Budget 2026 – 7 Key GST Changes Every Business Should Know
The Union Budget 2026 has proposed targeted changes to India’s GST law that can meaningfully impact pricing, discounts, exports and working capital. Below is a practical summary from AMD & Co., Chartered Accountants, Mumbai, focused on what CFOs and promoters should act on now.
1. Post-supply discounts finally aligned with commercial reality
Section 15(3)(b) of the CGST Act is being amended so that common commercial discounts are easier to reflect in GST:
- No pre-agreement condition – discounts need not be in a written contract signed before supply.
- No rigid invoice linkage – year-end or volume discounts need not be mapped invoice-wise.
- Credit note + ITC reversal framework – supplier issues a credit note under Section 34 and the recipient reverses proportionate ITC.
This change is especially relevant for FMCG, pharma, distribution and consumer businesses that run complex scheme structures.
2. Stronger link between valuation and credit notes
Section 34 is being aligned with Section 15 so that post-supply discounts are an explicit ground for issuing credit notes. For businesses, this means:
- Discount schemes, credit notes and ITC reversal workings must reconcile.
- Documentation around approvals and calculations will be a key audit focus.
3. Faster refunds under inverted duty structure
A risk-based mechanism is being rolled out to allow 90% provisional refunds for inverted duty structure cases on the lines of exports. This directly eases working capital pain for manufacturers and exporters with higher input tax than output tax.
4. Relief for smaller exporters
Thresholds that earlier restricted small-value export refunds are being relaxed, so even smaller exporters can access legitimate refunds where taxes have actually been paid. This is a good time to recheck export documentation quality.
5. Intermediary services can qualify as exports
Budget 2026 proposes to omit the special place-of-supply rule for intermediary services. In many cross-border cases, this will allow Indian intermediaries to treat services to foreign clients as exports:
- Place of supply shifts to the recipient’s location.
- Zero-rating becomes available with ITC refunds.
- IT/ITES, marketing support and sourcing agents gain a level playing field against overseas competitors.
6. Mandatory ISD registration from 1 April 2025
Businesses with multiple registrations under the same PAN will be required to distribute common input services only through the Input Service Distributor (ISD) route.
- Cross-charging third-party services will no longer be acceptable.
- Head office costs like rent, software, audit fees and advertising will have to be routed via monthly GSTR-6 filings.
- Incorrect handling risks ITC denial and penalties.
7. Compliance and data quality expectations are rising
With revised return formats, risk-based refunds and data triangulation across GST, TDS and income tax, quality of data in your ERP and returns is central.
- Reconcile GSTR-2B, purchase registers and books every month.
- Strengthen documentation around discounts, credit notes and approvals.
- Use dashboards to monitor refund cycles, scrutiny notices and trends.