The Union Budget 2026–27 marks a course correction rather than cosmetic change in India’s indirect tax framework. Several long-standing interpretational disputes under GST are sought to be resolved legislatively, while Customs law continues its transition towards tariff-based certainty and trade facilitation.

I. GST – Legislative Amendments with Direct Business Impact

1. Post-sale Discounts: Statutory Realignment with Commercial Reality

(Sections 15(3) & 34, CGST Act)

The Finance Bill, 2026 proposes a paradigm shift in the treatment of post-supply discounts.

What changes?

a.The requirement of a pre-existing agreement and invoice-wise linkage for post-sale discounts is proposed to be eliminated.

b.Valuation adjustment shall now hinge on:

-issuance of a credit note under Section 34, and

-reversal of proportionate ITC by the recipient.

This amendment acknowledges commercial realities where discounts are performance-linked, turnover-based, or crystallise post-supply. The law now aligns with the principle that substance must prevail over form.

Caution; the onus shifts to ITC reversal compliance at the recipient’s end. Absence of a statutory verification mechanism may invite future CBIC prescriptions.

2. Refund Reforms: Working Capital Relief Finally Codified

(Section 54 (6) and (14), CGST Act)

A. Provisional Refund for Inverted Duty Structure (IDS)

-Provisional refund of up to 90% is proposed to be extended to IDS refunds, previously restricted to zero-rated supplies.

-This is a major relief for sectors chronically burdened with ITC accumulation.

While the law enables faster refunds, procedural discipline under Rules 90 and 91 will remain decisive.

B. Removal of Minimum Refund Threshold for Export of Goods

-The ₹1,000 minimum threshold is proposed to be removed only for export of goods with payment of IGST.

-Particularly beneficial for small exporters and e-commerce driven exports.

3. Advance Ruling Appeals: Temporary Bridge over a Long-Standing Void

(Section 101A, CGST Act)

Pending constitution of the National Appellate Authority for Advance Ruling (NAAAR), the Government may empower any existing authority, including a Tribunal, to hear appeals against Advance Rulings.

Impact

-May reduce conflicting State-level AAR interpretations.

-Restores appellate continuity

Effective Date

Proposed to be effective from 1 April 2026.

4. Intermediary Services: End of the Deeming Fiction

(Section 13, IGST Act)

One of the most awaited reforms:

-Section 13(8)(b) is proposed to be omitted.

-Place of supply for intermediary services will now be governed by the default rule under Section 13(2)—i.e., location of the recipient.

Consequences

-Indian intermediary services supplied to foreign clients may now qualify as export of services, enabling zero-rate supply benefits.

-Services received from overseas intermediaries by Indian entities will qualify as import of services, attracting IGST under RCM.

While classification disputes on “intermediary” may persist, the constitutional infirmity of destination-agnostic taxation is addressed. However, absence of retrospective effect means legacy disputes remain alive.

The Budget 2026–27 reinforces the move towards certainty, neutrality, and destination-based taxation. While legislative intent is clear, the true test will lie in timely notifications, rule amendments, and administrative execution.

Until enacted and notified, these proposals remain prospective and advisory in nature.