GST Changes From 1 November 2026: Post-Sale Discounts, Inverted Duty Refunds and ₹1,000 Limit
Four GST changes from 1 November 2026 hit the books of almost every business that gives trade discounts or claims refunds. Through Notification No. 03/2026-Central Tax dated 26 October 2026 (S.O. 5791(E)), the Central Board of Indirect Taxes and Customs has appointed 1 November 2026 as the date on which sections 153 to 155 of the Finance Act, 2026 take effect. Those sections rewrite how post-sale discounts are valued under section 15 of the CGST Act, allow credit notes for them under section 34, extend the 90% provisional refund to inverted duty structure claims under section 54(6) and lift the ₹1,000 minimum for refunds on goods exported on payment of IGST.
The same date also brings ITC on input services into the inverted duty refund for the first time, a change the GST Council approved at its 57th meeting and which GSTN has explained in its FAQs on the Council's decisions. The notification does not give any of these amendments retrospective effect, so the old position continues to govern discounts, credit notes and refund computations relating to the period before 1 November.
What changes from 1 November 2026 at a glance
The table sets out each change, the position until 31 October 2026 and the position from 1 November 2026.
| Provision | Until 31 October 2026 | From 1 November 2026 |
|---|---|---|
| Post-sale discount, section 15(3)(b) | Excluded from value only if agreed before or at the time of supply and linked to specific invoices, with ITC reversed by the recipient | Excluded if the supplier issues a credit note and the recipient reverses the attributable ITC under section 34; no pre-agreement or invoice linking needed |
| Credit note, section 34(1) | Allowed for excess value or tax, goods returned and deficient supplies | Also expressly allowed for a post-sale discount covered by section 15(3)(b) |
| 90% provisional refund, section 54(6) | Statutory route limited to zero-rated supplies | Extended to refund of unutilised ITC on account of inverted duty structure |
| Minimum refund, section 54(14) | No refund below ₹1,000 | ₹1,000 floor does not apply to refund on goods exported with payment of tax |
| Net ITC in inverted duty refund, rule 89(5) | Only ITC on inputs (goods) | ITC on input services availed on or after 1 November 2026 also included |
Post-sale discount and credit note under the amended section 15(3)(b)
The old section 15(3)(b) was the reason many suppliers stopped passing GST through on year-end and target-based incentives. A discount given after the supply could reduce the taxable value only if it had been fixed in an agreement entered into at or before the supply and could be traced to particular invoices. Volume rebates worked out at the end of a quarter, scheme payouts to dealers and price-protection credits often failed one of those tests, so suppliers issued financial credit notes without GST and the tax stayed in the original invoice.
From 1 November 2026, the test is mechanical. The supplier issues a credit note under section 34 for the discount, and the recipient reverses the input tax credit attributable to it. If both happen, the discount comes out of the value of supply. There is no longer any need to show that the discount was agreed in advance or to tie it to individual invoices. A discount recorded only in the books, without a GST credit note, does not reduce output tax.
The practical consequence sits with the recipient. The supplier's reduction in output tax now depends on the dealer or distributor actually reversing ITC, so the supplier needs a way to confirm that the reversal has happened, and the recipient needs to account for it in its own return. Distribution agreements, dealer scheme circulars and credit note formats should be checked before the first November scheme payout. As Business Today reported on 27 October 2026, practitioners expect FMCG, pharmaceuticals, retail and consumer durables, where dealer incentives are routine, to use the new route most.
90% provisional refund for inverted duty structure under section 54(6)
Section 54(6) has so far given a statutory 90% provisional refund only on zero-rated supplies, that is, exports and supplies to SEZ units. Inverted duty refunds were granted provisionally only under administrative instructions, the most recent being CBIC Instruction No. 06/2025-GST dated 3 October 2025. From 1 November 2026, the provisional refund of unutilised ITC claimed under clause (ii) of the first proviso to section 54(3) has a footing in the Act itself.
GSTN's FAQs describe how this will run. Low-risk zero-rated and inverted duty claims will get an automated provisional sanction of 90% of the amount claimed, without any interface with the officer at that stage. The provisional refund order in FORM GST RFD-04 is proposed to be issued by the system within three working days of acknowledgement. The time to issue an acknowledgement in RFD-02 or a deficiency memo in RFD-03 comes down from 15 days to 10 days, and if the officer does neither within 10 days, the application is deemed acknowledged. Once acknowledged, no deficiency memo can be issued later. The officer still examines the claim and passes the final order in RFD-06.
