Summary of GST Circulars dated 26 October 2026 Circular Nos. 257/03/2026-GST to 264/10/2026-GST

Summary of GST Circulars dated 26 October 2026

Circular Nos. 257/03/2026-GST to 264/10/2026-GST

The attached PDF contains eight CBIC GST circulars covering registration procedures, demand and appeal proceedings, pre-deposit requirements, Input Service Distributor (ISD), input tax credit for banks and vehicle demo cars, export proceeds, and the omission of Rule 96(10).[cite: 40]

The summaries below are arranged circular-wise, with bullet points covering the substantive clarifications, procedural requirements, and practical implications for taxpayers and GST professionals.[cite: 40]

Circular No. 257/03/2026-GST

Subject: Guidelines for handling applications for GST registration | 38 pages[cite: 40]

1. Objective and background

The circular aims to simplify GST registration for genuine applicants while preventing fake registrations used for passing on ineligible ITC without actual supplies.[cite: 40]
Delays and rejections often arise from incomplete information, missing documents, incorrect or inconsistent details, and illegible uploads.[cite: 40]
Applicants are advised to furnish accurate information and supporting documents at the time of application to reduce unnecessary queries.[cite: 40]
The circular supplements the guidelines for officers issued through Instruction No. 03/2025-GST dated 17 April 2025.[cite: 40]
It includes detailed applicant guidelines, FAQs and document checklists to promote uniformity in registration processing.[cite: 40]

2. Applicable registration forms and filing procedure

Normal registration applications are generally filed online in FORM GST REG-01 through the GST portal.[cite: 40]
The relevant forms for special categories are:[cite: 40]
- REG-07: Tax deductors under Section 51 and tax collectors under Section 52.[cite: 40]
- REG-09: Non-resident taxable persons.[cite: 40]
- REG-10: Specified non-resident online money gaming suppliers and OIDAR suppliers covered by the form.[cite: 40]
- REG-13: Application for a Unique Identity Number for specified bodies and persons.[cite: 40]
The application process is accessed through Services → Registration → New Registration.[cite: 40]
REG-01 contains Part A for generating the Temporary Reference Number (TRN) and Part B for the detailed application.[cite: 40]
The application covers business constitution, registration reason, premises, promoters, bank accounts, business activities, HSN/SAC details and authorised signatories.[cite: 41]
The GST portal's registration manual and FAQs should be consulted when completing the application.[cite: 41]

3. Part A of REG-01: Basic information

Enter the correct PAN and legal name.[cite: 41]
The legal name must match the Income Tax PAN records and, where applicable, the company's incorporation records issued by the Ministry of Corporate Affairs.[cite: 41]
For a proprietorship, enter the proprietor's name as the legal name.[cite: 41]
Select the correct State/UT and district of the principal place of business.[cite: 41]
Where the email address and mobile number are linked to PAN, applicants are advised to use those details.[cite: 41]

4. Part B: Business details

Select the correct constitution of business, such as proprietorship, partnership, HUF, company, LLP, trust, association or other applicable category.[cite: 41]
Upload the relevant constitution documents, including:[cite: 41]
- Partnership deed for partnership firms.[cite: 41]
- Registration certificate or other constitution proof for societies, trusts, clubs, government departments, associations and similar entities.[cite: 41]
- Karta-related documentation for an HUF.[cite: 41]
An SEZ Unit or SEZ Developer must select the correct category and provide its name, approval order number and date, validity period, approving authority and approval order.[cite: 41]
Applicants opting for the composition scheme must select the correct composition option and eligibility category.[cite: 41]
Applicants opting for Casual Taxable Person status or Rule 14A must select the relevant option.[cite: 41]
Select the correct reason for registration, such as crossing the threshold, voluntary registration, change in constitution, inter-State supply or liability under reverse charge.[cite: 41]

5. Promoters, partners and persons responsible for the business

Furnish the required personal and identification details of the relevant persons, depending on the business constitution.[cite: 41]
For proprietorships, provide the proprietor's details.[cite: 41]
For partnerships and LLPs, provide details of the managing partner and other partners.[cite: 41]
For HUFs, provide Karta details.[cite: 41]
For companies, provide details of the managing director and whole-time directors.[cite: 41]
For associations, provide the relevant managing committee members' details; for trusts, provide the board of trustees' details.[cite: 41]
DIN is required for company directors and designated partners of LLPs, as applicable.[cite: 41]
Upload recent photographs of the relevant persons. For partnerships/LLPs and associations, the circular specifies a maximum of ten persons for certain photograph requirements where the total number exceeds ten.[cite: 41]
Photographs must be recent, clear, individual colour photographs showing the person's full front face.[cite: 42]
Group photographs, photographs copied from identity documents, and unclear or incorrect photographs should not be uploaded.[cite: 42]

6. Authorised signatory and representative

Furnish the primary authorised signatory's details and those of other authorised signatories, if any, subject to the maximum of ten signatories.[cite: 42]
Provide the applicable identity, contact, residential address, designation and other prescribed details.[cite: 42]
Upload the authorised signatories' photographs.[cite: 42]
Upload an authorisation letter issued by the proprietor, partners, board, trust or management committee, as applicable, evidencing appointment of the authorised signatory.[cite: 42]
Details of an authorised representative may also be furnished.[cite: 42]
Where the representative is an enrolled GST Practitioner, provide the Enrolment ID; otherwise, provide the relevant identification and contact details.[cite: 42]

