The Union Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman presented the Union Budget 2025-26 in Parliament, today i.e. February 01, 2026. Majorly the changes were earlier recommended by the GST Council in its 56th GST Council Meeting held in September 2025. The key highlights of the proposed changes under GST Law are as follows:
The Key Highlights of the Budget relates to:
A. Amendment to Section 15(3) : Valuation of Supply – Post-Sale Discounts
Section 15(3)(b) is proposed to be substituted to allow exclusion of post-supply discounts from the value of supply without requiring any prior agreement, subject to:
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Issuance of a credit note by the supplier, and
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Proportionate reversal of ITC by the recipient, in accordance with section 34.
Comments – A significant proposed amendment clarifies the treatment of discounts for valuation purposes. Previously, the conditions for excluding discounts from the value of supply after it was effected were subject to interpretation. The proposed amendment in revised clause (b) of sub-section (3) of section 15 specifies that post-supply discounts will only be excluded if a credit note has been issued by the supplier, AND the recipient of the supply has reversed the input tax credit (ITC) attributable to such discount, in accordance with section 34.
B. Amendment to Section 34 of the CGST Act – Credit Notes
Section 34(1) is proposed to expressly include post-sale discounts referred to in section 15(3)(b) as a ground for issuance of credit notes.
Specifically, sub-section (1) of section 34 now proposed to explicitly includes cases “where a discount referred to in clause (b) of sub-section (3) of section 15 is given.” This proposed modification directly addresses the issuance of credit notes in scenarios involving discounts.
C. Amendment to Section 54 of the CGST Act – Refund Provisions
(a) Section 54(6): Provisional Refund for Inverted Duty Structure –The scope of 90% provisional refund is proposed to be extended to unutilised ITC arising from inverted duty structure under section 54(3)(ii).
The phrase “or of unutilised input tax credit allowed under clause (ii) of the first proviso to sub-section (3)” has been proposed to be inserted after “supply of goods or services or both.” This change explicitly allows for refunds of unutilised Input Tax Credit (ITC) under specific conditions, providing relief to taxpayers who might have accumulated ITC without immediate output tax liability.
(b) Section 54(14): Removal of Threshold for Export Refunds – Refund restrictions under section 54(14) is proposed to not apply where refund is claimed on account of exports made with payment of tax.
After the amendments proposed in Budget 2026, Section 54(14) now reads in effect as “No refund shall be paid under sub-section (5) or sub-section (6) if the amount of refund claimed is less than ₹1,000, other than cases where refund of tax is claimed on account of goods exported out of India with payment of tax.”
Currently, The ₹1,000 minimum threshold for refund continues to apply as a general rule. Refunds below ₹1,000 under Section 54(5) (final refund), and Section 54(6) (provisional refund) not be granted. After, the proposed amendment to Section 54 introduces an exception within sub-section (14). It now states that the threshold does not apply where goods are exported out of India, and export is made with payment of IGST. However, Section 54(14) restrictions CONTINUES to apply in other situations as it is. eg. Inverted Duty Structure (IDS) Refunds, Refunds Due to Excess Balance in Electronic Cash Ledger, Refunds of Excess Payment of Tax.
This clarifies that certain refund rules do not apply to scenarios involving export with payment of tax, streamlining the refund process for exporters and preventing potential confusion or dual claims. This means Section 54(14) will no longer bar export refunds, irrespective of amount.
D. Amendment to Section 101A of the CGST Act – Interim Appellate Mechanism for Advance Rulings – Proposed Insertion of sub-section (1A) empowers the Government to:
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Authorise an existing Authority or Tribunal to hear appeals under section 101B,
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Until the National Appellate Authority for Advance Ruling (NAA) is constituted.
E. Amendment to Section 13(8)(b) of the IGST Act – Intermediary Services – Clause (b) of section 13(8), which deemed the place of supply of intermediary services as the location of the supplier, has been proposed to be omitted.
In the Integrated Goods and Services Tax Act, 2017, a notable change has been proposed to be made in Section 13, which pertains to the place of supply of services. Specifically, clause (b) of sub-section (8) of Section 13 has been omitted. This particular clause generally dealt with the place of supply in certain scenarios involving intermediary services, among others. The omission of this clause is significant as it simplifies the determination of the place of supply for certain services, potentially reducing litigation and providing more clarity for businesses engaged in international service transactions.
The Finance Bill, 2026 relating to GST portion can be accessed at https://taxo.online/wp-content/uploads/2026/02/Finance_Bill-GST.pdf
The Complete Finance Bill, 2026 can be accessed at https://taxo.online/wp-content/uploads/2026/02/Finance_Bill.pdf
