The Finance Bill, 2026, introduces certain amendments to the Central Goods and Services Tax (CGST) Act, 2017, and the Integrated Goods and Services Tax (IGST) Act, 2017. These changes are designed to reduce the compliance burden, rationalise refund mechanisms, and streamline the appellate process.
1. Liberalisation of Post-Sale Discounts (Sections 15 and 34)
From a valuation perspective, the proposed amendment to Section 15(3)(b) of the CGST Act represents a significant shift in the treatment of post-supply discounts.
- Decoupling from Pre-sale Agreements: The earlier requirement mandated that such discounts must be established in terms of an agreement entered into at or before the time of supply and specifically linked to relevant invoices.
- The Proposed Change: The amendment removes the necessity of linking discounts to prior agreements or specific invoices. Instead, the law now validates these discounts through the issuance of a credit note under Section 34, provided the recipient of the supply reverses the input tax credit (ITC) attributable to said discount.
- Consequential Amendment: Correspondingly, Section 34(1) is being amended to explicitly include the reference to discounts governed by Section 15(3)(b), thereby providing a robust legal basis for issuing credit notes in these scenarios.
- What Does Not Change: The fundamental prerequisite for the supplier to reduce their tax liability remains the actual reversal of Input Tax Credit (ITC) by the recipient. Furthermore, the issuance of a valid credit note under Section 34 remains the mandatory instrument for effecting this adjustment.
The amendment to Section 15(3)(b) of the CGST Act simplifies post-sale discounts by removing the rigid requirement that discounts must be pre-agreed and linked to specific invoices—allowing businesses to issue retroactive credit notes without prior documentation, provided the buyer reverses the proportionate Input Tax Credit. This change eliminates compliance complexity for distributor-retailer models, volume rebates, and performance-based discounts, bringing GST treatment closer to commercial realities while maintaining tax neutrality through the mandatory ITC reversal mechanism.
2. Rationalisation of the Refund Framework (Section 54)
The Bill seeks to enhance liquidity for taxpayers through two critical modifications to the refund provisions under Section 54:
- Provisional Refunds for Inverted Duty Structure: Sub-section (6) of Section 54 is being amended to extend the facility of “provisional refunds” (90% of the claim) to cases involving the refund of unutilised ITC arising from an inverted duty structure under Section 54(3)(ii).
- What Does Not Change: The quantum of the provisional refund remains capped at 90% of the claim amount. The statutory process for the final verification and sanction of the remaining 10% after due audit and scrutiny under the standard refund rules remains intact
- Removal of the Refund Threshold for Exports: Under the existing Section 54(14), no refund of tax or unutilised ITC is allowed if the amount is less than ₹1,000. The amendment carves out an exception for cases where goods are exported out of India with the payment of tax, effectively removing this threshold limit for such exporters.
- What Does Not Change: The ₹1,000 threshold limit remains operative for all other categories of refunds, including domestic inverted duty structure claims, unutilised ITC on exports of services, and other miscellaneous refund types not specifically exempted by this amendment
3. Place of Supply for Intermediary Services (IGST Act, Section 13)
A significant cross-border tax reform is proposed via the omission of Clause (b) of Section 13(8) of the IGST Act, 2017.
- The Default Rule: Previously, the place of supply for “intermediary services” was the location of the supplier.
- New Determination: Following this omission, the place of supply for such services will be determined as per the default provision of Section 13(2), which is the location of the recipient of services. This alignment is expected to reduce complexity for service providers operating in global value chains.
- What Does Not Change: The statutory definition of an “intermediary” and the place of supply rules for other specific services enumerated under Section 13 (such as performance-based services or those relating to immovable property) remain governed by their existing respective sub-sections
4. Interim Appellate Arrangements for Advance Rulings (Section 101A)
To address the delay in the constitution of the National Appellate Authority for Advance Ruling, a new sub-section (1A) is being inserted into Section 101A.
- Empowering Existing Authorities: The Central Government, on the recommendations of the GST Council, may now empower any existing Authority or Tribunal to hear appeals filed under Section 101B (Appeals in Matters of Advance Rulings)
- Effective Date: Unlike most other GST amendments, this specific provision is set to take effect from 1 April 2026.
- What Does Not Change: The substantive right to file an appeal under Section 101B is preserved. Additionally, the long-term statutory mandate to eventually constitute a dedicated National Appellate Authority under Section 101A(1) remains unchanged; the new provision is merely a procedural bridge to resolve the current adjudicatory vacuum
Implementation Timelines
Save for the amendment to Section 101A, these legislative changes will be brought into force on a date to be notified by the Central Government in the Official Gazette. Such notification will be issued following recommendations from the GSTCouncil and in coordination with concurrent amendments by the States and Union Territories with legislature
Read More about Various changes proposed in Budget 2026 : https://ssburad.com/budget-2026-mini-updates/