Introduction
On 26 October 2026, the Central Board of Indirect Taxes and Customs (CBIC) issued eight circulars (Nos. 257 to 264/2026-GST) in one stroke. Individually, each resolves a specific pain point. Together, they signal a clear direction: fewer procedural hurdles at entry, greater discipline on the Department in litigation, and relief where taxpayers’ cash is locked up.
Some of these circulars settle long-running disputes in the taxpayer’s favour. Others change what the Department must do before it can sustain a demand. Businesses that act on them early will protect credit, refunds and litigation positions. Those that do not may lose them.
Circular 257/03/2026-GST: Registration, with Guardrails on Officer Queries
The Board has issued an applicant-facing guide to FORM GST REG-01. It includes 51 FAQs, a constitution-wise document checklist and prescribed formats for an inheritance affidavit, a no-rent-agreement undertaking and a consent letter.
What matters most
- Officers are told what not to ask. Queries on an applicant’s residence being in another city or State, on Udyam certificates, on whether a premises is “suitable” for the stated activity, on whether an electricity connection is domestic or commercial, or on the size of a bill are discouraged. Utility bills and property tax receipts are to be checked only for name and address. For rent agreements, the officer checks validity, names of both parties and the exact address.
- Deficiencies must be raised through FORM GST REG-03. The applicant has seven working days to reply in REG-04, and the officer must then decide within seven working days. Inaction results in deemed approval under rule 9.
- Seven working days where Aadhaar authentication is completed; thirty days where it is not, or where physical verification is triggered. Registration under rule 14A (the simplified scheme for small suppliers passing on ITC below ₹2.5 lakh a month) is granted automatically within three working days.
- Premises documents are now clearly mapped to the nature of possession: owned, rented (registered or unregistered), consent-based, co-working, inherited and SEZ premises. A premises held by parents, spouse or a partner or director cannot be declared as “own”. It must be declared on a consent basis.
- Practical clarifications. A Udyam certificate is neither required nor accepted as proof of premises. Bank details are not mandatory at the application stage but must be furnished within thirty days of registration or before filing GSTR-1, whichever is earlier. Separate registration is mandatory for an SEZ unit even where a non-SEZ GSTIN exists in the same State.
- Grievance route. Delay or unwarranted queries can be escalated to the jurisdictional Chief Commissioner or State Commissioner.
This is a useful stick against arbitrary rejections. Where an application has been queried on a ground the Circular now discourages, the taxpayer has a documented basis to push back.
Circular 258/04/2026-GST: The Show Cause Notice Is the Whole Case
This is the most consequential circular of the set for litigation. It lays down detailed expectations for show cause notices (SCNs), personal hearings, adjudication orders, rectification and first appeals.
Key positions
- A notice must carry its own case. Relying on the Supreme Court’s decision in G.R. Infra Project Ltd. v. State of Madhya Pradesh (19.08.2026), the Board accepts that the requirements for a valid notice must appear in the notice itself, and that deficiencies cannot be cured later.
- Fraud, wilful misstatement or suppression cannot be invoked mechanically. Section 74 or 74A(5)(ii) requires specific material showing intent to evade tax, set out in the SCN. Non-payment alone, or a discrepancy found in scrutiny, is not enough. Where this is not established, the demand must be confined to section 73 or 74A(5)(i).
- Mixed demands must be separated by ground and quantum. A second notice on the same facts for a later period should ordinarily be under the non-fraud provisions.
- No parallel proceedings by CGST and State authorities on the same subject matter (section 6).
- Hearings. Virtual hearings are encouraged, records of each hearing must be maintained and reflected in the order, and a fresh hearing is needed if the adjudicating officer changes.
- Speaking orders. Generic recitals such as “reply has been considered” are discouraged. Each submission and each case law cited must be addressed, with reasons for acceptance or rejection.
- No demand beyond the SCN (section 75(7)). Tax, interest and penalty must be quantified issue-wise and year-wise, and penalty must be separately justified.
