Legal & Finance Weekly
GST Council moves to drop arrest powers and put refunds on autopilot
The 57th meeting, the first in thirteen months, left rates largely alone and rewrote the process instead. None of it is law yet.
Meeting in New Delhi on 8 October after two postponements, the GST Council recommended the complete withdrawal of arrest powers by omitting section 69 of the CGST Act, and a rise in the monetary threshold for prosecution from ₹1 crore to ₹5 crore. The list of offences in section 132 is to be narrowed, with the fake-credit offence confined to input tax credit taken without receipt of goods or services, or without an invoice.
The rest of the package is aimed at cash flow and at the volume of notices. The principal recommendations are below.
| Area | What the Council recommended |
|---|---|
| Refunds | Excess cash-ledger balances to be refunded automatically. For zero-rated supplies and inverted duty structure, 90% of the claim to be sanctioned provisionally by the system on a risk basis. Acknowledgement or deficiency memo within 10 days instead of 15, failing which it is deemed. |
| Accumulated credit | Refund of credit on capital goods for zero-rated supplies, and on input services and capital goods for inverted duty structure. Input services: for credit availed on or after 1 November 2026. Capital goods: credit availed on or after 1 April 2027, spread over 60 months. |
| Blocked credits | Section 17(5) to be amended to lift restrictions on, among others, outdoor catering, health and life insurance, telecom towers, pipelines laid outside the factory, free samples, and goods written off on expiry of shelf life as required by law. |
| Demands and penalties | No show-cause notice where tax is below ₹10,000. Penalty of 5% in non-fraud cases if tax and interest are paid within 30 days (section 73) or 60 days (section 74A) of the order. General penalty under section 125 cut from ₹25,000 to ₹10,000. Pre-deposit capped at ₹40 crore in penalty-only appeals. |
| Export of services | The “distinct person” condition in section 2(6)(v) of the IGST Act to go, opening refunds on services supplied to or through an Indian company’s own foreign branches. Section 13(3)(a) also to be omitted. |
| Goods in transit | Interception only on specific intelligence and with authorisation of a Joint Commissioner or above; no interception in transit States where an e-way bill exists; no confiscation under section 130 of goods in transit. |
| Registration | Automatic acceptance of most amendments; system-based cancellation; a new rule 14B letting small sellers register in other States using an e-commerce operator’s warehouse as place of business. |
| Other | Transfer of title in intellectual property, temporary or permanent, to be treated uniformly as a supply of services. A hearing before credit is blocked under rule 86A. A validation clause for notices struck down for covering multiple financial years. E-invoicing extended to reverse-charge supplies from unregistered persons and import of services for taxpayers at ₹5 crore turnover and above. |
On rates. Changes were limited and mostly clarificatory. Delivery services supplied through e-commerce operators move to 5% without credit; electric-vehicle passenger transport gets an optional 5% rate with restricted credit; the upfront concession amount paid for toll rights on highway projects is to be exempt; and the notional interest booked between bank branches under funds transfer pricing is to be treated as “interest”. Specified waste and scrap comes under reverse charge, with 2% TDS on business-to-business supplies.
Status. The Finance Ministry’s release says in terms that the recommendations take effect only through law amendments, notifications and circulars. Several need amendments to the CGST and IGST Acts, which means Parliament. The revised return-reconciliation mechanism is proposed from the April 2027 return and is to be put out for public consultation first.
SEBI lets top-rated listed issuers place debt without a merchant banker
Three circulars dated 7 October reshape private placement of debt. The first replaces para 1.3 of Chapter V of the NCS Master Circular: an issuer may now dispense with a merchant banker if it meets all five conditions.
It must be regulated by SEBI, the RBI, IRDAI or PFRDA; be listed for at least a year with no pending SEBI or exchange fines under the LODR Regulations; have no default in the last three financial years and the current one, certified by its statutory auditor; issue senior debt secured by a first or pari passu charge (public sector issuers may be unsecured); and carry a rating of AA− or better on the placement date, the lowest rating counting. It took effect immediately. Exchanges are still to specify the formats in which issuers show eligibility.
The second raises the cap on ISINs maturing in a financial year to 17 per issuer: 12 for plain vanilla debt and 5 for structured, market-linked, floating-rate, zero-coupon and Tier II instruments, with six more for section 54EC bonds. Beyond ₹15,000 crore maturing in a year, each further ₹3,000 crore earns one more plain vanilla ISIN.
A colour-coded credit meter for every listed bond
The third circular makes a “Credit Risk-o-Meter” mandatory in offer documents, abridged prospectuses, private placement memoranda, advertisements, and on the web and mobile platforms of online bond platform providers. It covers listed and to-be-listed non-convertible securities, commercial paper, securitised debt, security receipts and market-linked debentures, whether issued publicly or privately.