7. Principal place of business (PPOB)

Enter the complete and specific business address, including building/flat/shop/plot number, street, locality, village/town/city, district, PIN code and other applicable details.[cite: 42]
Provide the Khasra/Khata number and Taluka/Block details wherever applicable.[cite: 42]
The address should identify the actual premises, not merely a village, road, locality or colony.[cite: 42]
Latitude and longitude may also be furnished; the GST portal permits selection of the location through its map.[cite: 42]
The address in REG-01 must match the address appearing in the supporting premises documents.[cite: 42]
Select the correct State and Central tax jurisdiction based on the address and PIN code.[cite: 42]
State the nature of business conducted at the premises, such as manufacturing, wholesale, retail, service provision, warehouse or depot.[cite: 42]
Incorrect jurisdiction or insufficient address details may cause processing delays, transfer of the application or adverse physical verification findings.[cite: 42]

8. Documents for premises: Ownership, rent and consent

Own premises: Upload a clear, legible ownership-related document from the prescribed list, such as the latest property tax receipt, municipal khata/property identification document, electricity bill or water bill.[cite: 42]
Premises belonging to a family member, partner or director are not automatically treated as owned by the applicant entity. The correct category must be selected based on the actual arrangement.[cite: 42]
Consent basis: Where premises belong to a family member or another person who has permitted their use, select the consent category and upload the prescribed premises proof and consent letter.[cite: 42]
Registered rent/lease: Upload the registered rent or lease agreement.[cite: 42]
Unregistered rent/lease: Upload the rent/lease agreement and a prescribed premises document in the landlord's name.[cite: 43]
No rent/lease agreement: Upload the prescribed undertaking confirming possession of the premises and an acceptable premises document in the applicant's name, as specified by the circular.[cite: 43]
Co-working premises: Provide the membership agreement or equivalent proof showing the allocated desk, seat, suite or area and complete address. Additional ownership or registered lease documents of the co-working provider are required, as applicable.[cite: 43]
SEZ premises: Provide the relevant approval letters, certificates or other documents evidencing the location of the SEZ Unit/Developer.[cite: 43]
Premises in a deceased ancestor's name: Provide the death certificate and the prescribed affidavit explaining succession or legal inheritance and establishing the applicant's possession.[cite: 43]
All documents should be clear, legible, complete and consistent with the declared address.[cite: 43]

9. Other registration requirements

Provide complete information for the additional place of business, wherever applicable.[cite: 43]
Ensure that business constitution, premises, authorised signatory details, bank information and business activities are mutually consistent.[cite: 43]
Select the applicable goods/services classification and HSN/SAC details.[cite: 43]
Provide the prescribed supporting documents for special business categories, including SEZ applicants and other specified categories.[cite: 43]
Applicants should review the checklist annexed to the circular before submission.[cite: 43]

10. Registration processing, Aadhaar authentication and physical verification

Registration applications are processed online.[cite: 43]
If the application is selected for biometric-based Aadhaar authentication, the applicant must complete the prescribed biometric authentication and document verification at the designated GST Suvidha Kendra within 15 days of receiving the TRN.[cite: 43]
Failure to complete the required process may prevent further processing of the application.[cite: 43]
Physical verification may be conducted where Aadhaar authentication is not opted for or is not completed, where the application is selected based on risk parameters, or where the proper officer considers verification necessary after obtaining the required approval.[cite: 43]
A registration application may be rejected where required information is not provided, documents are defective or the applicant fails to respond adequately to a notice.[cite: 43]

11. Clarifications and rejection procedure

Where clarification or additional documents are required, the officer may issue FORM GST REG-03.[cite: 43]
The applicant must reply in FORM GST REG-04 within seven working days of receiving the notice.[cite: 43]
The officer is required to take a decision within seven working days after receiving the clarification, in accordance with the circular's stated procedure.[cite: 44]
If approved, the registration certificate is issued in FORM GST REG-06.[cite: 44]
If rejected, the rejection order is issued in FORM GST REG-05.[cite: 44]
If no action is taken by the officer within the applicable prescribed time limit, the circular explains that registration is deemed approved and the certificate is made available electronically, subject to the applicable legal procedure.[cite: 44]
An applicant whose application is rejected may file a fresh application after correcting the deficiencies.[cite: 44]

12. Simplified registration under Rule 14A

The circular explains the optional simplified registration scheme introduced with effect from 1 November 2025.[cite: 44]
The scheme is intended for eligible small businesses that do not need to pass on more than 2.5 lakh of tax per month through outward taxable supplies to registered recipients.[cite: 44]
Registration under the scheme is granted electronically within three working days, subject to the applicable conditions.[cite: 44]
Applicants must apply in REG-01, opt for Aadhaar authentication and select Rule 14A.[cite: 44]
They cannot declare outward taxable supplies to registered persons involving tax exceeding 2.5 lakh in a month.[cite: 44]
A person cannot obtain more than one Rule 14A registration in the same State/UT on the same PΑΝ.[cite: 44]
To withdraw from the scheme and obtain normal registration, the taxpayer must file FORM GST REG-32, after filing all returns due up to the application date and having filed at least one tax-period return after obtaining Rule 14A registration.[cite: 44]
After approval, the taxpayer becomes a regular taxpayer and is no longer subject to Rule 14A restrictions.[cite: 44]

