As we move closer to Budget 2026, the business community is looking forward to meaningful improvements in the GST framework—reforms that can simplify compliance, reduce litigation, and support India’s growing economy. Based on industry experience and practical challenges, here are three key expectations:
Key Union Budget 2026 Expectations
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Rationalisation of Place of Supply Rules for Intermediary Services
As Budget 2026 approaches, one of the most significant expectations relates to the place‑of‑supply provisions applicable to intermediary services. Under the current GST provisions, the place of supply is deemed to be the location of the intermediary, even when the service is provided to a foreign recipient and the consideration is received in convertible foreign exchange. This results in taxation of transactions that effectively qualify as exports of services. Such a provision imposes an undue tax burden on service providers located in India and contradicts the principle of zero‑rating exports. Budget 2026 is expected to address this anomaly by aligning the place of supply with the location of the recipient, thereby ensuring that genuine export-oriented services are not taxed domestically.
For a wider perspective on policy reforms expected in Budget 2026, readers may also refer to our detailed blog on Union Budget expectations for businesses.
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Extension of Amnesty Scheme to Section 74 Proceedings
When GST was introduced in 2017, taxpayers, particularly small and medium enterprises, committed several inadvertent errors due to the complexity of the new law. These early-stage mistakes led to a large number of show-cause notices and demand orders under Sections 73 and 74 of the CGST Act. Recognising this, the Government introduced an amnesty scheme in finance act 2024 for cases under Section 73, granting relief from interest and penalty. A similar scheme is now anticipated for matters falling under Section 74, where allegations of fraud or suppression were often invoked mechanically. Extending amnesty to Section 74 cases would significantly reduce litigation and provide much-needed relief to honest taxpayers who committed only procedural or unintentional lapses.
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Rationalisation of Penalties for E-Way Bill Violations
Another important expectation from Budget 2026 is the rationalisation of penalties imposed for e-way bill violations. At present, the penalty is uniformly equivalent to 200% of the tax involved, irrespective of whether the lapse is minor or substantial. This rigid penalty structure is disproportionate and creates unnecessary hardship for genuine taxpayers. A graded penalty mechanism—where minor procedural lapses attract lower penalties—would be more equitable and aligned with the principles of fairness and natural justice.
Looking Ahead
Budget 2026 presents a valuable opportunity to strengthen trust between taxpayers and the administration. Thoughtful reforms in these areas can go a long way in improving compliance, reducing disputes, and supporting India’s economic momentum.
