Businesses across hospitality, transport, e-commerce, agriculture and recycling will need to review their GST treatment from 1 November 2026, following a series of notifications issued by the Central Board of Indirect Taxes and Customs on 26 and 27 October.
The changes cover post-supply discounts, refund provisions, input tax credit, electric vehicle services, delivery platforms, scrap purchases and several exemptions. Their commencement is phased: certain procedural changes begin in December 2026, while the expansion of e-invoicing to specified reverse-charge transactions begins in January 2027.
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- Post-supply discounts: Credit notes and recipient ITC reversal become central
Notification No. 03/2026–Central Tax brings Sections 153 to 155 of the Finance Act, 2026 into force from 1 November 2026, activating amendments to Sections 15, 34 and 54 of the CGST Act.
The substituted Section 15(3)(b) permits a post-supply discount to be excluded from taxable value where the supplier issues a credit note and the recipient reverses the input tax credit attributable to that discount in accordance with Section 34.
This replaces the earlier wording requiring the discount to be established through an agreement entered into before or at the time of supply and specifically linked to relevant invoices. Section 34 is also amended expressly to accommodate these discount credit notes.
Businesses should therefore review their discount schemes, credit-note documentation and the process for confirming corresponding ITC reversal by customers. The amendment does not dispense with Section 34’s applicable conditions and reporting requirements.
- Refund relief for inverted-duty businesses and small export claims
The amendment to Section 54(6) extends the statutory framework for provisional refunds to eligible unutilised ITC claims arising from an inverted duty structure.
Section 54(14) is also amended to exclude refunds of tax paid on goods exported out of India from the minimum refund restriction in that provision. Exporters with small refund amounts should examine the amended provision alongside the applicable refund procedure.
These changes concern refund entitlement and processing; businesses must still establish eligibility and satisfy the relevant documentary requirements.
- Hotels get limited credit for accommodation procured from another supplier
Notification No. 06/2026–Central Tax (Rate) changes the ITC conditions attached to specified hotel accommodation services.
Under the amended condition, a supplier operating under the relevant concessional entry may claim ITC on hotel accommodation procured from another supplier of hotel accommodation. Credit on other goods and services used in providing the service remains restricted under that entry.
Where the upstream supplier charges central tax above 2.5%, the eligible credit is capped at the amount calculated at 2.5% of the value of that input accommodation service.
The notification illustrates this with accommodation procured for ₹10,000 on which the upstream supplier charges ₹900 CGST. The downstream supplier charging 2.5% CGST can claim only ₹250 CGST credit.
This is targeted relief for accommodation supply chains. It does not open unrestricted ITC on all hotel expenses.
- Restaurant, outdoor catering and IRCTC-linked food supplies receive targeted ITC relief
The same notification relaxes the credit restrictions for specified restaurant and catering supplies.
For restaurant services other than at specified premises, the amended condition permits credit on restaurant services procured from another service provider within the described category.
For the covered outdoor catering entries, credit becomes available on outdoor catering services procured from another supplier. Where the upstream central tax exceeds 2.5%, the credit remains capped at the amount calculated at 2.5%.
The notification also permits specified same-line credit for food and drink supplies procured from Indian Railways, IRCTC or their licensees for the covered supplies in trains or at platforms.
Businesses should identify the precise entry applicable to their outward supply before claiming credit. The exceptions concern defined upstream supplies, while the broader restrictions under the concessional entries continue.
- Electric passenger transport and vehicle rentals get express rate options
Notification No. 06/2026–Central Tax (Rate) inserts specific entries for electric vehicle services where battery-charging costs form part of the consideration.
The covered categories are passenger transportation by electrically operated vehicles, renting electric vehicles designed to carry passengers, and renting electric vehicles for transporting goods.
The entries prescribe a central tax option of 2.5% with restricted ITC, or 9% without the special ITC restriction stated against the concessional option. These correspond to the familiar combined GST rates of 5% and 18%, subject to the applicable accompanying tax provisions.
Under the concessional option, credit is restricted principally to the specified same-line transport or rental services. Higher upstream tax does not permit unlimited credit: the notification caps eligible CGST credit at 2.5% of the relevant input service value.
The definition covers road vehicles running solely on electrical energy from an external source or fitted batteries and expressly includes e-bicycles.
- Delivery services: Rate conditions and platform liability must be examined separately
The delivery-sector amendments address both the tax treatment of the service and the person responsible for paying tax.
Notification No. 06/2026–Central Tax (Rate) substitutes the relevant delivery-service entry to prescribe 2.5% CGST without ITC for the described categories. These include specified services supplied through an electronic commerce operator by a supplier not liable for registration under Section 22(1), and delivery services relating to goods supplied through an electronic commerce operator.
Separately, Notification No. 09/2026–Central Tax (Rate) substitutes the delivery-service clause under the Section 9(5) notification. It covers delivery services other than postal and courier services, except where the person supplying through the operator is liable for registration under Section 22(1).
Platforms should consequently verify the supplier’s registration liability and the nature of the delivery service. The wording turns on liability for registration under the specified provision, making a simple registered-versus-unregistered classification insufficient.
- Passenger vehicle renting: Invoice-rate reference changes
Notification No. 08/2026–Central Tax (Rate) makes a narrow amendment to Entry 15 of Notification No. 13/2017–Central Tax (Rate), replacing the figure “6” with “9” in the supplier-description column.
