General information, not professional advice. GST rules, rates and due dates change by notification. Check the current position on the GST Portal or with your CA before you act on anything here.
Status on 13 October 2026: recommended, not in force. Everything on this page is a recommendation of the GST Council. A recommendation becomes law only when the Act or the Rules are amended, or a notification or circular is issued. Until then the existing rules apply to your bills, returns and e-way bills.
The short version
- The Council recommended amending section 17(5) so that credit is no longer blocked on, among others, outdoor catering, health and life insurance and free samples.
- Refunds for an inverted duty structure would count credit on input services availed on or after 1 November 2026.
- Credit on capital goods would count in refunds for zero-rated supplies made without payment of tax and for inverted duty, spread over 60 months, for credit availed on or after 1 April 2027.
- Refunds would be faster: acknowledgement in 10 days and, for low-risk zero-rated and inverted duty claims, 90% of the amount claimed sanctioned provisionally by the system.
- Until the Act and Rules are amended, blocked credits stay blocked. Do not claim them early.
Credits that would be unblocked
Section 17(5) of the CGST Act lists purchases on which input tax credit is not allowed even when they are for the business. The Council recommended amending it to remove the restriction on credit for, among others:
- outdoor catering;
- health insurance and life insurance;
- telecommunication towers;
- pipelines laid outside factory premises;
- free samples;
- goods destroyed or written off on expiry of shelf life, as required by law.
For a business that pays for health or life insurance, uses an outdoor caterer, or writes off expired stock, that is tax which today usually becomes a cost, unless the law obliges you to provide the facility. The release says "inter alia", so the final list will be the one in the amended section, and the conditions will be in its wording. Wait for it.
Separately, the Council recommended limited credit within the same line of business for restaurant and outdoor catering services, hotel accommodation up to ₹7,500 per unit per day, and gym and fitness services, in the way it is already available for passenger transport, tour operators and renting of motor vehicles.
Inverted duty: input services
An inverted duty structure is where the tax rate on your inputs is higher than on what you sell, so credit keeps building up. You can claim a refund of it, but today the calculation leaves out credit on input services and capital goods.
The Council recommended including credit on input services, for credit availed on or after 1 November 2026. The FAQs make one limit clear: whether you have an inverted structure is still tested on inputs against output.
| Case | Result under the proposal |
|---|---|
| Inputs at 18%, sales at 5%, plus professional services at 18% | Inverted. Credit on those services availed from 1 November 2026 enters the refund calculation |
| Inputs at 5%, sales at 5%, plus services at 18% | Not inverted. No refund merely because the services carry a higher rate |
Capital goods over 60 months
Credit on capital goods would count in two kinds of refund: zero-rated supplies made without payment of tax, and inverted duty. It would be spread in equal parts over 60 months from the month the credit is availed, and only for credit availed on or after 1 April 2027. Credit that is blocked or has to be reversed stays out.
Faster refunds
The Council recommended amending section 54 and the refund rules in two phases.
- Excess cash ledger balance: the full refund sanctioned automatically by the system, with no officer involved.
- Acknowledgement: the officer's time to acknowledge or issue a deficiency memo cut from 15 days to 10. If neither is issued, the application is deemed acknowledged.
- Zero-rated supplies and inverted duty: 90% of the claim sanctioned provisionally by the system for claims it rates as low risk. The FAQs say the provisional order is proposed within three working days of acknowledgement.
- Phase two: the system acknowledges the application itself after validating it, and sanctions the full refund for low-risk zero-rated claims.
- Small refunds: the ₹1,000 minimum would be tested on the total across CGST, SGST and IGST, not head by head.
The refund form, FORM GST RFD-01, would capture details in a format the system can read, in place of uploaded scans for zero-rated and inverted duty claims. That makes the data in your books the thing the refund is checked against.
For exporters
- The cap in rule 89(4)(C), which limits the turnover of zero-rated goods to 1.5 times the value of like goods sold domestically, would be removed.
- Services supplied to or through your own foreign branch or office could qualify as an export of services, by removing the condition in section 2(6)(v) of the IGST Act.
- Goods sold to an overseas buyer but delivered to that buyer in an SEZ or FTWZ, and paid for in foreign exchange or permitted rupees, would be treated as a supply to the SEZ or FTWZ.
Matching credit in returns
The Council also recommended a new way to correct returns so that credit claimed in GSTR-3B lines up with GSTR-2B, together with rules for the Invoice Management System, where you accept, reject or keep pending each inward document, and for two portal statements, one for reverse-charge tax and one for credit reversed and reclaimed (new rules 86C and 86D). It recommended this from the return of April 2027, after a public consultation. How the two returns relate today is in GSTR-1 vs GSTR-3B.
What to do now
- Do not claim blocked credits yet. Credit on insurance, catering or samples taken before the amendment is in force is credit wrongly availed.
- Record the purchase anyway. Keep these bills in your books with the supplier's GSTIN and the tax shown, so the credit is ready to claim from the notified date.
- If your structure is inverted, make sure the input service invoices behind credit you avail on or after 1 November 2026 are recorded and appear in your GSTR-2B.
- Ask your CA how the 60-month spread would work for a machine you plan to buy around April 2027.
Sources
- Ministry of Finance press release, Recommendations of the 57th Meeting of the GST Council, 8 October 2026 (PIB release ID 2320934)
- The same release on the GST Council website (PDF)
- The FAQs issued with the recommendations in October 2026
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Purchase bills recorded the way a refund needs them
Scan or enter a supplier's bill and AawazAI keeps the GSTIN, HSN and tax on each line, so the purchase register your CA works from is already clean.
Frequently asked questions
Can I claim ITC on health insurance now?
Not on the strength of this meeting. The Council recommended amending section 17(5) to remove the restriction on credit for health and life insurance, among others. The credit becomes available only when the amended section is in force, on its terms.
Which input service credit would count for inverted duty refunds?
Credit on input services availed on or after 1 November 2026, under the Council's recommendation. That date is a cut-off for which credit counts: the refund can be claimed only after section 54(3) and the Rules are amended. Whether a structure is inverted is still tested by comparing the rate on inputs with the rate on output supplies.
Will I get a refund of ITC on capital goods?
Under the proposal, yes, for zero-rated supplies made without payment of tax and for inverted duty, spread in equal parts over 60 months, and only for credit availed on or after 1 April 2027.
How fast will GST refunds be paid?
The proposal is acknowledgement within 10 days instead of 15, with deemed acknowledgement after that, and, for low-risk zero-rated and inverted duty claims, 90% of the amount claimed sanctioned provisionally by the system. Excess cash ledger balance would be refunded automatically.
Is the 1.5 times cap on refunds for zero-rated goods going?
The Council recommended amending rule 89(4)(C) to remove the limit that caps the turnover of zero-rated goods at 1.5 times the value of like goods supplied domestically.