Finance Bill 2026: Analysis of GST Amendments

A clause-by-clause review of CGST and IGST changes covering valuation, refunds, advance ruling framework and intermediary services.

UNION BUDGET 2026–27 has taken major steps towards indirect tax reforms in Customs Duties and Goods and Services Tax (GST).

The focus has been on ease of doing business, ease of living and boosting the manufacturing sector through simplification of procedures and tariff structures, including duty correction and automation of trade processes, while placing greater trust in businesses and taxpayers.

Finance Bill, 2026 proposes amendments in tax laws to make trade and commerce easier, facilitate exports, encourage sustainable business practices and, at the same time, protect tax revenue.

On the GST front, a few crucial changes have been proposed in the CGST and IGST laws for simplification, removal of ambiguities and making compliance and understanding easier. These, inter alia, relate to:

• Valuation vis-à-vis post-sale discounts
• Issuance of credit notes
• Provisional refunds in cases of inverted duty structure
• IGST refunds
• Constitution of National Appellate Authority for Advance Ruling (NAAAR)
• Place of supply for exports/imports through intermediaries (IGST)

There is no proposal for GST rate change or rationalisation thereof, as such an exercise was undertaken in October 2025.

Bird’s-Eye View of Proposed Changes

Following is the snapshot of GST-related changes (CGST & IGST) in the Finance Bill, 2026 (FB):

S. No.	FB Clause	Section Affected	Nature of Change	Effective Date	Change in Brief
1	137	15 (CGST)	Section 15(3)(b) substituted	w.e.f. notified date after enactment	Valuation of taxable supply – delinking post-sale discount from agreement/invoices for credit notes
2	138	34 (CGST)	Amendment	w.e.f. notified date after enactment	Credit notes – reference to discount u/s 15(3)(b) for issuing credit notes for post-supply discounts
3	139	54 (CGST)	Amendment	w.e.f. notified date after enactment	Refund of tax – provisional refund in inverted duty structure cases (sub-section 6); removal of threshold for refunds arising from export of goods with payment of tax (sub-section 14)
4	140	101A (CGST)	New sub-section (1A) inserted	w.e.f. notified date after enactment	Constitution of National Appellate Authority for Advance Ruling – Government may notify any existing authority, including GSTAT, to hear appeals till National Authority is constituted
5	141	13 (IGST)	Section 13(8)(b) omitted	01.04.2026	Place of supply in relation to ‘intermediary’ omitted; place of supply to be location of recipient of services

 

CLAUSE BY CLAUSE ANALYSIS OF PROPOSED AMENDMENTS

Valuation, Post-Sale Discount and Credit Notes

The Finance Bill, 2026 proposes amendments in Sections 15 and 34 of the CGST Act, 2017.

Section 15: Valuation of Supplies (Clause 137 of Finance Bill, 2026)

In the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the Central Goods and Services Tax Act), in Section 15, in sub-section (3), for clause (b), the following clause shall be substituted, namely:

 “(b) after the supply has been effected, if for such discount, a credit note has been issued by the supplier and input tax credit as is attributable to such discount has been reversed by the recipient of the supply, in accordance with the provisions of Section 34.”

Sub-section (3) of Section 15 of the CGST Act, 2017 is being amended to do away with the requirement of linking post-sale discount with an agreement and to refer to issuance of credit note under Section 34 where the input tax credit is reversed by the recipient.

According to the Notes on Clauses to the Finance Bill, 2026, the objective of amendment by Clause 137 is to amend sub-section (3) of Section 15 of the CGST Act so as to remove the requirement of linking post-sale discount with an agreement specifically linked to relevant invoices and to refer to issuance of credit note under Section 34 where the input tax credit is reversed by the recipient.

Presently, Section 15(3) of the CGST Act, 2017 provides that the value of supply shall not include any discount which is given:

(a) before or at the time of supply, if such discount has been duly recorded in the invoice issued in respect of such supply; and

(b) after the supply has been effected, if:

(i) such discount is established in terms of an agreement entered into at or before the time of such supply and specifically linked to relevant invoices; and

(ii) input tax credit as is attributable to the discount has been reversed by the recipient of the supply.

Post-sale discount is the discount given by businesses after the sales or supplies are made. While GST is payable on the valuation at the time of supply of goods, any post-sale discount given to the buyer results in a situation where GST has been paid in excess of what is actually payable. This excess tax paid is equivalent to the tax payable on the discount component offered post-sale.

It is a common trade practice in India as well as globally to grant post-sale discounts. It is prevalent in industries such as automobiles, consumer goods, FMCG, textiles, pharmaceuticals and others. To document post-sale discount transactions, a credit note is issued by the supplier to reduce the tax liability.

