Union Budget 2026: Pre-Budget Expectations on GST Reforms

Pursuant to the recommendations of the 56th GST Council meeting, several important legislative amendments are expected to be introduced through Union Budget 2026. These changes aim to improve export competitiveness, simplify valuation rules, reduce disputes, and ease compliance—particularly for small businesses and exporters.

The following GST amendments are expected to materially impact trade, services, and refund mechanisms.

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Amendment to Place of Supply Rules for Intermediary Services (IGST Act)

At its 56th meeting, the GST Council recommended deletion of section 13(8)(b) of the Integrated Goods and Services Tax (IGST) Act, 2017.

Current Position

• Intermediary services are deemed to be supplied at the location of the supplier, even when services are rendered to overseas clients.
• This results in GST liability in India and denial of export benefits.

Expected Amendment

• Deletion of section 13(8)(b) of the IGST Act.
• Place of supply for intermediary services to be determined under section 13(2), i.e. the location of the recipient of services.

Impact

• Indian intermediary service providers will qualify as exporters.
• Eligibility for export benefits such as zero-rating and refunds.
• Reduction in long-standing litigation and constitutional challenges around intermediary taxation.

This amendment is expected to significantly improve India’s competitiveness in global services exports.

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Amendments to Post-Sale Discount Provisions

(Sections 15 and 34, CGST Act)

The GST Council has recommended important changes to valuation and credit note provisions relating to post-sale discounts.

Removal of Pre-Agreement Requirement

• Omission of section 15(3)(b)(i) of the CGST Act, 2017.
• Removes the requirement to prove that post-sale discounts:
  • Were agreed upon before or at the time of supply
  • Were specifically linked to individual invoices

This simplifies commercial discounting practices and aligns GST law with business realities.

Mandatory Credit Note Mechanism and ITC Reversal

• Section 15(3)(b) to be amended to require post-sale discounts to be passed on only through a GST credit note issued under section 34.
• Corresponding amendment to section 34 to reference section 15(3)(b).
• Recipient will be required to reverse input tax credit (ITC) where:
  • A post-sale discount is granted, and
  • The value of supply is reduced through a GST credit note

Impact

• Greater legal clarity on treatment of discounts.
• Reduction in valuation-related disputes.
• Clear linkage between discounts, credit notes, and ITC reversal.

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GST Refunds for Low-Value Export Consignments

(Section 54, CGST Act)

To support small exporters, the GST Council has recommended a key reform to the refund framework.

Expected Amendment

• Amendment to section 54(14) of the CGST Act, 2017.
• Removal of the minimum threshold for refund claims on exports made on payment of GST.

Impact

• Enables GST refunds even for low-value export consignments.
• Particularly beneficial for:
  • Small exporters
  • Exporters using courier and postal channels
• Improves cash flow and reduces working capital stress for MSMEs.

This change aligns GST refunds with the objective of promoting inclusive exports.

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Conclusion: GST Reforms in Budget 2026

The GST amendments expected in Union Budget 2026 reflect a continued shift towards simplification, export promotion, and litigation reduction.

Key outcomes include:

• Improved export competitiveness for services and goods.
• Alignment of GST valuation rules with commercial practices.
• Better refund access for small and emerging exporters.

Together, these reforms strengthen GST as a facilitative tax regime and support India’s broader trade and ease-of-doing-business objectives.