57th GST Council meeting: making GST simpler for nano-enterprises

Official source: Recommendations of the 57th Meeting of the GST Council, PIB press release, Ministry of Finance, 8 October 2026.

Discussion of GST usually focuses on collections and rates. It rarely looks at who actually files GST returns. When you look at that, the picture is dominated by very small businesses.

Who is in GST?

GSTN’s report “9 Years of GST” shows that in FY 2025-26, about 1.13 crore GSTINs filed GSTR-3B and reported turnover. Of these:

• 27.3 lakh (24%) had annual turnover up to ₹10 lakh
• 48.1 lakh (42%) had turnover between ₹10 lakh and ₹1 crore

So two out of three GST filers are nano-enterprises. More than half of them, about 39 lakh, reported turnover up to ₹20 lakh. That is the threshold for compulsory registration for most service providers (₹40 lakh for most suppliers of goods). Many of these businesses register voluntarily, or because they sell across states or through e-commerce platforms, which requires registration whatever the turnover.

Their numbers are growing, but more slowly than those of larger taxpayers. Between 2021-22 and 2025-26, GSTINs with turnover up to ₹1 crore (leaving aside nil filers) grew by about 4% a year, from 64 lakh to 75 lakh. Those with ₹1–5 crore grew by about 9% a year, and those above ₹5 crore by about 10%. The nano share of filers fell from 71% to 67%. Part of this is inflation pushing businesses into higher slabs, which are fixed in rupees. But it shows that smaller businesses, even those below mandatory thresholds, are increasingly finding GST to be a fact of life.

Even this is an undercount. Another 40 lakh or so GSTINs declared nil or no turnover in the year. The 13.6 lakh composition taxpayers, most of them small, file different returns and do not appear in these tables at all.

Together, the two nano segments paid only about 4% of the GST paid in cash. Their presence in GST is not about revenue. It is about market access. Because input tax credit flows along the supply chain, business buyers prefer registered suppliers. E-commerce platforms require a GSTIN, and registration gives a small business credibility. GST is becoming a must-have for any business that wants to grow, whatever its size.

Who bears the cost of GST?

Being in GST costs more than the tax itself. Businesses also pay to prepare and file returns, often with professional help, and face late fees and penalties when they file late or make mistakes. Each of these takes a larger share of turnover the smaller the business.

• Compliance costs. A study of 247 small businesses in Tamil Nadu (Madras School of Economics, 2022) found that GST compliance cost firms with turnover up to ₹40 lakh about ₹29,000 a year, or 1.45% of turnover. For the largest firms it was 0.02%.
• Tax paid in cash. Taking the middle of each turnover slab, GSTN’s data suggest that cash GST is about 3–4% of turnover for businesses between ₹5 lakh and ₹1 crore, 2–2.7% for ₹1–5 crore, and 1.3–1.6% for ₹10–500 crore. Smaller businesses appear to claim less input tax credit, perhaps because more of their inputs come from unregistered suppliers.
• Late fees and penalties. The daily late fee is the same ₹50 for every business, and fixed minimum penalties weigh most on the smallest. We estimate that late fees alone take about 1.4% of the cash GST paid by businesses below ₹1 crore, against about 0.05% for larger firms (see below).

When compliance costs fall more heavily on smaller firms, size itself becomes a barrier. Small businesses find it harder to grow and compete with larger ones, and the market economy as a whole becomes less competitive.

How common is late filing?

We used GSTN’s state-wise GSTR-3B filing data (as of 31 August 2026) to estimate how many returns are filed after the due date.

• In FY 2025-26, 17.7% of GSTR-3B returns were filed late. That is about 19 lakh returns every month, or 2.25 crore in the year.
• Timeliness has improved a lot: in the early years of GST, 30 to 40% of returns were late. But for four years running, about one return in six has been late.
• According to a Lok Sabha reply of February 2026, late fees brought in ₹1,749 crore in 2024-25, of which ₹1,342 crore came from GSTR-3B. That is about 0.1% of the GST paid in cash.
• Dividing the GSTR-3B late fees by the number of late returns for 2024-25 gives roughly ₹620 per late return. The late fee is ₹50 a day (₹20 for nil returns), capped at ₹2,000 per return for businesses up to ₹1.5 crore (₹500 for nil returns). ₹620 is about 12 days of fees at ₹50 a day. If most late returns were months late, the average would be close to the cap. Nil returns pay less per day, so the typical delay may be somewhat longer, but it is likely to be weeks rather than months.

This is a rough estimate. Fees collected in a year do not correspond exactly to the returns filed that year, and none of this data is published by turnover class. Still, the pattern is clear: late filing is likely to be a mass phenomenon of short delays. That reflects limited capacity, such as an owner waiting for an accountant who prioritises bigger clients, or for a buyer’s payment, rather than evasion. Fees on such delays raise little revenue, but they irritate taxpayers and add to the burden of notices.

The burden is also uneven. Businesses with turnover up to ₹1 crore file roughly 65–73% of GSTR-3B returns. If they are late about as often as others, they pay about 70% of GSTR-3B late fees: around ₹940 crore in 2024-25, or about ₹890 per business. That is about 1.4% of the GST they paid in cash, against about 0.05% for larger firms, a burden roughly 30 times heavier relative to the tax they pay. If their share of late fees is anywhere between 60% and 90%, the figure ranges from 1.2% to 1.8%. GSTN could settle this by publishing late fees by turnover slab.

