Budget 2026: GST Surprises with Practical Consequences

Budget 2026: GST Surprises with Practical Consequences

Through focused amendments under the CGST Act, the Budget 2026 has addressed long-standing operational bottlenecks that affected day-to-day GST compliance. Some changes don’t make headlines, but they have meaningful impact on outcomes. These practical amendments that ease cash flow pressure, reduce disputes, and restore balance between law and commerce.

This analysis covers three key amendments and evaluates their practical consequences for businesses.

1. The Post – Sale Discount Saga

Pre Budget 2026 - Section 15(3)(b)(i) of the CGST Act, 2017 [Existing Law]: The value of the supply shall not include any discount which is given after the supply has been effected, if 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.

Therefore, as per the current provision of Section 15(3)(b)(i) of the CGST Act, 2017 a discount given after the supply is made can be excluded from the value of supply only if the following two conditions are satisfied:

1. Pre-agreed in contract – The discount must be established in terms of an agreement entered into at or before the time of supply.
2. Invoice Linking – The discount must be specifically linked to relevant invoices.

Pre-Budget 2026 - Section 34(1) of the CGST Act, 2017: 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.

Recommendation of the 56^th GST Council Meeting:

• The GST Council in its 56^th meeting recommended to omit Section 15(3)(b)(i) of CGST Act, 2017 thereby omitting the requirement of establishing the discount in terms of an agreement entered into before or at the time of such supply and specifically linking of the same with relevant invoices.

• Furthermore, it was recommended to amend Section 34 of the CGST Act, 2017 to include a reference to Section 15(3)(b)(ii) of the CGST Act, 2017 so as to provide for reversal of Input tax credit by the recipient in case where a post-sale discount is given and value of supply is reduced through GST Credit note.

Amendment introduced in Budget 2026: Relevant extract from the Finance Bill 2026 is reproduced below for reference –

“Clause 137 of the Bill seeks to amend sub-section (3) of section 15 of the Central Goods and Services Tax Act to do away with requirement of linking the post-sale discount with an agreement specifically linked to relevant invoices and to refer to issuance of credit note under section 34 where the input tax credit is reversed by the recipient.

Clause 138 of the Bill seeks to amend section 34 of the Central Goods and Services Tax Act so as to include the reference of discount referred under clause (b) of sub-section (3) of section 15 in the said section for issuing credit notes for post-supply discounts.”

Change in provision after Budget 2026 Amendment:

• The Finance Bill 2026 has removed the requirement to tie the discount to a prior agreement and to specific invoices. Accordingly, a post-sale discount can be excluded from the value of supply if the supplier has issued a GST credit note for that discount and the recipient of supply has reversed the attributable ITC in accordance with Section 34.

• In other words, the statutory hook has shifted from a “pre-agreement + invoice-linkage” test to a credit note/ITC-reversal mechanism under Section 34. Accordingly, The Finance Bill also introduced an amendment to Section 34(1) to expressly include credit notes issued for post-sale discounts referred to in Section 15(3). This aligns the valuation provision more directly with the credit note process, which will serve as the compliance anchor for adjustments.

• The same will be notified through the notification issued by CBIC or on approval of the Finance Bill 2026 whichever is earlier.

Practical impact on the Businesses

• Suppliers no longer need to demonstrate that a discount was agreed before or at the time of supply or tied to specific invoices they simply need to issue a credit note but need to ensure recipient ITC reversal.

• This simplifies compliance and reduces litigation related to documentation of historical agreements for commercial discounts.

1. The Faster Refund Route

2.1 Amendment in Section 54(6) of the CGST Act, 2017:

Pre-Budget Section 54(6) of the CGST Act, 2017: As of now, the provisional refund can be granted equivalent to the 90% of the amount so claimed on account of zero-rated supplies only.

Recommendation of the 56th GST Council Meeting:

The GST Council in its 56^th GST Council Meeting recommended amending section 54(6) of the CGST Act, 2017, to provide for sanction of 90% of refund claimed on provisional basis, in cases arising out of inverted duty structure, on the basis of identification and evaluation of risk by the system.

This is in similar lines as is presently available for refund in respect of zero-rated supply. This was made operationalized from 1st November 2025.

Amendment introduced in Budget 2026:

“Clause 139 of the Bill seeks to amend sub-section (6) of section 54 of the Central Goods and Services Tax Act to extend the provisions of provisional refund to refunds arising out of inverted duty structure.”