13. Other FAQs and annexures

The circular includes FAQs explaining mandatory registration categories, registration forms, other relevant forms, application timelines, premises documentation and special situations.[cite: 44]
It explains that separate registrations may be obtained for multiple places of business or business verticals in the same State/UT, subject to the applicable legal conditions.[cite: 44]
It provides specific guidance for premises owned by relatives, rented premises, co-working spaces, SEZ units and premises inherited from deceased ancestors.[cite: 44]
The annexures include a checklist of registration information/documents, premises-related document guidance, and prescribed formats for relevant undertakings, consent letters and affidavits.[cite: 44]
Applicants should refer to the complete annexures when preparing their application, as the requirements differ according to business constitution and premises status.[cite: 44]

Practical implication: Before filing or replying to a GST registration query, verify the legal name, business constitution, promoters, authorised signatory, exact premises address, jurisdiction and supporting documents. The circular seeks to reduce avoidable REG-03 notices and registration rejections.[cite: 44]

Circular No. 258/04/2026-GST

Subject: Demand, adjudication and appeal proceedings under the CGST Act, 2017 | 18 pages[cite: 45]

1. Purpose and guiding principles

The circular establishes a uniform framework for officers conducting adjudication and appeal proceedings.[cite: 45]
Orders must consider the taxpayer's submissions, supporting evidence, applicable statutory provisions and relevant judicial decisions.[cite: 45]
Adjudicating and appellate authorities must independently apply their minds to the issues and record clear findings on each material issue.[cite: 45]
Vague, non-speaking or unreasoned orders can result in unnecessary litigation, remand or reversal.[cite: 45]
Proceedings must comply with the principles of natural justice and give the taxpayer a fair opportunity to present their case.[cite: 45]

2. Pre-show-cause notice intimation

Under Rule 142(1A), a pre-SCN intimation in Part A of FORM GST DRC-01A may, wherever feasible, be issued before a formal show-cause notice.[cite: 45]
It provides the taxpayer an opportunity to clarify the proposed liability and may promote voluntary compliance.[cite: 45]
The objective is to resolve issues at an early stage and reduce unnecessary formal proceedings.[cite: 45]

3. Issuance and contents of show-cause notices

A show-cause notice may be issued where the department proposes action affecting a taxpayer, including tax determination, refund rejection, recovery of erroneous refunds or registration-related action.[cite: 45]
The notice must specify the alleged contraventions and provide a meaningful opportunity to respond.[cite: 45]
The relevant statutory summaries must be uploaded electronically in FORM GST DRC-01 or FORM GST DRC-02, as applicable.[cite: 45]
A properly drafted SCN should contain:[cite: 45]
- Taxpayer identity, GSTIN/Temporary ID, registration status, address, jurisdiction and relevant tax period.[cite: 45]
- Background and reason for initiating proceedings.[cite: 45]
- Objective factual findings and discussion of documents and evidence.[cite: 45]
- The relevant legal provisions and how the alleged conduct violates them.[cite: 45]
- Clear charges, with the role of each noticee identified separately where multiple persons are involved.[cite: 45]
- Quantification of the proposed demand and its basis, preferably financial-year-wise where multiple years are involved.[cite: 45]
- Interest proposals drafted appropriately where the amount depends on the actual date of payment.[cite: 45]
- The adjudicating authority, reply deadline and consequences of non-compliance.[cite: 45]
A notice should not merely reproduce statutory provisions without explaining the facts and grounds of the proposed action.[cite: 46]

4. Fraud, wilful misstatement and suppression of facts

Invoking Section 74 or the relevant fraud-related provisions of Section 74A requires specific factual and evidentiary grounds.[cite: 46]
Merely using the expressions "fraud", "wilful misstatement" or "suppression of facts" is insufficient.[cite: 46]
The notice must disclose the material facts and circumstances supporting the allegation of intent to evade tax.[cite: 46]
A simple discrepancy or non-payment of tax does not automatically establish fraud or deliberate suppression.[cite: 46]
An incorrect statement is not necessarily a wilful misstatement unless it was knowingly made with knowledge of its inaccuracy.[cite: 46]
Mere omission is not suppression unless the circumstances establish deliberate concealment or the required intent.[cite: 46]
Scrutiny proceedings should not automatically be converted into fraud-related proceedings merely because a discrepancy is detected.[cite: 46]
Where subsequent notices concern the same facts and grounds as an earlier fraud-related notice, a second notice generally should not invoke the same extended grounds without new and independent grounds.[cite: 46]
The circular discusses the relevant judicial decisions, including G.R. Infra Project Ltd. v. State of Madhya Pradesh and Sriba Nirman Company v. Commissioner (Appeals).[cite: 46]

5. Demands involving Sections 73, 74 and 74A

Section 73 deals with cases not involving fraud, wilful misstatement or suppression; Section 74 concerns such fraud-related cases.[cite: 46]
Where an SCN proposes demands under both Sections 73 and 74, it should clearly distinguish the factual and legal grounds and quantify each category separately.[cite: 46]
Section 74A applies from FY 2024-25 onwards and provides a common 42-month notice timeline from the due date of the annual return.[cite: 46]
For FY 2024-25 onwards, if different sets of facts involve both fraudulent and non-fraudulent allegations, the notice should separately explain the charges, grounds and quantified demand for each category.[cite: 46]

