Budget 2026 Updates: Major Changes in GST Law

GST Changes Announced in Budget 2026 – Key Amendments Explained

The Finance Bill, 2026 proposes several significant amendments to the Central Goods and Services Tax Act, 2017 (CGST Act) with the intent of simplifying GST compliance, reducing litigation, and strengthening refund and appellate mechanisms.

Unless specifically stated otherwise, these amendments will become effective from a date to be notified, simultaneously with corresponding amendments by the States and Union Territories.

1. Amendment to Section 15(3): Post-Sale Discounts

Earlier Position

Post-sale discounts were allowed to be excluded from the value of supply only if:

  • The discount was agreed upon before or at the time of supply, and

  • The recipient reversed proportionate Input Tax Credit (ITC).

This condition led to frequent disputes where commercial discounts were offered after supply without explicit prior agreements.

Amendment Proposed (Finance Bill, 2026 – Clause 137)

  • The requirement of linking discounts to a pre-existing agreement has been removed.

  • Section 15(3) now allows exclusion of discounts based on issuance of a credit note under Section 34, subject to reversal of corresponding ITC by the recipient.

Impact

✔ Greater commercial flexibility
✔ Reduced valuation-related litigation
✔ Better alignment with real-world business practices

2. Amendment to Section 34: Credit Notes

Earlier Position

Section 34 did not explicitly link credit note provisions with valuation rules under Section 15, resulting in interpretational challenges.

Amendment Proposed (Clause 138)

  • Section 34 is amended to expressly reference Section 15.

Impact

✔ Clear legal linkage between valuation and credit notes
✔ Strengthens validity of post-sale discount adjustments
✔ Reduces objections during audits and assessments

3. Amendment to Section 54(6): Provisional Refund for Inverted Duty Structure

Earlier Position

Provisional refund of 90% was primarily available for zero-rated supplies, while refunds arising from Inverted Duty Structure (IDS) were excluded.

Amendment Proposed (Clause 139)

  • Provisional refund provisions are extended to IDS-related refunds.

Impact

✔ Improved cash flow for manufacturers
✔ Reduced working capital blockage
✔ Major relief for sectors with higher input tax rates

4. Amendment to Section 54(14): Removal of Refund Threshold Limit

Earlier Position

A threshold limit applied for sanctioning refunds, leading to procedural delays—especially for small exporters.

Amendment Proposed (Clause 139)

  • Threshold limit removed for refund claims relating to export of goods with payment of tax.

Impact

✔ Uniform refund processing
✔ Faster refunds for small exporters
✔ Reduced administrative discretion

5. Insertion of Section 101A(1A): Interim National Appellate Mechanism

Earlier Position

Conflicting Advance Ruling decisions were appealable to the National Appellate Authority (NAA), which was never constituted—leaving taxpayers without remedy.

Amendment Proposed (Clause 140)

  • New Section 101A(1A) empowers the Government to notify an existing authority or tribunal to hear such appeals until NAA is constituted.

  • Sub-sections (2) to (13) of Section 101A will not apply in such cases.

  • Explanation clarifies that “existing authority” includes a tribunal.

📌 Effective Date: 1 April 2026

Impact

✔ Resolves long-standing appellate vacuum
✔ Provides certainty in advance ruling disputes
✔ Strengthens GST dispute resolution framework

6. IGST Act Amendment: Place of Supply for Intermediary Services

Earlier Provision

Under Section 13(8)(b) of the IGST Act, intermediary services were deemed supplied at the location of the service provider, making overseas services taxable in India.

Amendment Proposed (Clause 141)

  • Section 13(8)(b) is omitted.

  • Place of supply will now be determined as per Section 13(2)—i.e., location of the recipient.

Impact

✔ Intermediary services to foreign clients qualify as export of services (subject to conditions)
✔ GST generally not applicable on such transactions
✔ Major relief for service exporters and consultants
✔ Long-pending litigation expected to subside

Conclusion

The GST amendments proposed in the Finance Bill, 2026 mark a decisive move toward taxpayer-friendly, litigation-free, and business-aligned GST administration. Key reforms in valuation, refunds, appellate remedies, and cross-border services are expected to significantly improve compliance efficiency and certainty.

Businesses and professionals should closely evaluate these changes and prepare for implementation once notified.