on or after 1 November 2026 in respect of invoices pertaining to periods prior to November 2026. It needs to be examined if ITC refund shall be available, so long as the ITC is validly availed and forms part of the electronic credit ledger, and whether such credit should be eligible for inclusion in the refund formula.
The remaining amendments are largely procedural and aligned with the refund process reforms agenda aimed at reducing officer interaction and expediting refund processing.
The turnover of zero-rated supply of goods will now be considered at the actual value of such supplies, as opposed to 1.5 times cap provided earlier.
1. Amendment to Rule 89
Rule 89, which deals with “application for refund of tax, interest, penalty, fees or any other amount” has been amended as follows:
Under Rule 89(4)(B), “Net ITC” will, with effect from 1 April 2027, include ITC availed on capital goods attributable to the relevant period.
The cap under Rule 89(4)(C) restricting the turnover of zero-rated goods to 1.5 times the value of like domestic supplies, has been omitted with effect from 1 November 2026
Further, Clause (G) and an Explanation have been inserted under Rule 89(4) to provide for the inclusion of ITC availed on capital goods in the refund computation. One of the conditions prescribed is that the ITC on such capital goods must have been availed on or after 1 April 2027 and computed in the manner prescribed, i.e., based on 1/60th per month for the months falling in the relevant periods, after considering the applicable reversals. A declaration on capital goods (Rule 89(2)(p)) is also required.
Maximum Refund = (Turnover of inverted rated supply × Net ITC ÷ Adjusted Total Turnover) – tax payable on such supply. Net ITC now includes eligible input services(ITC availed on or after 1 November 2026) and ITC on capital goods attributable to the relevant period. The earlier scaling of tax payable by (Net ITC ÷ ITC on inputs and input services) no longer appears.
Rule 89(2) has been amended to replace the requirement of furnishing the “number and date” of specified documents with the requirement to furnish their “details”. The change applies to documents required to submitted along with a refund application under clauses (b), (ba), (bb), (c), (d) and (e) of Rule 89(2).
Clause (h) of Rule 89(2) has been amended to provide that, for claiming a refund of unutilised ITC on account of an inverted duty structure, the statement accompanying the refund application shall contain details of the invoices received, along with details of ITC, and details of the invoices issued during a tax period.
Further, clauses (ha), (n), (o) and (p) have been inserted under Rule 89(2) prescribing additional statements/documentary evidence/declaration to be furnished along with refund applications. The provisions of clause (p) will be effective from 1 April 2027.
- Clause (ha): statement to be furnished where the refund pertains to unutilised ITC on account of inverted duty structure.
- Clause (n): Statement to be furnished where refund pertains to unutilised ITC
- Clause (o): Declaration to be furnished where the refund claim is on account of unutilised ITC or zero rated supply made with payment of tax.
- Clause (p): Declaration to be furnished where the refund claim under Rule 89(4) and Rule 89(5) includes credit availed on capital goods.
Rule 89(3) has been substituted to prescribe the manner and the order in which the electronic credit ledgers would be debited in cases involving refund of ITC.
2. Amendment to Rule 90
Rule 90, which deals with the ‘acknowledgement’, has been amended to shorten the timeline for issuance of an acknowledgement upon scrutiny of the completeness of the application and for communication of deficiencies, if any. Accordingly, the time limit prescribed under Rule 90(2) and Rule 90(3) has been reduced to a period of 10 days of filing of the application from earlier fifteen days.
Further, a new sub-rule (3A) has been inserted to provide that where neither an acknowledgement is issued nor deficiencies are communicated within 10 days of filing of the application, the application shall be deemed to have been acknowledged, and the acknowledgement shall be made available to the applicant accordingly.
3. Amendment to Rule 91
Rule 91(2) has been substituted to provide that the common portal shall generate an order in FORM GST RFD-04, based on system-driven risk identification and evaluation, within three working days from the date of acknowledgment under Rule 90. The order shall not require revalidation by the proper officer.
Further, Rule 91(3) has been amended to provide that the payment order in FORM GST RFD-05 for the amount sanctioned under Rule 91(2) may be made available through the common portal.
4. Amendment to Rule 92
Rule 92(1B) has been inserted to provide that a system generated Form GST RFD-06 shall be generated in cases involving refund of the balance in the electronic cash ledger or electronic credit ledger. The said form shall specify the amount adjusted against any outstanding demand and the balance refund amount admissible to the applicant.
Further, Rule 92(4) has been substituted, inter alia, to omit the requirement of revalidation of a payment order where the refund has not been disbursed within the same financial year in which such payment order was issued.
Input Service Distributor (‘ISD’) – Key amendments to Rules 36, 39, 54 and 60 of the CGST Rules
1. Amendment to Rule 36
Rule 36, which prescribes the “documentary requirements and conditions for claiming ITC”, has been amended to clarify that ITC shall be distributed by ISD only on the basis of any of the prescribed documents containing all the mandatory particulars specified under Chapter VI. The amendments have been made to Rule 36(1) and Rule 36(2).
2. Amendment to Rule 39
Rule 39, which prescribes the “procedure for distribution of ITC by ISD” has been amended. Under Rule 39(1)(i), the word ‘central tax’ has been inserted to widen the manner of distribution of the credit of Integrated tax as credit of Integrated tax or Central tax.