However, earlier this required proper documentation such as a pre-agreed discount through an agreement entered into at or before the time of supply and linkage to relevant invoices, besides reversal of the related input tax credit by the recipient.

The proposed amendment makes the condition of prior agreement and invoice linkage no longer mandatory for availing the benefit of post-sale discount. It simplifies compliance and is likely to reduce disputes regarding authenticity of post-sale discounts. Indeed, it is a welcome change.

It may be noted that the proper officer may verify reversal of input tax credit and justification for issuance of credit note during scrutiny of GSTR-3B returns or during audit proceedings.

Section 34: Credit and Debit Notes (Clause 138 of Finance Bill, 2026)

In Section 34 of the CGST Act, in sub-section (1), after the words “both supplied are found to be deficient”, the words “or where a discount referred to in clause (b) of sub-section (3) of Section 15 is given” shall be inserted.

Section 34 is being amended so as to include reference to post-sale discounts referred to in Section 15(3)(b) for issuing credit notes.

According to the Notes on Clauses to the Finance Bill, 2026, the objective of Clause 138 is to amend Section 34 to include the reference of discount under clause (b) of sub-section (3) of Section 15 for issuing credit notes for post-supply discounts.

Presently, Section 34(1) provides that where one or more tax invoices have been issued and the taxable value or tax charged exceeds the taxable value or tax payable in respect of such supply, or where goods are returned, or where goods or services or both supplied are found to be deficient, the registered person may issue credit notes.

The proposed amendment enables issuance of credit notes in cases of post-sale discounts without the stringent documentation requirements previously insisted upon. This amendment is consequential to the change in Section 15(3)(b).

Section 54: Refund of Tax (Clause 139 of Finance Bill, 2026)

Clause 139 proposes amendments in sub-sections (6) and (14) of Section 54 of the CGST Act.

Sub-section (6) is proposed to be amended to extend provisional refund benefit to refunds arising from inverted duty structure cases.

Presently, provisional refund of 90 percent is available only in respect of zero-rated supplies. Taxpayers facing inverted duty structure often suffer working capital blockage due to delay in refund of accumulated input tax credit. The amendment enables grant of 90 percent provisional refund in such cases, thereby easing liquidity concerns.

Sub-section (14) presently provides that no refund shall be paid if the amount is less than ₹1,000. The amendment carves out an exception for refund of IGST paid on export of goods with payment of tax. Accordingly, even if the refund amount is less than ₹1,000, it shall be admissible in such export cases.

While this is a beneficial measure, practically such small-value claims may be limited. Nonetheless, it may benefit small or occasional exporters.

Section 101A: Constitution of National Appellate Authority for Advance Ruling (Clause 140)

Clause 140 inserts new sub-section (1A) in Section 101A of the CGST Act.

It provides that till the National Appellate Authority for Advance Ruling (NAAAR) is constituted, the Government may, on the recommendation of the GST Council, notify any existing authority constituted under any law — including a Tribunal — to hear appeals under Section 101B.

In such cases, sub-sections (2) to (13) of Section 101A shall not apply, and references to NAAAR shall be construed as references to such notified authority.

This provision ensures continuity of appellate mechanism where conflicting advance rulings are issued by Appellate Authorities of different States or Union Territories. In all likelihood, GST Appellate Tribunal (GSTAT) may be notified for this purpose.

The amendment shall come into force from 1 April 2026.

Amendment in IGST Act, 2017 – Section 13 (Clause 141)

Clause 141 omits clause (b) of sub-section (8) of Section 13 of the IGST Act, 2017.

Presently, Section 13(8)(b) provides that place of supply of intermediary services shall be the location of the supplier of services. This has resulted in taxation of intermediary services even where the recipient is located outside India, leading to significant litigation.

With omission of this clause, place of supply of intermediary services shall be determined under the default provision of Section 13(2), i.e., the location of the recipient of services.

This aligns with the internationally accepted principle that exports of goods and services should not be taxed. If the intermediary is located in India and the recipient is outside India, such supply would qualify as export of services subject to fulfilment of prescribed conditions.

This is indeed a welcome amendment and is expected to reduce disputes considerably. It would, however, have been ideal if the amendment had been made applicable retrospectively.

Conclusion

The GST amendments proposed in the Finance Bill, 2026 are reform-oriented and focus on simplification, reduction of litigation, improved liquidity and strengthening of institutional mechanisms.

By rationalising valuation provisions for post-sale discounts, extending provisional refunds to inverted duty cases, removing export refund thresholds, strengthening the advance ruling appellate framework and correcting anomaly in intermediary services taxation, the Union Budget 2026–27 continues the calibrated evolution of India’s GST regime.
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