GST Council on 8 October: what small firms should note
Most of it is still a recommendation, not law. But a few items change how you should run your books from this month.
· 3 min read · For owners and accountants of small and mid-sized firms, traders and exporters
You run a trading firm in Tiruppur or a small engineering unit in Hosur. Your accountant says the GST Council met on 8 October and "a lot changed". Not quite. The Council recommends. The law changes only when the Act and rules are amended and notified. Still, the direction is clear and two items have dates. Here is what matters to a small firm.
What was recommended
- Fewer small notices. No show cause notice where the tax involved is under ₹10,000, counting CGST, SGST, IGST and cess together. Pending notices below that amount are to be decided as if the limit already applied.
- Smaller penalties. The maximum general penalty drops from ₹25,000 to ₹10,000. In non-fraud cases, a reduced 5% penalty if you pay tax and interest within 30 days of the order, and no ₹10,000 minimum penalty.
- Arrest powers withdrawn. Section 69 of the CGST Act is to be omitted. The limit for prosecution rises from ₹1 crore to ₹5 crore.
- Late fee relief. For firms with turnover up to ₹5 crore, no late fee on a regular return if you file it by the end of the month in which it was due.
- Faster refunds. Excess cash ledger balance to be refunded automatically. Acknowledgement time cut from 15 to 10 days. For exports and inverted duty cases, 90% of the claim to be released provisionally by the system.
- More input credit. Credit on health and life insurance, outdoor catering and goods written off on expiry is to be allowed. Refund of credit on input services in inverted duty cases applies to credit taken from 1 November 2026.
- Selling in other states online. A new rule 14B lets a small seller register in a state with no office there, by declaring the e-commerce platform's warehouse as the place of business.
- Wider e-invoicing. Firms with turnover of ₹5 crore and above will need e-invoices for reverse charge purchases from unregistered persons and for imported services. Date to be notified.
- Return changes from April 2027. New statements for reverse charge, credit reversal and reclaim, and a mechanism to correct GSTR-3B so it matches GSTR-1 and GSTR-2B.
What is not law yet
Almost all of this needs amendments to the CGST Act and the state Acts, then rule changes and notifications. Only two items in the release carry a date: input service refunds from 1 November 2026 and the return mechanism from April 2027. Everything else is "when notified". Do not ignore a notice under ₹10,000 today because of a press release.
What to do this month
- List every pending notice with its tax amount. Mark the ones under ₹10,000 so the list is ready when the threshold is notified.
- If you are near ₹5 crore turnover, start recording reverse charge purchases from unregistered suppliers and imported services invoice by invoice. E-invoicing will need that data.
- If you sell through an online platform and want to stock in another state, wait for rule 14B to be notified before signing a lease there.
- If inverted duty refunds are stuck, keep input service invoices from 1 November separate. Those may become refundable.
- Check that your books can produce a credit reversal and reclaim trail. The April 2027 returns will ask for it.
How we can help
Kanakku keeps purchase, reverse charge and credit entries clean as they happen, so a new return form does not mean a month of rework. Sol reads supplier invoices in Tamil and English and tags them for you. To see how your books would look under the new return mechanism, talk to us.