Further, under Rule 39(1A), the word “common” has been omitted to allow a registered person to transfer to the ISD the credit of tax paid under reverse charge on input services attributable to distinct persons, even where such services do not qualify as “common” input services.
3. Amendment to Rule 54
Rule 54(1A), which deals with the issuance of documents by a registered person (having the same PAN and State Code as an ISD) for transfer of credit to an ISD for distribution, has been amended. The amendments expand the scope of the transfer mechanism from credit relating to “common input services” to credit in respect of “input services attributable to one or more distinct persons”, thereby enabling the transfer of ITC relating to such services to the ISD for distribution, similar to amendment made in rule 39(1A).
Corresponding amendments have been made in Rule 54(1A)(a)(iv) and Rule 54(1A)(b).
4. Amendment to Rule 60
Rule 60(2) has been amended to provide that invoice details furnished by a non-resident taxable person in FORM GSTR-5 shall also be made available to the ISD in FORM GSTR-6A.
LKS Comments
The amendments streamline the ISD framework by:
Clarifying the documentary requirements for availment and distribution of ITC.
Permitting distribution of integrated tax credit as central tax.
Expanding the scope of transfer of ITC to an ISD to include input services attributable to one or more distinct persons, including services subject to reverse charge, without the necessity of it being common input services.
Enabling invoice details furnished by non-resident taxable persons in FORM GSTR-5 to be made available to an ISD in FORM GSTR-6A.
Electronic credit ledger – Key amendments to Rule 86 and 86A.
1. Amendment to Rule 86
Rule 86, which deals with the electronic credit ledger, has been amended to link the debit of the electronic credit ledger for claiming a refund of unutilised ITC with the procedure prescribed under Rule 89(3).
2. Amendment to Rule 86A
Rule 86A, which deals with the conditions for use of the amount available in the electronic credit ledger, has been amended to revise the procedure for restricting debit of ITC from the ledger. While the powers under Rule 86A to restrict debit of the electronic credit ledger were being exercised by lower-level authorities pursuant to the present notification, the reference to the “Commissioner or an officer authorised by him, not below the rank of an Assistant Commissioner” has been replaced with “proper officer”. Further, the proper officer is required to issue an order in FORM GST DRC-26 restricting debit of the amount, which shall be made available electronically to the registered person on the common portal.
The order shall remain in force until the expiry of one year from its issuance or until the proper officer permits debit of the amount upon being satisfied that the conditions for restriction no longer exist, whichever is earlier. The registered person may file an objection in FORM GST DRC-27, which shall be disposed of by the proper officer after granting a reasonable opportunity of being heard. The decision shall be communicated electronically in FORM GST DRC-28, either allowing debit of the amount in Part A or rejecting the objection in Part B.
LKS Comments
The amendments effectively make ITC blocking at par with provisional attachment in terms of procedure, while not maintaining the adequate safeguards which are applicable for provisional attachment u/s 83. The powers have now been given to proper officer (instead of Assistant Commissioner and above). The procedure now permits officer to pass order for blocking ITC, and thereafter allows objection and post-decisional hearing. This is a departure from existing Court rulings which require pre-decisional hearing before blocking of ITC.
Further, the provisions now clarify the procedure for debiting the electronic credit ledger while claiming refunds of unutilised ITC.
E-way bill and provisional attachment – Amendments
1. Amendment to Rule 138
Rule 138 deals with “Information to be furnished prior to commencement of movement of goods and generation of e-way bill” has extend the scope to generate e-way bill if goods are transported by metro railway.
Further, in terms of proviso to 138(2A), metro railway shall not deliver the goods unless the e-way bill is produced at the time of delivery.
2. Amendments to Rule 159
Rule 159 which deals with “provisional attachment of property” have been amended to specify that that the Commissioner has to pass an order in Part A of Form GST DRC-22.
Further, the Commissioner can reject the objection application in Part B of Form GST DRC-22 if not satisfied with the submissions of the applicant.
LKS Comments
E-waybill provisions have been amended to recognize metro railway as the mode of transport.
Further, changes have been made in forms relating to provisional attachment. Part B in Form GST DRC-22 i.e., “Order for rejection of application submitted for restoration of provisionally attached property / bank account” has been brought to establish a structured and accountable procedure for handling taxpayers objections against the provisional attachment of property.
Other changes
1. Amendment to Rule 44
Rule 44 has been amended, to omit the reference to Section 29(5) in sub-rule (1) and include FORM GST REG-16 in sub-rule (4) linking ITC reversal on cancellation.
2. Amendment to Rule 62
Rule 62(5) has been amended by substituting the word “April” with “June”, thereby extending the due date for furnishing FORM GSTR-4 by a registered person withdrawing from the composition scheme to 30 June following the end of the financial year in which such withdrawal takes place.
3. Amendment to Rule 63
Rule 63 has been amended by substituting the word “twenty” with “thirteen”, thereby reducing the time limit for furnishing FORM GSTR-5 and payment of applicable tax, interest, penalty, fees or other dues to thirteen days from the end of the tax period or seven days from the last day of the registration validity period, whichever is earlier.
4. Insertion of Rule 83C
A new Rule 83C has been inserted to prescribe the procedure for amendment of enrolment particulars of GST Practitioners. An application in FORM GST REG-14, duly signed or verified through an electronic verification code and accompanied by supporting documents, is required to be filed electronically on the common portal. The procedure prescribed under Rule 19 for amendment of registration particulars shall apply mutatis mutandis to such applications.
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