6. Parallel proceedings and timely notices

Section 6 restricts parallel proceedings by Central and State/UT tax officers on the same subject matter where proceedings have already been initiated by the other jurisdictional authority.[cite: 46]
CGST and SGST authorities should coordinate to prevent duplicate proceedings and inconsistent decisions.[cite: 46]
Notices should, as far as practicable, be issued sufficiently before the statutory deadline rather than at the last minute.[cite: 46]
This provides taxpayers adequate time to respond and allows adjudication to be completed within the statutory period.[cite: 46]

7. Service of notices and natural justice

Notices must be served through the prescribed modes under Section 169, including applicable personal delivery, post/courier, registered email or availability on the common portal.[cite: 47]
Demand summaries must also be uploaded in DRC-01 as required by the Rules.[cite: 47]
Taxpayers must receive a meaningful opportunity to reply and present relevant material.[cite: 47]
The adjudicating authority must consider the reply, documents and evidence rather than mechanically confirm the proposed demand.[cite: 47]
Where a personal hearing is legally required, the prescribed opportunity must be provided.[cite: 47]
Orders should demonstrate that the taxpayer's material arguments and evidence were considered.[cite: 47]

8. Adjudication orders and appellate orders

Orders should identify the issues requiring determination and set out the facts, taxpayer's submissions, legal provisions and evidence.[cite: 47]
Each material issue should be decided through a clear, reasoned finding.[cite: 47]
The authority should explain why submissions or evidence are accepted or rejected.[cite: 47]
The order must distinguish the allegations in the SCN from the findings actually established.[cite: 47]
The confirmed demand, tax period, tax, interest and penalty should be stated clearly.[cite: 47]
An order should not travel beyond the grounds and scope of the notice in a manner inconsistent with law.[cite: 47]
Appellate authorities should independently examine the grounds of appeal and the material on record, rather than simply endorse the original order.[cite: 47]
Where cross-appeals by the taxpayer and department concern the same impugned order, the appeals should be processed together and disposed of through a common composite order where applicable.[cite: 47]
The summary of an appellate order under Section 107(11) should be issued in FORM GST APL-04, clearly showing the final demand confirmed.[cite: 47]
The circular also provides guidance on the treatment of remand matters and the need for reasoned decisions.[cite: 47]

9. Nature of the guidelines

The guidelines are intended to improve consistency, transparency, quality of decision-making and compliance with natural justice.[cite: 47]
They are illustrative and non-exhaustive.[cite: 47]
The circular specifically states that the guidelines should not be cited by proper officers as the basis of show-cause notices, final orders or appellate orders.[cite: 47]
Any implementation difficulties should be brought to the Board's notice.[cite: 47]

Practical implication: When replying to an SCN, check whether the allegations, legal provisions, evidence and demand calculations are clearly specified. When challenging an order, examine whether the authority addressed the taxpayer's submissions and gave reasoned findings on each material issue.[cite: 47]

Circular No. 259/05/2026-GST

Subject: Pre-deposit under Sections 107(6) and 112(8) of the CGST Act | 5 pages[cite: 48]

1. Purpose of the circular

The circular clarifies how the mandatory pre-deposit for filing appeals under Section 107 or Section 112 is to be calculated and treated.[cite: 48]
It addresses differing interpretations regarding the amount payable for admission of appeals and the treatment of the pre-deposit when an appeal is decided or remanded.[cite: 48]

2. Pre-deposit for appeal before the Appellate Authority

Under Section 107(6), an appellant must pay:[cite: 48]
- The full amount of tax, interest, fine, fee and penalty admitted by the appellant; and[cite: 48]
- 10% of the remaining disputed tax, subject to the applicable statutory maximum.[cite: 48]
The admitted liability and disputed liability must be distinguished when determining the amount payable.[cite: 48]
The mandatory pre-deposit relates to the disputed tax component, rather than automatically being calculated on the entire disputed demand including interest and penalty.[cite: 48]
The applicable statutory ceiling must be observed.[cite: 48]

3. Pre-deposit for appeal before the Appellate Tribunal

Section 112(8) prescribes the payment requirements for an appeal before the Appellate Tribunal.[cite: 48]
The appellant must pay the admitted amount of tax, interest, fine, fee and penalty, along with the prescribed percentage of disputed tax as pre-deposit.[cite: 48]
The amount already deposited at the first appellate stage must be considered while determining the further pre-deposit payable at the Tribunal stage, in accordance with the statutory provisions and the clarification in the circular.[cite: 48]
The appellant should calculate the further amount after taking into account the relevant statutory percentage, the amount already paid and the applicable monetary ceiling.[cite: 48]

4. Where the dispute involves tax, interest and penalty

The pre-deposit should be calculated by identifying the disputed tax component separately from interest, fine, fee and penalty.[cite: 48]
The admitted portion must be paid in full as prescribed by the relevant appeal provision.[cite: 48]
The pre-deposit requirement is distinct from the full payment of admitted liabilities.[cite: 48]
The relevant appeal provision and the nature of the order should be examined before calculating the amount.[cite: 48]

5. Effect of an appellate decision or remand

The circular clarifies the treatment of pre-deposit when the appeal is decided by the appellate authority or the matter is remanded for fresh adjudication.[cite: 49]
Where a matter is remanded, the pre-deposit is to be dealt with in accordance with the outcome and the applicable statutory provisions.[cite: 49]
If the tax demand is ultimately upheld, the pre-deposit is to be adjusted as prescribed; it is not to be treated as an independent payment over and above the confirmed liability without considering the applicable adjustment rules.[cite: 49]
Refund or adjustment of pre-deposit must be considered in light of the final appellate outcome and applicable interest provisions.[cite: 49]