- Rectification under section 161 is limited to errors apparent on the face of the record, and only the issuing authority can rectify.
- Appeals. Limitation is a preliminary issue. Delay beyond the condonable period is not to be heard on merits. Additional grounds and additional evidence are admitted on limited conditions, with reasons recorded. Cross-appeals are to be decided together by a common order.
- AI tools. Any AI-generated input used in adjudication must be independently verified. Responsibility for the order remains with the officer.
A caveat the Board itself adds. The guidelines are expressly illustrative and may not be cited by officers in SCNs or orders. Taxpayers and their counsel, however, can and should rely on them as the Department’s own stated standard.
Every pending SCN should now be re-read against this checklist. Notices that plead “fraud or suppression” in bare terms, quantify nothing or mix grounds are open to challenge.
Circular 259/05/2026-GST: Pre-Deposit, Finally Settled
Varying field interpretations on pre-deposit have been put to rest.
- “Admitted amount” is what the taxpayer accepts and does not challenge. It must be paid in full. “Tax in dispute” is the contested portion, and 10% of it is the pre-deposit. The taxpayer makes this election at the time of filing (Table 14 of APL-01; Table 20 of APL-05).
- For the Tribunal, the 10% is computed on the tax still in dispute out of the liability confirmed by the Appellate Authority, in addition to the amount already paid at the first appeal.
- Refund does not require the order to say so. It is claimed in RFD-01 under serial number 7 (“on account of order”).
- A Departmental appeal is no ground to withhold refund unless the favourable order is stayed by the Tribunal or a Court.
- Interest under section 115 runs separately from the actual date of payment at each appellate level.
- On remand, the refund is due. On partial remand, the confirmed portion, with interest, is adjusted first and only the balance is refunded.
Clients with favourable appellate orders and pre-deposits still on the Department’s books should file refund claims now. Rejection merely because the Department “intends to appeal” is contrary to this Circular.
Circular 260/06/2026-GST: Input Service Distributors
Seven clarifications, with these taking priority:
- More than one ISD registration is permitted in a State for separate verticals or places of business that hold separate registrations. Each registrant receiving input service invoices for distinct persons must register as an ISD.
- Eligibility under sections 16 and 17 is the recipient’s responsibility. The ISD distributes in accordance with section 20, and the recipient makes the reversals under sections 17(1), 17(2) and 17(4). Excess or irregular distribution attracts recovery from recipients (section 21) and penalty on the ISD (section 122(1)(ix)).
- Timing. Credit is to be distributed in the month in which the ISD ascertains it to be prima facie eligible, not merely the month the invoice appears in GSTR-6A. Eligible and ineligible credit must be distributed separately.
- Rule 54(1A) documents (credit transfer by a same-PAN, same-State registrant to the ISD) are a transfer mechanism only. They are excluded from “turnover in State”, from “adjusted total turnover” for refunds and from “Net ITC” in the refund formula, and no reversals arise in the hands of the transferor on that credit.
Groups with centralised procurement should review their ISD architecture and month-end distribution cut-offs. The turnover and refund-formula exclusions are a favourable outcome for exporters using rule 54(1A).
Circular 261/07/2026-GST: Section 17(4) for Banks and NBFCs
- Scope. A registration that does not supply deposits, loans or advances services (for example, one engaged solely in bullion trading) neither has the option nor is required to follow section 17(4).
- All-or-nothing. If one eligible registration of the entity opts for section 17(4), all eligible registrations of that entity must follow it.
- Second proviso relaxation. The relaxation from the 50% restriction applies only to supplies from a same-PAN registrant who has also opted for section 17(4).
- GSTR-3B reporting. The Circular prescribes the table-wise manner of availment and reversal, both where the Invoice Management System (IMS) is not used and where it is. ITC that is not yet eligible should be temporarily reversed in Table 4(B)(2) (or kept pending on IMS) and later reclaimed within the section 16(4) time limit.