Not every claim will qualify. The FAQs exclude certain notified commodities, applicants who have not completed Aadhaar authentication under rule 10B, and cases with a pending DRC-01, a mismatch between appeal forms, or a pending appeal. Goods listed in Notification No. 5/2017-Central Tax (Rate), on which inverted duty refund is barred, remain barred, and the power to withhold refunds under sections 54(10) and 54(11) is untouched. Interest under section 56 still runs if the refund is not paid within 60 days.
Inverted duty refund on input services from 1 November 2026
Until now, "Net ITC" in the rule 89(5) formula meant ITC on inputs, which in practice means goods. A manufacturer whose output is taxed at 5% while raw materials carry 18% got back the excess credit on raw materials, but credit on freight, job work, rent, maintenance, professional fees and similar services stayed locked in the electronic credit ledger. The GST Council's 57th meeting recommended including ITC on input services in Net ITC, and the FAQs confirm the cut-off: input services availed on or after 1 November 2026. ITC on capital goods joins the computation for both zero-rated and inverted duty refunds only from 1 April 2027, and then in one-sixtieth monthly portions over 60 months.
Two limits matter. Inverted duty is still tested by comparing the tax rate on input goods with the rate on output supplies. A business does not become eligible merely because the services it buys are taxed at a higher rate than its output. And credit blocked under section 17(5), or reversed under rule 43, stays out of Net ITC.
The cut-off is linked to when the service is availed, so the date on each invoice and the period of the service needs care. An illustration, using assumed figures: a fabric processor taxed at 5% on output pays ₹1,80,000 of GST on a transport contract for October, invoiced on 31 October 2026, and ₹1,80,000 on the same contract for November, invoiced on 30 November 2026. The October credit stays outside Net ITC for the refund, while the November credit enters it. If the November refund application covers both months, only ₹1,80,000 of service credit, not ₹3,60,000, should go into Net ITC. Taking both would draw a deficiency memo or a recovery later.
₹1,000 refund threshold and exports on payment of IGST
Section 54(14) bars any refund below ₹1,000. The FAQs clarify that the threshold applies to the total refund across all tax heads taken together, not separately to CGST, SGST and IGST. From 1 November 2026, it no longer applies to refunds of IGST paid on goods exported out of India. Refunds of export IGST will therefore be paid even where the amount is a few hundred rupees, which helps courier and postal exporters and small cross-border e-commerce sellers whose individual consignments carry small amounts of tax. The threshold continues for every other category of refund, including inverted duty claims.
Rule 89(4)(C) cap and other refund process changes
The FAQs also confirm that the condition in rule 89(4)(C), under which the value of zero-rated goods was capped at 1.5 times the value of like goods supplied domestically, has been removed. Refunds of excess balance in the electronic cash ledger are to be processed fully by the system without an officer. No physical documents or copies of invoices are to be submitted with refund applications, while all returns due before the application must be on file. FORM GST RFD-01 is also being amended, and the PIB note on the 57th GST Council recommendations lists the wider refund reforms the Council approved in October.
The statutory text of all three sections was introduced as clauses 137 to 139 of the Finance Bill, 2026, which left their commencement to a later notification. That notification has now come.
Checks for November returns and refund claims
Suppliers running dealer schemes should decide whether November payouts will go out as GST credit notes, update ERP credit note templates and tell customers that their ITC reversal is a condition of the supplier's tax reduction. Recipients should set up a process to identify such credit notes and reverse the related ITC in the return for the month in which they receive them.
Businesses with an inverted duty structure should tag purchase invoices for services by the date the service was availed, so that the first refund claim covering November 2026 includes only qualifying service credit. Exporters who earlier ignored small IGST refunds because of the ₹1,000 floor should watch for them in the refund status after 1 November. The first full month under the new rules ends on 30 November 2026, and the returns for November will be the first to carry discount credit notes and ITC reversals under the new section 15(3)(b).
Official source: View the official source document