This changes the rate reference used to identify suppliers falling within the reverse-charge entry for covered passenger vehicle renting transactions.
It should not be described simply as an increase in the reverse-charge tax rate from 6% to 9%. The amendment changes a condition in the entry; businesses must read it alongside the service description, supplier and recipient categories, and applicable rate notification.
- Reverse charge extended to used cooking oil and specified scrap
Notification No. 04/2026–Central Tax (Rate) extends reverse charge to the following goods supplied by an unregistered person to a registered person:
| Goods | Tariff heading |
| Used cooking oil | 1518 |
| Waste and scrap of plastics | 3915 |
| Waste and scrap of tyres | 4004 |
| Electrical and electronics waste and scrap | 8549 |
Registered purchasers in the recycling, waste-management and used-oil sectors should review vendor classification and purchase accounting from 1 November.
The notification changes who must discharge tax on the specified transactions. It does not prescribe one uniform GST rate for every category in the table.
- Related registration and TDS changes for scrap businesses
Notification No. 06/2026–Central Tax removes the benefit of the particular registration exemption under Notification No. 5/2017–Central Tax for suppliers of used cooking oil, plastic scrap, tyre scrap, metal scrap under Chapters 72 to 81, and electrical and electronics waste and scrap.
Suppliers must assess registration under the applicable statutory provisions. Removal of this exemption should not automatically be presented as compulsory registration for every small supplier regardless of turnover or other relevant conditions.
Notification No. 07/2026–Central Tax also substitutes the relevant clause in the GST TDS notification to cover registered recipients purchasing these five categories from other registered persons.
The TDS provision must be applied with Section 51, including its threshold and other conditions. Purchases from unregistered suppliers under reverse charge and purchases from registered suppliers under the TDS framework require separate accounting treatment.
- Retreaded tractor tyres move to the 5% GST category
Notification No. 02/2026–Central Tax (Rate) places retreaded tractor tyres under heading 4012 in the 2.5% CGST schedule. The corresponding integrated tax amendment prescribes 5% IGST.
The higher-rate tyre entry is amended to exclude retreaded tractor tyres. The concession therefore needs to be applied to the specified product category rather than to all retreaded tyres.
The notification also expressly includes qualifying seaweed-extract-based bio-stimulants within the relevant fertiliser entry, subject to registration under Schedule VI of the Fertiliser Control Order.
- Psyllium seeds exempted; nominated-agency definition updated
Notification No. 03/2026–Central Tax (Rate) adds psyllium seeds, described as Isobgul/Isobgol under tariff item 1211 90 13, to the exemption schedule from 1 November.
Notification No. 05/2026–Central Tax (Rate) updates the definition of “Nominated Agency” in the relevant exemption notification by linking it to entities mentioned in Appendix 4B of the Handbook of Procedures, as amended by DGFT from time to time.
- New service exemptions cover helicopter travel, coffee curing and toll rights
Notification No. 07/2026–Central Tax (Rate) introduces or revises several exemptions.
Seat-share helicopter passenger services embarking from or terminating at an airport or helipad in the eight specified northeastern States, or at Bagdogra in West Bengal, are brought within the relevant exemption.
New entries also cover services by the Seamen’s Provident Fund Organisation to persons governed by the relevant Act, coffee-curing services supplied to coffee cultivators, and grants of specified exclusive toll-collection rights by the listed government and public authorities.
The warehousing exemption is restated to cover cereals, pulses, fruits, vegetables and seeds meant for sowing. A detailed definition of “seed” includes specified planting and propagation material.
The notification also excludes GTA services relating to goods supplied through an electronic commerce operator from the particular exemption at Entry 21A. This exclusion requires examination of that entry rather than an assumption that every GTA exemption is withdrawn.
- Highway concessionaires get an escrow-based tax-payment mechanism
Notification No. 10/2026–Central Tax (Rate) prescribes a special mechanism for concessionaires supplying operation and maintenance services under qualifying Toll-Operate-Transfer agreements.
Central tax is payable on the amount charged or debited from the escrow account towards operation and maintenance expenditure, in the tax period in which that expenditure is charged or debited.
The notification defines the covered concession agreement by reference to exclusive toll-collection rights, operation and maintenance obligations, and an upfront concession fee. Concessionaires should align their escrow records and tax-period reporting with these conditions.
- Registration reforms begin, while other changes follow later
Notification No. 05/2026–Central Tax generally commences on 1 November, subject to expressly deferred provisions. New Rule 14B permits eligible e-commerce goods suppliers to obtain registration in another State using a consenting operator’s warehouse, subject to verification and other conditions.
Its ₹2.5 lakh monthly criterion concerns specified output-tax liability on supplies to registered persons, excluding same-PAN registrations. It is not a turnover threshold.
The phased commencement makes date-by-date review essential: specified changes begin in December 2026, while e-invoicing for covered inward reverse-charge supplies and service imports starts on 1 January 2027. Specified cancellation, credit-ledger restriction and capital-goods refund provisions commence in April 2027.
Businesses preparing for November should prioritise tax-rate masters, eligible ITC categories, supplier registration checks, scrap procurement, platform liability and credit-note procedures. Each change should be mapped to its notification and commencement clause before invoices, returns or refund claims are revised.
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