- Past periods. Field officers are directed not to take an adverse view of a different reporting methodology for earlier periods, provided the ITC availed is consistent with the principles in the Circular.
The protection for past reporting practices is valuable. Financial entities should reconcile historical 3B positions against the stated principles before any audit or notice arrives.
Circular 262/08/2026-GST: ITC on Demo Vehicles in the Dealer-Agency Model
The Board has withdrawn paragraph 4.6 of Circular 231/25/2024-GST, which had denied ITC on demo vehicles to dealers acting as agents of manufacturers. ITC on such demo vehicles is now clarified as not blocked under section 17(5)(a). The reasoning: demo vehicles serve the same purpose under both the traditional and the agency model, and the words “such motor vehicles” in section 17(5)(a)(A) cover vehicles used to further the supply of similar vehicles.
Dealers who reversed or did not claim credit on demo vehicles on the basis of the 2024 clarification should examine refund or re-availment options, subject to the time limit in section 16(4) and the other conditions of the Act.
Circular 263/09/2026-GST: Realisation of Export Proceeds
This is a welcome easing for service exporters, and it also clarifies recovery under rule 96B for goods.
- Services. Receipt in convertible foreign exchange or in repatriable INR accounts (SNRR, INR Nostro and similar) satisfies the “payment received” condition in section 2(6)(iv) of the IGST Act.
- Stockbrokers serving FPIs, NRIs and OCIs: receipts through SNRR or NRE accounts qualify. NRO receipts qualify if routed through a repatriable account.
- Set-off of export receivables against import payables is accepted where it is in accordance with RBI directions. The Board notes that the new FEMA (Export and Import of Goods and Services) Regulations, 2026, from 1 October 2026, remove the earlier like-for-like restrictions.
- Reinsurance brokers retaining commission from funds before remitting net premium: the condition is treated as satisfied.
- Goods. For rule 96B, the realisation period is as prescribed under RBI’s Master Direction No. 16/2015-16 (as amended), including extensions. No recovery of refund where the AD bank has written off the realisation requirement, wholly or partly.
Many export-of-service refund and zero-rating claims were held up on the mode of receipt. These should be revisited.
Circular 264/10/2026-GST: Rule 96(10) Omission Operates Retrospectively
Following the Supreme Court’s judgment of 6 August 2026 in Goodluck India Limited v. Union of India, the Board accepts that the omission of rule 96(10) (effective 8 October 2024) takes effect retrospectively from 23 October 2017. Field formations must deal with pending proceedings accordingly. The same treatment applies, with necessary changes, to the omission of rules 89(4A) and 89(4B).
The relief is for pending proceedings. Exporters with pending refund claims, show cause notices or appeals involving these rules should move promptly to bring this Circular and the judgment on record. Closed or finally decided matters will turn on their own facts.
AMLEGALS Remarks
These circulars give effect to the part of the 57th GST Council’s recommendations (08.10.2026) that can be delivered by administrative clarification alone. That is why they can be implemented immediately, and it is also why they should be read for what they leave out. The larger reforms the Council recommended, including the omission of section 69, the higher prosecution threshold, the ₹10,000 floor for show cause notices, the ₹40 crore cap on pre-deposit for penalty-only orders and the extension of inverted duty refunds to input services and capital goods, still need amendments to the Act, the Rules or notifications. Until those are notified, they remain recommendations.
Two further points deserve attention. First, circulars under section 168(1) bind the Department, not the courts, so a favourable circular strengthens a taxpayer’s hand but does not replace a well-pleaded reply or appeal. Second, Circular 258’s own caution that officers may not cite it in their notices and orders does not stop taxpayers from holding the Department to the standards it has set for itself. The prudent course is to use these circulars now: file the refund claims, test the pending notices against the new standards, and correct historical positions on ISD and section 17(4) before the next audit cycle. The direction is clear. What remains to be seen is how uniformly it is applied in the field.
For any queries or feedback, feel free to connect with Dhwani.tandon@amlegals.com