What has the 57th GST Council done?

The Council’s recommendations of 8 October 2026 address this directly:

• No late fee on GSTR-3B for businesses with turnover up to ₹5 crore, if the return is filed by the end of the month in which it was due
• No show-cause notice where the tax involved is below ₹10,000, also applied to pending notices and appeals
• In non-fraud cases, the ₹10,000 minimum penalty is removed, and the penalty falls to 5% if tax and interest are paid within 30 days of the order
• The general penalty is cut from ₹25,000 to ₹10,000
• Arrest powers under GST are removed, and the prosecution threshold rises from ₹1 crore to ₹5 crore

The message is that small delays and small disputes should not be costly. The late-fee waiver costs the exchequer very little: all GSTR-3B late fees together are under 0.1% of cash GST, and the waiver covers only returns filed by the end of the month they were due. For small businesses, where late fees are about 1.4% of the GST they pay in cash, the relief is real. Two caveats remain. These are recommendations, and they take effect only through notifications and amendments to the Act. And the late-fee waiver covers GSTR-3B, so composition taxpayers do not benefit.

Beyond late fees: lowering the cost of entry

Several other recommendations matter for small businesses, and especially for those not yet in GST.

• Easier to get in. A single circular listing the documents needed, a revised registration form (REG-01) with drop-down menus, and a more user-friendly portal. This builds on the automatic registration route, introduced after the 56th Council, for businesses that pass on up to ₹2.5 lakh of input tax credit a month.
• Easier to get out. Applications to cancel registration will be accepted automatically once returns are filed and dues are paid, starting with smaller taxpayers. An easy exit makes it less risky to try GST.
• Formal markets without registration. Plastic, e-waste, tyre and used cooking oil scrap sold by unregistered suppliers to registered buyers moves to reverse charge, so the buyer pays the tax. Delivery services through e-commerce platforms, by people not required to register, will be taxed at 5%, paid by the platform. In both cases the buyer or the platform carries the compliance.
• Selling in other states. Small e-commerce sellers can register in another state using the platform’s warehouse as their place of business, with automatic approval. They still need a registration in their home state.
• Simpler returns, later. An optional scheme with an annual return and quarterly payments (ARQP), for businesses up to ₹5 crore that sell only to consumers, has been approved in principle as a concept note.

GST data: from sharing to publishing

Ahead of the meeting, Mint reported that the Council was likely to consider sharing GST data with the statistics ministry (MoSPI). The data would help estimate trade margins, build an index for the unincorporated sector and create a statistical business register. The Council was also to consider a framework for sharing GST data with other ministries. The official press release does not mention a decision yet.

We welcome this direction. GST is probably India’s richest near-real-time record of economic activity. A business register and an unincorporated-sector index would directly improve how nano-enterprises are counted in official statistics.

Sharing within government is a good start. We would suggest going one step further: alongside the GST statistics already published, the government could release aggregate numbers:

• By turnover slab: number of taxpayers, turnover, invoices, tax paid in cash and through ITC, timeliness of filing, and new registrations and cancellations
• By HSN/SAC code (at 2- or 4-digit level, by state where possible): value of outward supplies and number of suppliers

These would be aggregates, with small cells suppressed, so taxpayer confidentiality is protected. They would give commentators and researchers a way to understand:

• How enterprises perform: do small businesses grow and move up turnover slabs, or stagnate and exit? Is formalisation deepening?
• Whether policies work: how the 56th Council’s rate rationalisation affected specific products, and whether the 57th Council’s late-fee waiver improves timeliness for small taxpayers
• Sectoral and regional activity: early signals of demand and production by product and state, well before annual surveys, which states, lenders and industry associations could use
• Questions outside the direct remit of GST or MoSPI: supply-chain dependencies, industrial clusters, growth of e-commerce sellers, the waste and recycling economy, and export-oriented small producers

Publishing such data regularly would let researchers, commentators and civil society do analysis that ministries may not prioritise, and it would improve public debate on GST itself. deAsra INSIGHTs would be glad to contribute.

The 57th Council has shown that the government reads the evidence on small taxpayers. The next step is to let everyone read it.

Data sources: GSTN, “9 Years of GST” (FY 2025-26 taxpayers and cash payment by turnover slab; GSTR-3B filing compliance), “8 Years of GST” (FY 2024-25) and earlier GSTN annual reports (taxpayers by turnover slab, 2019-20 to 2023-24); GSTN state-wise GSTR-3B filing statistics (2017-18 to 2026-27, data as of 31 August 2026); S. Vishnuhadevi and D. Hima Bindu, “Compliance Costs of GST for Small Business Enterprises in Tamil Nadu”, Madras School of Economics Working Paper 229 (August 2022); Lok Sabha Unstarred Question 387 (2 February 2026); PIB press release on the 57th GST Council meeting (8 October 2026); Mint, “GST Council may weigh wider data sharing” (7 October 2026). Late-filing, late-fee burden, per-return fee and cash-GST-to-turnover figures are deAsra INSIGHTs estimates.