CBIC Issues Eight GST Circulars on 26 October 2026: Adjudication Discipline, Pre-Deposit Refunds, ISD, Bank ITC, Demo Vehicles, Export Remittances and Rule 96(10)

The Central Board of Indirect Taxes and Customs (CBIC) has issued eight GST circulars, Nos. 257/03/2026-GST to 264/10/2026-GST, all dated 26 October 2026. Together they tell officers how to draft show cause notices and orders, settle long-running disputes on pre-deposit refunds and Input Service Distributor (ISD) credit, and give relief to exporters, banks and automobile dealers.

Among the key changes, Circular No. 258 bars invoking fraud or suppression merely because tax is unpaid. Circular No. 264 accepts that the omission of rule 96(10) operates retrospectively from 23 October 2017.

Circular No.	Subject	Who should read it
257/03/2026-GST	Guidelines for GST registration applications	New applicants, practitioners
258/04/2026-GST	Demand, adjudication and appeal proceedings	Every taxpayer facing an SCN or appeal
259/05/2026-GST	Pre-deposit under sections 107(6) and 112(8)	Appellants
260/06/2026-GST	Input Service Distributor issues	Multi-registration businesses
261/07/2026-GST	Section 17(4) option for banks and NBFCs	Banks, financial institutions, NBFCs
262/08/2026-GST	ITC on demo vehicles in dealer-agency model	Automobile dealers
263/09/2026-GST	Receipt of export proceeds	Service exporters, stock brokers, reinsurance brokers
264/10/2026-GST	Omission of rule 96(10)	Exporters with IGST refund disputes

Registration: officers told to stop seeking unwarranted documents (Circular No. 257/03/2026-GST)

CBIC has issued applicant-side guidelines for filing FORM GST REG-01, complementing Instruction No. 03/2025-GST of 17 April 2025 meant for officers. The circular notes that most rejections and queries arise from illegible uploads, vague addresses and wrong selection of the nature of premises.

On the officer side, the circular is direct. Queries may be raised in FORM GST REG-03 only for incomplete or illegible documents, an address mismatch, or a vague address. Officers must not ask for an Udyam certificate, question why the applicant lives in another city, or object that the activity cannot be run from the premises. They must also not classify an electricity connection as domestic or commercial, scrutinise bill amounts, or treat residential premises as unfit for business.

The key documentary positions are:

• Premises owned by a parent, spouse or partner is "consent", not "own"; a consent letter (Annexure VI) and one ownership document of the consenter are needed.
• An unregistered rent agreement needs one document in the landlord's name; where no agreement exists, an undertaking (Annexure V) with a utility bill suffices.
• Inherited property needs a death certificate, an affidavit (Annexure IV) and one ownership document.
• Co-working spaces need the membership agreement plus the provider's ownership or registered lease document.
• A jointly owned property needs no NOC from co-owners.
• Telecom towers and ATMs need not be declared as places of business.

The circular also restates the timelines: seven working days for Aadhaar-authenticated cases, thirty days where physical verification applies, and three working days under rules 9A and 14A. Inaction beyond these limits means deemed approval. Grievances over delay or unwarranted queries can be taken to the jurisdictional Chief Commissioner or State Commissioner on a designated email. The circular carries 51 FAQs and four annexures, including formats for the affidavit, undertaking and consent letter.

Adjudication: no extended period merely for non-payment (Circular No. 258/04/2026-GST)

The longest circular of the set lays down a code of conduct for show cause notices, adjudication orders and first appeals. CBIC says it acted after noticing vague, non-speaking orders that ignored taxpayer submissions and were later remanded or reversed.

Show cause notices. An SCN must identify the noticee, the period and the source of proceedings, link each act of the noticee to the provision breached, and quantify the demand year-wise. Relying on the Supreme Court's ruling in G.R. Infra Project Ltd. v. State of Madhya Pradesh, (2026) 45 Centax 331 (S.C.), dated 19.08.2026, the circular says a defect in the SCN cannot be cured later. Pre-SCN intimation in Part A of DRC-01A should be issued wherever feasible.

Fraud and suppression. Sections 74(1) and 74A(5)(ii) cannot be invoked merely because GST was not paid, or in scrutiny cases solely because a discrepancy was found. The SCN itself must set out the material showing intent to evade; repeating the words "fraud, wilful misstatement or suppression" is not enough. Citing Sriba Nirman Company v. Commissioner (Appeals), (2025) 29 Centax 206 (A.P.), the circular adds that an incorrect statement is not wilful unless knowingly false. A second SCN on the same facts for a later period should ordinarily be issued under section 73 or 74A(5)(i).