Six levels run from green for AAA to red for B and below. Where there are several ratings the lowest drives the meter. The word “unsecured” must appear in bold red where it applies, and unsecured perpetual bonds such as AT1 carry an added warning that the meter does not reflect the risk of total loss. Bond platforms must update the meter within 24 hours of a rating change through an automated system with no manual override.
The circular applies after 45 days, which on our count is 21 November. It has no transitional provision for bonds already listed.
RBI finalises counterparty credit risk capital rules
Amendment Directions issued on 7 October (RBI/2026-27/284) require commercial banks with an international presence, or with derivatives of ₹25,000 crore and above at book value, to measure derivative exposures under the Standardised Approach for Counterparty Credit Risk from 1 April 2027, on a group-wide basis. Other banks may stay on the Current Exposure Method.
Exposure is 1.4 times the sum of replacement cost and potential future exposure for each netting set. Trade exposures to a qualifying central counterparty attract a 2% risk weight. Banks may defer option premium for users under a board-approved policy. Companion directions on a Credit Valuation Adjustment framework followed on 8 October, also effective 1 April 2027.
For corporates the effect is indirect: the capital a bank holds against a client’s hedges will be recalculated, and pricing and collateral terms may follow.
Rate hike absorbed; Jio price band reported
The Monetary Policy Committee’s unanimous 25 basis point increase on 7 October took the repo rate to 5.50% and moved the stance to “calibrated tightening”. The RBI raised its 2026-27 growth forecast to 7.1% and its inflation forecast to 5.2%. Minutes are due on 21 October.
Equities fell for two sessions and recovered on Friday. The Sensex closed at 72,472.33, up 879 points, and the Nifty at 22,520.45, up 289, led by IT stocks as crude eased and bond yields cooled.
Bloomberg reported on Friday that Jio Platforms has set a price band of ₹1,065–1,119 a share, which on the draft offer of up to 27 crore fresh shares would raise about ₹30,213 crore at the top end, with the issue expected to open on 21 October and list on 28 October. Earlier reports had put the issue at ₹37,700 crore. None of this is a company announcement; the red herring prospectus will settle it.
A good week to be compliant. Read the fine print before acting on it.
Two regulators did the same thing this week from different directions. The GST Council proposed to stop treating every taxpayer as a suspect, and SEBI stopped requiring a merchant banker for issuers whose record speaks for itself. In both cases the relief goes to those who can prove a clean history: no defaults, no pending fines, returns filed, dues paid. A compliance record is turning into something with a price.
The caution is timing. The GST measures are recommendations. Arrest powers remain on the statute book, section 17(5) still blocks the credits it blocked last week, and a refund filed tomorrow is processed under today’s rules. The SEBI exemption is in force, but the exchanges have not yet said how eligibility is to be evidenced.
- GST credits. Do not take credit on outdoor catering, employee insurance or similar items until section 17(5) is actually amended. Do start identifying the amounts, so the claim is ready.
- Inverted duty and export businesses. Model the working capital released by refunds on input services from 1 November 2026 and on capital goods from 1 April 2027, and consider the timing of large capital purchases against the second date.
- Companies with foreign branches. Revisit the GST position on services supplied to your own overseas establishments once the IGST amendment is notified.
- Pending small demands. Notices and appeals under ₹10,000 are proposed to be closed as if the threshold had always applied. Hold off paying to settle until the provision is enacted.
- Debt issuers rated AA− and above. Test all five SEBI conditions now, obtain the statutory auditor’s no-default certificate, and check the exchange’s format before mandating an issue without a merchant banker. Map ISINs by maturity year against the new 12 and 5 limits.
- All debt issuers and bond platforms. Redesign offer documents and advertisements for the Credit Risk-o-Meter before 21 November.
- Borrowers who hedge. Ask relationship banks how the 2027 capital rules will affect derivative pricing and collateral, alongside the repricing already triggered by the rate hike.
Also this week
Sources
- Recommendations of the 57th GST Council meeting (PIB release, via TaxGuru)
- SEBI merchant banker exemption, CorpLawUpdates
- SEBI ISIN limits for privately placed debt, CorpLawUpdates
- SEBI Credit Risk-o-Meter, CorpLawUpdates
- RBI SA-CCR Amendment Directions, CorpLawUpdates
- RBI updates, CorpLawUpdates
- RBI repo rate, October 2026, CorpLawUpdates
- Highlights of the October monetary policy, PTI via DT Next
- Closing bell, 9 October 2026, Kotak Neo
- Jio IPO price band, Bloomberg
- Jio IPO, Business Today
- SME Growth Fund, CorpLawUpdates
- SEBI updates, CorpLawUpdates
- LiveLawBiz daily round-ups, 5–8 October 2026