Budget Analysis on GST – FY 2026–27
Compiled by: CA Srishti Bhartia
Reviewed by: CA Deepak Jain
Proposals contained in Union Budget 2026 draw inspiration from the deliberations and recommendations of the 56th meeting of the GST Council
Central Goods and Services Tax Act, 2017 (CGST Act)
| Section | Existing Provisions | Proposed Provisions | Impact |
|---|---|---|---|
| Section 15(3)(b) |
Existing Provisions The value of the supply shall not include any discount which is given- 1. before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and 2. after the supply has been effected, if- a. such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and b. input tax credit as is attributable to the discount on the basis of document issued by the supplier has been reversed by the recipient of the supply. |
The value of the supply shall not include any discount which is given- 1. before or at the time of the supply if such discount has been duly recorded in the invoice issued in respect of such supply; and 2. after the supply has been effected, if for such discount, a credit note has been issued by the supplier and input tax credit as is attributable to such discount has been reversed by the recipient of the supply, in accordance with the provisions of section 34. |
Section 15(3)(b) deals with exclusion of post-sale discount in value of supply. Earlier, post-sale discount were not excluded from value of supply. However, a shift was brought in 56th GST Council Meeting and the requirement of an agreement was done away with. To provide clarity on the treatment of post-sale discount and bring in the enabling mechanism for the same, the CBIC issued Circular No. 251/08/2025-GST on 12th September 2025 – clarifying this stance. This has now been integrated into the Act itself. It has specifically allowed deduction of discount from value of supply upon fulfilment of 3 conditions, in toto, – 1. Credit note has been issued to this effect 2. ITC has been reversed by recipient 3. Credit note has been issued as per S.34. This will enable the taxpayer to reduce GST on post-sale discount. |
| Section 34(1) | Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed. | Where one or more tax invoices have been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient or where a discount referred to in clause (b) of sub-section (3) of section 15 is given , the registered person, who has supplied such goods or services or both, may issue to the recipient one or more credit notes for supplies made in a financial year containing such particulars as may be prescribed. |
Pre amendment, any taxpayer could issue credit note – reducing its output GST liability – only in following scenarios – 1. where taxable value / tax is found to be in excess 2. where goods supplied are returned 3. where goods / services are found to be deficient. Post amendment, 4th scenario has been added for issuance of credit note – where post sale discount is given by the supplier. Thus, post amendment, the taxpayer can issue credit note to the recipient in 4 scenarios and reduce its output tax liability in respect of the underlying supply of goods / services. This is a consequential amendment to incorporate reduction in GST output tax liability in respect of post-sale discount. |
| Section 54(6) | Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant. | Notwithstanding anything contained in sub-section (5), the proper officer may, in the case of any claim for refund on account of zero-rated supply of goods or services or both or unutilised input tax credit allowed under clause (ii) of the first proviso to sub-section (3) made by registered persons, other than such category of registered persons as may be notified by the Government on the recommendations of the Council, refund on a provisional basis, ninety per cent. of the total amount so claimed, in such manner and subject to such conditions, limitations and safeguards as may be prescribed and thereafter make an order under sub-section (5) for final settlement of the refund claim after due verification of documents furnished by the applicant. |
Since inception, Section 54(6) of the Act has always allowed for sanction of 90% of the value of refunds on a provisional basis, after a risk-based assessment for zero-rated supply of goods or services. However, till date, this was almost notional in nature and has not been followed by the Authorities in spirit. As a confirmed specific measure to facilitate trade, the Finance Ministry recommended to not only implement the provision, but also expand its scope to include similar sanction of provisional refunds in cases of inverted duty structure (IDS). Accordingly, this provision has been amended to implement the decision of the GST Council. If followed in spirit, this mechanism will greatly help the taxpayers seeking refund and improve their working capital efficiency. |
| Section 54(14) | Notwithstanding anything contained in this section, no refund under subsection (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees. | Notwithstanding anything contained in this section, no refund under subsection (5) or sub-section (6), other than cases where refund of tax is claimed on account of goods exported out of India with payment of tax , shall be paid to an applicant, if the amount is less than one thousand rupees. |
Earlier, refund of tax for less than Rs. 1,000/- was not allowed to taxpayers. This was causing loss to small taxpayers – like artisans – who were exporting their goods but not getting refund of its accumulated ITC. As a specific measure to facilitate trade, Section 54 (14) has now been amended to remove the threshold limit for exports made with payment of tax. This is introduced with a view to encourage and bring ease for small export consignments, made through courier, postal mode, etc. It should be noted that such benefit is available, conditional upon the exports of goods being made with the payment of IGST and not on exports made under LUT – without payment of taxes. |
| Insertion of Section 101A (1A) | NA |
(1A) Notwithstanding anything contained in sub-section (1), till the National Appellate Authority is constituted under that sub-section, the Government, may on the recommendations of the Council, by notification, empower any existing Authority constituted under any law for the time being in force to hear appeals made under section 101B and in such case,— 1. the provisions of sub-sections (2) to (13) shall not apply; and 2. any reference to the National Appellate Authority under this Chapter shall be construed as a reference to such Authority. Explanation.— For the purposes of this sub-section, the expression “existing Authority” shall include a Tribunal. |
Till date, National Appellate Authority for Advance Rulings has not been constituted. As mandated under Section 101A of the Act, there are certain formalities and requisites to constitute the National Appellate Authority. For the constitution of such a statutory body, a modus operandi and certain synchronizations need to be achieved between Centre and State Governments – operating in federal structure. Accordingly, till the concerned authority is constituted, the power of hearing, deliberating and coinciding the decision of conflicting Advance Rulings of two or more Appellate Authorities of Advance Rulings, may be entrusted to any other existing Authority – function which was entrusted to National Appellate Authority of Advance Rulings. Further, insinuating from the Explanation, this power would be presumably conferred upon the newly constituted GST Appellate Tribunal. If done so, further clarification or amendment may be forthcoming, to extend the powers of the GSTAT. This is because, as per the current provisions, the GSTAT is specifically empowered to hear appeals against the orders passed under Section 107 and Section 108 of the Act, i.e., orders issued by the First Appellate Authority and the Revisional Authority only. |
Integrated Goods and Services Tax Act, 2017 (IGST Act)
| Section | Existing Provisions | Proposed Provisions | Impact |
|---|---|---|---|
| Section 13(8) |
The place of supply of the following services shall be the location of the supplier of services, namely:- 1. services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; 2. intermediary services; 3. services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. |
The place of supply of the following services shall be the location of the supplier of services, namely:- 1. services supplied by a banking company, or a financial institution, or a non-banking financial company, to account holders; 2. 3. services consisting of hiring of means of transport, including yachts but excluding aircrafts and vessels, up to a period of one month. |
This was deeming provision where it was deemed that place of supply for provision of agency service to foreign recipient would be the location of supplier. By virtue of this deeming provision, the agency service was considered to be provided in India and was taxed at 18% – which else, without this deeming provision, would have been considered as an export of service. In the 56th GST Council meeting, it was decided to do away with this provision and deeming fiction. Thus, this amendment brings in a contrarian impact of GST on the supply and receipt of intermediary services. For suppliers of intermediary services located in India, this provision brings in direct relief, shifting the supply of their services from taxable category into the zero-rated category (export of services), in fulfilment of conditions of Section 2(6) of the Act. This will not only grant them relief from paying GST on their supply, but also provide scope for availment of refund of unutilised ITC, as per provisions of Section 54 of the Act. Conversely, for recipients located in India and availing the services of foreign intermediaries, this provision specifically includes these transactions within the definition of import of services, and thereby attracting payment of GST on RCM basis. |