Change in provision after Budget 2026 amendment

The Budget 2026 proposed to amend sub-section (6) so that the provisional refund facility (90%) will also be available where the refund arises on account of unutilised input tax credit due to inverted duty structure.

Practical impact on the Businesses

1. This will provide businesses with accumulated ITC because of inputs being taxed at higher rates, an immediate liquidity rather than waiting long adjudication processes.
2. Provisional refunds are by definition provisional and thus, final adjudication can adjust/recover amounts.

2.2 GST Refunds in case of Low Export Assignments

Pre-Budget Section 54(14) of the CGST Act, 2017: Notwithstanding anything contained in this section, no refund under sub-section (5) or sub-section (6) shall be paid to an applicant, if the amount is less than one thousand rupees.

Recommendation of the 56th GST Council Meeting:

• The Council recommended amendment to Section 54(14) of the CGST Act, 2017 so as to remove the threshold limit for refunds arising out of exports made with payment of tax.
• This will particularly help small exporters making exports through courier, postal mode etc.

This will come as a relief for Small Exporters and shall mean Improved Cash Flow as every rupee of refund counts, especially for MSMEs with tight working capital cycles.

Amendment introduced in Budget 2026:

“Clause 139 of the Bill further seeks to amend sub-section (14) of section 54 of the Central Goods and Services Tax Act to provide for removing the threshold limit for refund claim in case of goods exported out of India with payment of tax.”

Change in provision after Budget 2026 amendment

The Finance Bill 2026 amends sub-section (14) of Section 54 of the CGST Act, 2017 so that the Rs.1,000 threshold will not apply to cases where refund of tax is claimed on account of goods exported out of India with payment of tax.

Practical impact on the Businesses

• Support small exporters / low-value consignments: Many courier/postal exports or small value shipments generate refund amounts below Rs.1,000. The threshold created a liquidity pain for micro/small exporters (and e-commerce sellers/exporters using courier). Removing the threshold helps them recover tax paid on exports.

• Trade facilitation / ease of doing business: The change aligns with simplifying refund processes for exporters and preventing taxpayers from being forced to forego legitimate refunds.

3. Hearing of Appeals till the National Appellate Authority for Advance Ruling is constituted under Section 101A(1) of the CGST Act, 2017

Budget 2026 Amendment:

“Clause 140 of the Bill seeks to insert a new sub-section (1A) in section 101A of the Central Goods and Services Tax Act so as to provide that till the National Appellate Authority for Advance Ruling is constituted under sub-section (1), the Government may on the recommendation of the Council, by notification, empower any existing Authority to hear appeals made under section 101B.

It further seeks to provide that in such case, the provisions of sub-sections (2) to (13) shall not apply.

It also seeks to insert an Explanation in the said sub-section so as to provide that the expression “existing Authority” shall include a Tribunal.”

Practical impact on the Businesses

1. Businesses can challenge conflicting Advance Rulings effectively,
2. Reduced litigation uncertainty and compliance risk,
3. While the National Appellate Authority for Advance Ruling remains the ultimate goal, Section 101(1A) now ensures that justice is not indefinitely deferred merely due to institutional delays.

4. Time to let go of Section 13(8)(b) of the IGST Act 2017

The place of supply for intermediaries has always been one of the most debated and grey areas under GST.

• Until now (Sec 13(8) of the IGST Act, 2017):

Place of supply = Location of the supplier

• Amendment in Budget 2026:

“Clause 141 of the Bill seeks to omit clause (b) of sub-section (8) of section 13 of the Integrated Goods and Services Tax Act, 2017 so as to provide that the place of supply for “intermediary services” shall be determined as per the provisions of sub-section (2) of section 13 of the said Act, which is the location of the recipient of such services.”

• Post Amendment (recommended in 56th GST Council Meeting and amended in Budget 2026):

Place of supply = Location of the recipient [Sec 13(2)].

Impact of the above amendment

• Supplier is in India

1. Classifies as Export of Services under GST.
2. Opens the door to refund claims u/s 54 of CGST Act.

• Supplier is outside India

1. Classifies as Import of services as Location of supplier is outside India, location of recipient in India and place of supply in India [post amendment],
2. Accordingly, RCM will be applicable on such import of services.