Practical implication: Before filing an appeal, prepare a calculation separating admitted tax, disputed tax, admitted interest/penalty and the pre-deposit already paid. Verify the applicable ceiling and any amount deposited at the previous appellate stage.[cite: 49]

Circular No. 260/06/2026-GST

Subject: Clarification on issues pertaining to Input Service Distributor (ISD) | 10 pages[cite: 49]

1. Requirement of separate ISD registration

The circular clarifies the application of Sections 2(61), 20 and 25 of the CGST Act and Rules 39 and 54(1A) of the CGST Rules.[cite: 49]
Where separate GST registrations have been obtained for different business verticals or places of business within a State/UT, each registration is treated as a distinct person under the Act.[cite: 49]
There is no general prohibition against obtaining more than one ISD registration in the same State/UT.[cite: 49]
Each registered person receiving input service invoices for or on behalf of distinct persons, and required to distribute the related ITC, must obtain the appropriate ISD registration.[cite: 49]
The requirement is linked to the distinct registered person receiving the invoices and distributing the credit, rather than merely to the number of States in which the business operates.[cite: 49]

2. Distribution of credit where multiple registrations exist

An ISD distributes eligible ITC attributable to input services received for or on behalf of distinct persons.[cite: 49]
The distribution must comply with Section 20 and Rule 39.[cite: 49]
The credit should be distributed to the relevant recipient registrations in the prescribed manner.[cite: 49]
Where a service relates to more than one recipient, the applicable allocation and distribution rules must be followed.[cite: 49]
The existence of multiple registrations does not permit credit to be distributed arbitrarily or without regard to the prescribed allocation mechanism.[cite: 49]
The ISD must maintain the relevant invoice and distribution documentation.[cite: 49]

3. Condition relating to distribution of credit

The circular explains the statutory condition under Section 20(2) concerning the distribution of credit.[cite: 50]
Distribution must be supported by the prescribed documentation and must comply with the applicable restrictions and conditions.[cite: 50]
The ISD should ensure that the tax attributable to each recipient is distributed in accordance with the statutory framework.[cite: 50]
Credit that is not eligible for distribution cannot be made eligible merely because it is passed through the ISD mechanism.[cite: 50]

4. Input services liable to reverse charge

The ISD definition includes invoices for input services liable to tax under reverse charge.[cite: 50]
Such invoices must be considered in accordance with the applicable ISD provisions and the prescribed treatment of the relevant tax.[cite: 50]
The taxpayer should distinguish the receipt of the service, payment of the reverse-charge liability and subsequent distribution of eligible ITC.[cite: 50]
The circular's clarification should be applied along with the specific statutory provisions governing reverse-charge supplies and ITC eligibility.[cite: 50]

5. ISD invoices, credit notes and debit notes

Rule 54(1A) prescribes the documentation for the ISD's distribution of credit.[cite: 50]
The relevant invoice, credit note or debit note must be issued in the prescribed manner.[cite: 50]
Where credit distributed earlier requires adjustment through a credit note or debit note, the adjustment must follow the applicable provisions.[cite: 50]
The documentation should identify the recipient registration and the amount of credit being distributed or adjusted.[cite: 50]
The ISD must ensure that the prescribed particulars are reflected in the relevant records and returns.[cite: 50]

6. Credit notes and debit notes relating to previously distributed credit

The circular clarifies the treatment of credit notes and debit notes in the ISD framework.[cite: 50]
Where the amount of credit distributed requires adjustment, the relevant adjustment must be made in accordance with the applicable ISD provisions.[cite: 50]
The adjustment should be attributable to the relevant recipient and supported by the prescribed document.[cite: 50]
The same amount should not be distributed or adjusted inconsistently across multiple recipient registrations.[cite: 50]

7. Compliance implications

Businesses with multiple GST registrations should review which registration receives common input service invoices.[cite: 50]
They should determine which registered person is required to operate as the ISD.[cite: 50]
Common input service expenses should be classified between services attributable to particular registrations and those requiring allocation.[cite: 51]
ISD documentation and credit distribution must be reconciled with the relevant returns.[cite: 51]
Businesses should review existing arrangements to ensure that the correct registration is distributing credit under the applicable ISD provisions.[cite: 51]

Practical implication: Companies with head offices, branches, factories or multiple GSTINS should review their common service invoices, identify the appropriate ISD registration(s), and verify that credit distribution and documentation comply with Section 20 and Rule 39.[cite: 51]

Circular No. 261/07/2026-GST

Subject: Input tax credit under Section 17(4) for banking companies and financial institutions | 8 pages[cite: 51]

1. Purpose and scope

The circular addresses inconsistent practices among banking companies, financial institutions and non-banking financial companies (NBFCs) regarding the 50% ITC option under Section 17(4).[cite: 51]
Section 17(4) provides an alternative to the normal proportionate-credit method under Section 17(2) for eligible entities engaged in accepting deposits or extending loans and advances.[cite: 51]
The clarification concerns the scope of the option, eligible credit, treatment of credit relating to inputs and input services, and the manner of determining the amount to be retained or reversed.[cite: 51]