Other directions for adjudication:

• No parallel proceedings by Central and State officers on the same subject matter, following Armour Security (India) Ltd., (2025) 33 Centax 222 (S.C.).
• Up to four hearing opportunities, virtual hearings encouraged, and a fresh hearing when the adjudicating authority changes.
• Orders must deal with every submission and every case law cited by the noticee; "reply has been considered" is not acceptable.
• No demand beyond the SCN amount or grounds (section 75(7)).
• AI tools may be used only with human verification; responsibility for the order stays with the officer.
• Rectification under section 161 lies only with the issuing authority, and only for errors apparent on the face of the record.

First appeals. Merits issues cannot be used to reject an appeal at the registration stage. Limitation is to be decided as a preliminary issue. Hearing details must form part of the appellate order. Additional evidence under rule 112 needs recorded reasons, and cross-appeals must be decided by a common order.

The circular states that the guidelines are illustrative and must not be cited by officers in notices or orders.

Pre-deposit: refund cannot be withheld because the department plans an appeal (Circular No. 259/05/2026-GST)

CBIC has answered six questions on pre-deposit under sections 107(6) and 112(8), after field offices took differing views.

Issue	CBIC's clarification
Meaning of "admitted amount"	The part of tax, interest, fine, fee and penalty the appellant accepts and does not challenge; it is paid in full. The rest is "tax in dispute", on which 10% is deposited. The split is the appellant's choice, shown in Table 14 of APL-01 and Table 20 of APL-05.
Tribunal pre-deposit after appellate order	10% is computed on the liability confirmed by the Appellate Authority that is still disputed, in addition to the first-appeal deposit.
Must the order direct refund?	No. The refund is claimed in RFD-01 under the category "on account of order".
Department contemplating further appeal	Refund is payable unless the favourable order is stayed by the Tribunal or a Court. Intent to appeal, or an appeal filed, is no ground to deny it.
Interest on refund of two deposits	Interest under section 115 runs separately from the actual date of each payment.
Remand by Tribunal	Full remand: pre-deposit is refundable. Partial remand: the confirmed demand and interest are adjusted first, and the balance refunded.

ISD: recipient, not the distributor, answers for section 16 conditions (Circular No. 260/06/2026-GST)

CBIC has settled seven issues on the Input Service Distributor mechanism under section 20 and rules 39 and 54(1A).

• Multiple ISDs. Each separately registered vertical or place of business in a State that receives input service invoices for distinct persons must take its own ISD registration. Credit goes only to the distinct person to whom it is attributable.
• Eligibility. Conditions under sections 16 and 17 must be met by the recipient of credit. Wrong distribution exposes the ISD to penalty under section 122(1)(ix); the excess is recovered from the recipient under section 21.
• "Available in a month". Credit becomes available for distribution only when the ISD ascertains it to be prima facie eligible after it appears in GSTR-6A. It is distributed in that month, split into eligible and ineligible credit.
• Reversals. The ISD distributes the full credit; reversals under sections 17(1), 17(2) and 17(4) are made by the recipients.
• Rule 54(1A) transfers. The invoice issued by a same-PAN, same-State registrant to transfer reverse-charge credit to the ISD is only a credit-transfer mechanism. It is excluded from "turnover in State" for ISD apportionment and from "adjusted total turnover" for refunds. The credit so transferred is not "Net ITC" under rules 89(4) and 89(5), and the transferor makes no reversals on it.

Banks and NBFCs: 50% option is all-or-none across lending registrations (Circular No. 261/07/2026-GST)

CBIC has clarified how the 50% ITC option under section 17(4) works for banks, financial institutions and NBFCs.

A registration that does not accept deposits or extend loans, such as one doing only bullion trading, can neither opt for nor be bound by section 17(4). Registrations that do lend or accept deposits may opt. Once one such registration opts, every other registration of the entity engaged in those services must follow section 17(4).

The second proviso, which allows full credit on supplies between same-PAN registrations, applies only when the supplying registration has also opted for section 17(4).

