GST 2026: The Year of Automated Enforcement & Final Relief

GST 2026 marks the end of discretionary compliance and the beginning of fully automated enforcement, with the GST portal now acting as an active regulator that auto-calculates late fees, blocks filings, suspends registrations, and permanently locks returns older than three years, extinguishing related ITC.

Late fees for GSTR-9/9C are now mandatory pre-payment items, bank-detail defaults trigger automatic suspension, and the Invoice Management System has matured into a strict ITC gatekeeper where inaction results in “deemed acceptance” and future penalties. At the same time, a narrowing relief window remains open through Section 128A amnesty—especially valuable for reclassified Section 74 cases—and major insurance premium exemptions are now live, requiring correct accounting treatment.

Litigation timelines have been unified under Section 74A with a 42-month limitation period, RCM enforcement (notably on metal scrap) has intensified, and businesses must immediately tighten audits, litigation reviews, and monthly IMS protocols to avoid system-driven non-compliance in this no-manual-override GST regime.

A Definitive Guide to the New “No-Manual-Override” Regime

As India settles into 2026, one reality is unmistakable: the GST “grace period” is officially over.

The government has decisively moved from policy fine-tuning to technology-led, automated enforcement. The GST portal is no longer a passive filing system. It now functions as an active regulator—auto-calculating penalties, blocking filings, suspending registrations, and extinguishing rights without human discretion.

This article serves as a comprehensive, practitioner-level guide to the GST regime now live as of January 1, 2026, combining enforcement changes, relief opportunities, litigation shifts, and operational risks that demand immediate attention.

The “No-Override” Compliance Checks

(Effective January 1, 2026)

Several compliance validations that were earlier “soft-enforced” are now hard-coded into the system. Officer discretion has been removed.

1. Auto-Lock on GSTR-9 / 9C Late Fees

The Change
For FY 2024-25 filings (due December 31, 2025) and all subsequent years, the GST portal auto-calculates late fees based on turnover and delay.

The Impact

• Returns cannot be filed unless the calculated late fee is paid in full.
• Manual editing of late fee fields to zero is permanently disabled.
• “File now, pay later” is no longer possible.

Turnover-Based Late Fee Structure

2. The “3-Year Data Lock”

The Rule
The GST portal now permanently bars the filing of any return (GSTR-1, 3B, 9, etc.) after three years from its due date.

Critical Implications

• Any pending return relating to late 2022 or earlier is now irreversibly locked.
• Filing with penalty is no longer permitted.
• Unclaimed ITC linked to those periods stands extinguished forever—with no appeal, condonation, or officer intervention available.

This is not a procedural delay—it is a statutory extinction of rights via technology.

3. Automated Registration Suspension

The Trigger
Failure to furnish validated bank account details within 30 days of GST registration.

The Result

• Registration is automatically suspended by the system.
• No officer approval or manual follow-up is possible.

The Only Fix

• Update valid bank details on the portal.
• Revocation occurs only after system validation—there is no manual “fast-tracking.”

Strategic Relief: Amnesty & Exemptions

(Relief windows exist—but they are closing fast)

1. The “Last-Chance” Amnesty under Section 128A

The historic waiver covering FY 2017-18 to FY 2019-20 is now in its final phase.

Key Deadline

• Full tax payment must be completed by March 31, 2026
• (March 31, 2025 applies to cases not covered by redetermination extensions)

The Hidden Opportunity: Section 75(2) Redetermination
If a case originally issued under Section 74 (Fraud) has been re-classified as Section 73 (Non-Fraud) by an officer or court:

• A fresh 6-month window opens to pay tax
• Entire interest and penalty are waived

This is the single most valuable litigation relief still available in 2026.

2. Major Insurance Exemptions (Effective September 2025)

Following the 55th and 56th GST Council recommendations, a landmark exemption is now live:

Exempt Supplies (Nil-Rated)

• Individual Term Life Insurance premiums
• Individual Health Insurance premiums (coverage up to ₹5 lakh)

Action Point
Accounting and ERP systems must classify these as “Exempt Supplies”, not taxable supplies.

This directly impacts:

• Rule 42 / 43 ITC reversals
• Common credit attribution
• Annual return disclosures

Incorrect classification will trigger automated mismatches.

The New Litigation Reality: Section 74A

For FY 2024-25 onwards, the historic distinction between fraud and non-fraud notices is eliminated.

What’s Changed

• All notices are now governed by Section 74A
• Officers no longer need to prove fraud to access extended timelines

Unified Limitation Period

• 42 months (3.5 years) from the Annual Return due date
• Applies uniformly to all cases

Strategic Consequence

The classic defence of “time-barred under Section 73” no longer exists for current periods.

Every taxpayer must plan on a 42-month exposure window.

Invoice Management System (IMS): Full Maturity

IMS is no longer a “new feature.”
It is now the sole gatekeeper of Input Tax Credit.

The “Deemed Acceptance” Trap

How It Works

• If a supplier uploads an invoice
• And no action is taken by the recipient by the 14th of the month
  → The invoice is Deemed Accepted

Why This Is Dangerous

If the invoice is:

• A duplicate
• Issued for returned goods
• Incorrectly raised

…and you fail to reject it:

• It flows into GSTR-3B as valid ITC
• Utilisation attracts interest and penalty when detected later

Mandatory Operational Discipline

Accounts teams must review IMS between the 11th and 13th every month.

Rule of Thumb:

If in doubt—Reject or keep Pending. Silence is acceptance.

2026 Rate & RCM Checklist

Critical RCM Enforcement Note

Metal scrap RCM is now aggressively enforced:

• Self-invoice generation is mandatory
• Tax payment is compulsory
• Portal blocks E-way bills for non-compliant transactions

The defence of “I didn’t know the supplier was unregistered” is no longer accepted.

Actionable Next Steps for January 2026

✅ Immediate Audit

• Check the Electronic ITC Reclaim Ledger
• A negative balance will block GSTR-3B filing

⚖️ Litigation Review

• Identify Section 74 cases (FY 2017-20) eligible for reclassification
• These are your “golden ticket” cases under Section 128A

🧾 IMS Protocol

• Implement a “Reject-First” policy
• Never allow doubtful invoices to reach Deemed Acceptance

Closing Note

GST 2026 marks a fundamental shift:
Compliance is no longer negotiated—it is executed by code.

Automation has replaced discretion. Relief exists, but only for those who act before the system locks them out.

For businesses, the mandate is clear:

Adapt processes, audit aggressively, and treat the GST portal as a regulator—not a filing website.