2. Which registrations can opt for Section 17(4)?

A banking company or financial institution may have several GST registrations, each treated as a distinct person.[cite: 51]
A registration that is not engaged in accepting deposits or extending loans or advances does not have the option and is not required to comply with Section 17(4).[cite: 51]
The circular gives an example of a registration engaged exclusively in bullion trading.[cite: 51]
A registration engaged in the specified banking or financial activities may opt for the Section 17(4) method, subject to the applicable conditions.[cite: 51]
The option is considered at the registration level; one registration's business activities do not automatically make every other registration eligible.[cite: 51]
Where one registration carries out both qualifying financial activities and other business activities, the relevant provisions must be applied to that registration based on its actual activities.[cite: 51]

3. Relationship with the second proviso to Section 17(4)

The circular clarifies the application of the second proviso to Section 17(4).[cite: 51]
Banking companies and financial institutions must examine the relevant statutory conditions and the consequences of opting for the special method.[cite: 51]
The treatment should be applied consistently with the prescribed rules rather than through an ad hoc allocation of credit.[cite: 52]

4. Correct manner of calculating eligible ITC

The circular clarifies the method for determining the ITC eligible to be considered under Section 17(4).[cite: 52]
The taxpayer must identify the eligible ITC from the relevant amount of credit.[cite: 52]
Credit relating to inputs and input services, including the relevant categories specified in the clarification, must be considered in accordance with the prescribed calculation.[cite: 52]
The amount that cannot be availed or retained must be excluded or reversed as applicable.[cite: 52]
Credit that is not otherwise eligible under the Act does not become eligible merely because the taxpayer uses the 50% method.[cite: 52]
The calculation must distinguish eligible ITC from credit that is blocked, ineligible or otherwise restricted.[cite: 52]

5. Treatment of system-generated ITC and reconciliation

The circular addresses differences between credit reflected in the system-generated records and the amount of ITC that may be considered for the special method.[cite: 52]
Taxpayers have an option to accept or reject the relevant auto-populated amount, as explained in the circular.[cite: 52]
Amounts requiring clarification or reconciliation must be kept pending until the prescribed verification is completed.[cite: 52]
The eligible amount must then be determined after considering the relevant credit, including amounts requiring reconciliation.[cite: 52]
The treatment must avoid including credit that is ineligible or counting the same credit more than once.[cite: 52]
Records should support the amount retained, excluded, reversed or subsequently availed.[cite: 52]

6. Practical compliance for banks and NBFCs

Each GST registration should assess its own business activities and eligibility for Section 17(4).[cite: 52]
Registrations engaged in qualifying lending/deposit-taking activities should review their ITC methodology.[cite: 52]
Registrations not engaged in the specified activities should not apply the special 50% method merely because another registration of the same entity is a bank or NBFC.[cite: 52]
Credit computations should be reconciled with system-generated information and the relevant accounting records.[cite: 52]
The taxpayer should preserve the working papers and supporting documentation for the ITC calculation and any reversal or adjustment.[cite: 52]

Practical implication: Banks and NBFCs should examine eligibility GSTIN-wise. The 50% method is not a blanket election for every registration of the same legal entity, and it does not override the general rules governing ITC eligibility.[cite: 52]

Circular No. 262/08/2026-GST

Subject: ITC on demo vehicles used by authorised agents of motor vehicle manufacturers | 3 pages[cite: 53]

1. Background

Circular No. 231/25/2024-GST dated 10 September 2024 had clarified the availability of ITC on demo vehicles used for test drives.[cite: 53]
Under paragraph 4.6 of that earlier circular, ITC was blocked in the dealer-agency model where the authorised dealer acted only as an agent or service provider to the manufacturer.[cite: 53]
Representations were received seeking reconsideration of this distinction between the dealer-agency model and the traditional dealership model.[cite: 53]

2. Relevant restriction under Section 17(5)

Section 17(5)(a) generally blocks ITC on motor vehicles for transporting persons having an approved seating capacity of not more than 13 persons, including the driver.[cite: 53]
The restriction does not apply in the specified cases, including where the vehicles are used for:[cite: 53]
- Further supply of such motor vehicles.[cite: 53]
- Transportation of passengers.[cite: 53]
- Imparting training on driving such motor vehicles.[cite: 53]

3. Difference between the two business models

Traditional dealership model: The dealer purchases vehicles and sells them to customers on its own account. Some vehicles are used as demo vehicles to promote sales.[cite: 53]
Dealer-agency model: The dealer purchases demo vehicles for test drives, but the actual sale of vehicles to customers is made directly by the original equipment manufacturer (OEM). The dealer principally provides marketing or facilitation services.[cite: 53]
In both models, demo vehicles provide prospective customers with the opportunity to experience the vehicle before purchasing it.[cite: 53]
In both cases, the vehicles are purchased from manufacturers against tax invoices and are generally recorded as capital assets in the dealer's books.[cite: 53]
Demo vehicles are generally retained for the required period and subsequently sold at written-down value, with applicable GST being paid on the subsequent sale.[cite: 53]
The circular notes that the treatment of these vehicles under the Central Motor Vehicle Rules, 1989, is also relevant to understanding their comparable nature.[cite: 53]

4. Interpretation of "such motor vehicles"

The expression "such motor vehicles" in Section 17(5)(a)(A) is significant.[cite: 53]
It indicates that the exception can cover vehicles used to facilitate further supply of similar motor vehicles, and is not necessarily limited to the very vehicle that is ultimately sold to a customer.[cite: 54]
Demo vehicles in both business models serve the same commercial purpose of promoting the further supply of motor vehicles.[cite: 54]
Denying ITC to dealers operating under the agency model, while allowing it under the traditional model, would create an unjustified difference in treatment between comparable activities.[cite: 54]