For GSTR-3B, credit is reported in this order: blocked credit under section 17(5) and non-business credit is reversed in Table 4(B)(1); same-PAN credit under the second proviso is availed in full; 50% of the balance is availed and the rest reversed in Table 4(B)(1). Credit not yet eligible under section 16 is reversed in Table 4(B)(2), or kept pending on IMS where IMS is used. Field formations are told not to object to a different reporting method for past periods, provided the amount of credit availed matches these principles.

Demo vehicles: ITC now allowed to dealers in the agency model (Circular No. 262/08/2026-GST)

CBIC has withdrawn para 4.6 of Circular No. 231/25/2024-GST dated 10.09.2024, which had blocked ITC on demo vehicles bought by dealers acting only as agents of the manufacturer.

The Board noted that in both the agency and traditional dealership models, demo vehicles are bought on tax invoices, capitalised, held for a mandatory period and later sold with tax. Denying credit to one model was discriminatory. It also read the words "such motor vehicles" in section 17(5)(a)(A) as covering vehicles used to further the supply of similar vehicles, not only the vehicle actually sold.

ITC on demo vehicles is therefore not blocked under section 17(5)(a) for dealers in the dealer-agency model.

Exports: rupee receipts, set-offs and net retention count as foreign exchange (Circular No. 263/09/2026-GST)

CBIC has widened the modes of payment that satisfy condition (iv) of section 2(6) of the IGST Act for export of services, building on Circular No. 202/14/2023-GST on Special Rupee Vostro Accounts.

• Proceeds received in convertible foreign exchange or in repatriable INR accounts such as SNRR, INR Nostro or similar accounts qualify.
• Stock brokers serving FPIs, NRIs and OCIs qualify when paid through SNRR or NRE accounts. Payments from NRO accounts must be routed through such repatriable accounts.
• Set-off of export receivables against import payables qualifies if done as per RBI directions. The Board notes that the earlier conditions fall away under the FEM (Export and Import of Goods and Services) Regulations, 2026, effective 1 October 2026.
• Reinsurance brokers who retain commission out of premium before remitting the net amount abroad are treated as having met the condition.

For export of goods, the time limit for realisation under rule 96B follows the RBI Master Direction No. 16/2015-16, as amended. Refund will not be recovered where the realisation requirement has been written off by the AD bank, in addition to write-offs by the RBI.

Rule 96(10): CBIC accepts retrospective omission from 23 October 2017 (Circular No. 264/10/2026-GST)

CBIC has accepted that the omission of rule 96(10), made by Notification No. 20/2024-Central Tax dated 08.10.2024, applies from 23.10.2017, the date the rule was introduced.

The Board relied on the Supreme Court's judgment dated 06.08.2026 in Goodluck India Limited v. Union of India, SLP (C) No. 24550 of 2025, and connected matters. The Court held that, with no saving clause accompanying the omission, it applies to all proceedings pending on the date of omission. It followed the Constitution Bench in Kolhapur Canesugar Works Ltd. v. Union of India, (2000) 2 SCC 536, that section 6 of the General Clauses Act does not save proceedings under an omitted rule.

Field formations are directed to dispose of pending rule 96(10) proceedings accordingly. The same treatment applies to the omitted rules 89(4A) and 89(4B).

Way forward

The circulars bind the department under section 168(1), so taxpayers can rely on them in pending matters right away.

• Pending SCNs and appeals. Check whether section 74 or 74A(5)(ii) was invoked without specific material on intent to evade, and whether orders ignored submissions or cited case law. Circular No. 258 and the G.R. Infra ruling strengthen challenges to the extended period, and the defect cannot be cured after the SCN.
• Pre-deposit refunds. Where an appeal has been won, file RFD-01 "on account of order" without waiting for a refund direction. Resist any hold-up based only on a proposed departmental appeal.
• Exporters. Revisit refund claims denied or recovered under rule 96(10), 89(4A) or 89(4B), and raise Circular No. 264 in pending proceedings. Rejections based on INR receipts, set-offs or net retention can be contested under Circular No. 263.
• Automobile dealers. Agency-model dealers can claim ITC on demo vehicles; past positions and any pending demands should be reviewed.
• ISD users, banks and NBFCs. Align ISD distribution and turnover computations with Circular No. 260, and confirm that all lending registrations follow the same section 17(4) choice.
• New registrations. Use the annexure formats and push back on queries outside the three permitted grounds in Circular No. 257.