5. Final clarification

ITC on demo vehicles is not blocked under Section 17(5)(a) in the dealer-agency model, subject to the applicable provisions of the Act.[cite: 54]
Paragraph 4.6 of Circular No. 231/25/2024-GST dated 10 September 2024 is expressly withdrawn.[cite: 54]
The circular directs that suitable trade notices be issued to publicise the clarification.[cite: 54]
Any difficulty in implementation should be brought to the Board's notice.[cite: 54]

Practical implication: Authorised motor vehicle dealers operating under the agency model can claim ITC on eligible demo vehicles used for test drives, subject to the applicable ITC conditions. The earlier clarification denying such ITC has been withdrawn.[cite: 54]

Circular No. 263/09/2026-GST

Subject: Receipt of payment for export of goods or services | 4 pages[cite: 54]

1. Receipt of export proceeds for export of services

The circular clarifies when receipt of payment in Indian rupees can satisfy the export-of-services condition under Section 2(6)(iv) of the IGST Act.[cite: 54]
The clarification covers payments received through:[cite: 54]
- Convertible foreign exchange.[cite: 54]
- Repatriable Indian rupee accounts, including Special Non-Resident Rupee (SNRR) accounts.[cite: 54]
- INR Nostro accounts and corresponding Rupee Vostro arrangements.[cite: 54]
- Other similar accounts permitted for repatriation of foreign exchange.[cite: 54]
The circular refers to Circular No. 202/14/2023-GST dated 27 October 2023, which had addressed receipt of export proceeds in INR through Special Rupee Vostro Accounts.[cite: 54]
Under the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, export payments for countries other than Nepal, Bhutan and members of the Asian Clearing Union may be made in INR or foreign currency, subject to the applicable rules.[cite: 54]
Therefore, receipt of export proceeds in permitted repatriable INR accounts can satisfy the relevant payment condition for export of services, subject to the applicable legal requirements.[cite: 54]

2. Payments to stockbrokers providing services to overseas clients

Indian stockbrokers may provide services to overseas clients, including Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs) and Overseas Citizens of India (OCIs).[cite: 55]
Where the broker receives payment in INR through repatriable accounts such as SNRR or NRE accounts, the payment may satisfy the relevant condition under Section 2(6)(iv) of the IGST Act.[cite: 55]
Where payments are received through NRO accounts, they must be routed through permitted repatriable INR accounts, such as SNRR or NRE accounts, in accordance with RBI guidelines, to qualify under the clarification.[cite: 55]

3. Set-off of export receivables against import payables

Set-off transactions are recognised as a valid method of settlement under FEMA regulations, subject to RBI directions.[cite: 55]
The earlier framework allowed specified set-offs, including goods against goods and services against services, subject to prescribed conditions.[cite: 55]
The Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026, effective from 1 October 2026, changed the applicable framework for such transactions.[cite: 55]
Where export receivables are set off against import payables in accordance with the applicable RBI directions, the relevant payment condition under Section 2(6)(iv) of the IGST Act is considered fulfilled.[cite: 55]
The transaction must be a valid set-off under the applicable FEMA/RBI framework; an unsupported accounting adjustment alone is not sufficient.[cite: 55]

4. Net retention mechanism for reinsurance brokers

Indian reinsurance brokers may receive their commission through a net retention mechanism instead of a separate inward foreign-currency remittance.[cite: 55]
The commission for broking services provided to foreign reinsurers may be retained from the funds otherwise payable to the foreign reinsurer.[cite: 55]
Under FEMA regulations, the foreign reinsurer/broker is treated as having paid the commission by authorising the Indian broker to retain it before remitting the net premium abroad.[cite: 55]
Where the applicable FEMA conditions are fulfilled, the export proceeds realisation and repatriation obligation is treated as discharged through this mechanism.[cite: 55]
Accordingly, the payment condition under Section 2(6)(iv) of the IGST Act is considered satisfied.[cite: 55]

5. Realisation of export proceeds for export of goods

Rule 96B of the CGST Rules provides for recovery of refund amounts where export sale proceeds are not realised, wholly or partly, within the period prescribed under FEMA, including any extension granted.[cite: 55]
The amount liable to be recovered corresponds to the extent of non-realisation and is subject to applicable interest.[cite: 55]
Recovery is ordinarily required within 30 days after expiry of the prescribed or extended period.[cite: 55]
Rule 96B also recognises an exception where the realisation requirement has been written off by the Reserve Bank of India on merits.[cite: 55]
The circular clarifies that the time limit and amount of export proceeds to be realised are governed by FEMA provisions administered by the RBI.[cite: 56]
The relevant time limit is the period prescribed in RBI's FED Master Direction No. 16/2015-16 dated 1 January 2016, as last amended on 5 June 2026 and as amended from time to time.[cite: 56]
Where the Authorised Dealer (AD) Bank has written off the requirement of realisation, wholly or partly, recovery under Rule 96B must not be made to the extent covered by that write-off.[cite: 56]

6. Compliance implications for exporters

Exporters of services should retain evidence of receipt of proceeds through permitted foreign-currency or repatriable INR accounts.[cite: 56]
Where payment is received through NRO accounts, verify that the prescribed routing requirements are fulfilled.[cite: 56]
For set-off transactions, retain the supporting documentation demonstrating compliance with RBI directions.[cite: 56]
Reinsurance brokers using net retention should maintain evidence of the arrangement and its treatment under FEMA.[cite: 56]
Exporters of goods claiming refunds should monitor the realisation deadline under the applicable RBI directions and retain evidence of any approved extension or write-off.[cite: 56]

Practical implication: Export proceeds do not necessarily have to arrive as a conventional foreign-currency inward remittance. Permitted repatriable INR receipts, compliant set-offs and qualifying net retention arrangements can satisfy the relevant payment condition. Exporters must still comply with the applicable FEMA/RBI requirements.[cite: 56]

Circular No. 264/10/2026-GST

Subject: Retrospective effect of omission of Rule 96(10) of the CGST Rules | 2 pages[cite: 56]

1. Background and issue

Rule 96(10) was introduced with effect from 23 October 2017.[cite: 56]
Its objective was to prevent exporters from receiving a double benefit where they had availed specified exemptions or concessions on procurement and also claimed refunds of IGST paid on exports.[cite: 56]
Exporters faced difficulties obtaining refunds because of the restriction imposed by Rule 96(10).[cite: 56]
Following consideration by the GST Council at its 54th meeting on 9 September 2024, the provision was omitted through Notification No. 20/2024-Central Tax dated 8 October 2024.[cite: 56]
The omission was initially made effective prospectively from 8 October 2024.[cite: 56]
Questions arose about whether the omission should apply retrospectively to the date the rule originally came into effect, particularly in pending proceedings.[cite: 56]

2. Supreme Court judgment

The circular refers to the Supreme Court's order dated 6 August 2026 in M/s Goodluck India Limited & Anr. v. Union of India & Ors., Special Leave Petition (Civil) No. 24550 of 2025, along with connected matters.[cite: 57]
The Supreme Court held that, in the absence of a saving clause or sunset clause accompanying the omission of Rule 96(10), the omission applies to proceedings pending on the date of omission.[cite: 57]
The Court relied on the Constitution Bench judgment in Kolhapur Canesugar Works Ltd. v. Union of India, which held that Section 6 of the General Clauses Act, 1897 does not automatically apply to the omission of a rule.[cite: 57]
Pending proceedings can continue after omission only where there is an express provision preserving them or an applicable legal mechanism providing for their continuation.[cite: 57]

3. Final clarification by CBIC

The omission of Rule 96(10) is to be treated as effective retrospectively from 23 October 2017.[cite: 57]
Field formations must deal with pending proceedings concerning Rule 96(10) in accordance with the Supreme Court's judgment.[cite: 57]
The clarification is not limited to Rule 96(10): the circular states that the same treatment applies, mutatis mutandis, to the omission of Rules 89(4A) and 89(4B).[cite: 57]
The circular directs that suitable trade notices be issued to publicise the clarification.[cite: 57]
Any difficulty in implementation should be brought to the Board's notice.[cite: 57]

4. Practical implications for exporters

Exporters involved in pending proceedings relating to Rule 96(10) should review the status of their cases in light of the retrospective omission.[cite: 57]
Taxpayers should identify whether their matters concern pending proceedings, completed proceedings or refund claims requiring separate procedural consideration.[cite: 57]
Relevant refund applications, notices, orders and earlier correspondence should be examined to determine the appropriate next step.[cite: 57]
The circular provides the legal clarification on retrospective omission; the procedural relief available in an individual case will depend on its status and the applicable law.[cite: 57]

Practical implication: Rule 96(10) is treated as omitted retrospectively from 23 October 2017. This is particularly important for pending disputes concerning IGST refunds on exports where the earlier restriction was invoked. The same approach extends to the omitted Rules 89(4A) and 89(4B).[cite: 57]

Consolidated quick-reference table

Circular	Subject	Main takeaway
257/03/2026-GST	GST registration	Standardises application details, premises proof, authentication, query handling and Rule 14A guidance.[cite: 57]
258/04/2026-GST	Demand, adjudication and appeals	Requires properly reasoned notices and orders, clear evidence and compliance with natural justice.[cite: 57]
259/05/2026-GST	Appeal pre-deposit	Clarifies the pre-deposit requirements under Sections 107(6) and 112(8).[cite: 58]
260/06/2026-GST	Input Service Distributor	Clarifies ISD registration, credit distribution and related documentation.[cite: 58]
261/07/2026-GST	Section 17(4) ITC	Clarifies eligibility for the 50% ITC method for banks and financial institutions at the registration level.[cite: 58]
262/08/2026-GST	Demo vehicles	Withdraws the earlier restriction on ITC for eligible demo vehicles under the dealer-agency model.[cite: 58]
263/09/2026-GST	Export proceeds	Recognises permitted INR receipts, compliant set-offs and net retention arrangements, and clarifies Rule 96B.[cite: 58]
264/10/2026-GST	Omission of Rule 96(10)	Treats the omission retrospectively from 23 October 2017 and extends the approach to Rules 89(4A) and 89(4B).[cite: 58]

Note: These are summaries of the attached circulars, organised to preserve the principal clarifications and practical requirements. For a legal submission or a decision involving a particular taxpayer, the exact wording of the relevant circular, statutory provisions and applicable judicial directions should be checked.[cite: 58]

General