Beyond the Headlines: E-Invoicing for RCM, Credit Clarifications and Other GST Changes You Should Know

GST UPDATE | PART 2 | NOVEMBER 2026

The quieter changes in the November 2026 GST package that matter for cash flow and compliance

In our earlier update, we covered the headline GST changes that took effect on 1 November 2026: easier post-sale discounts, 90% provisional refunds for inverted duty, relief for small exporters, the scrap and waste rules and the registration overhaul.

The same package, issued after the 57th GST Council meeting, also contained a number of less publicised changes. The most important of them is a new e-invoicing obligation for reverse charge purchases from January 2027. Others settle long-standing credit questions, change how e-commerce delivery is taxed and improve refund cash flow. We have listed them below in order of practical importance.

The changes at a glance

Change	Effective from	Who should take note
E-invoicing for RCM purchases and import of services	1 January 2027	Businesses above the e-invoice threshold
ITC on demo vehicles, used cars; rate clarifications	Circulars of October 2026	Auto dealers, toy, paper and fertiliser trades
E-commerce operator liable for delivery services by unregistered providers	1 November 2026	E-commerce platforms, delivery partners
1.5x domestic-value cap on export refunds removed	1 November 2026	Exporters under LUT
Capital goods ITC in refunds; Rule 86A procedure	1 April 2027	Manufacturers; all taxpayers
Refund acknowledgement in 10 days; system-generated provisional refund	1 November 2026	All refund claimants
Inverted duty refund now includes ITC on input services	1 November 2026	Manufacturers with accumulated ITC

1. E-invoicing extended to RCM purchases and import of services

Until now, e-invoicing applied to B2B supplies and exports made by taxpayers above the notified turnover threshold. Purchases on which the recipient pays tax under reverse charge were documented through self-invoices prepared outside the e-invoice system.

What has changed: Notification 04/2026-Central Tax extends e-invoicing, from 1 January 2027, to:

• supplies received from unregistered persons on which the recipient pays tax under reverse charge; and
• import of services.

In these cases, the recipient will generate an IRN for the self-invoice on the Invoice Registration Portal. To support this, the e-invoice schema (version 1.2 of FORM GST INV-01) adds two new supply types: RCMDOM for domestic reverse charge purchases and RCMIMP for import of services. GSTN has already opened a sandbox for testing.

Use the next two months well

Speak to your billing or ERP provider now about RCM self-invoice support under schema 1.2. Map your recurring RCM purchases (for example, services from unregistered vendors) and import of services transactions, and test them on the sandbox before 1 January 2027.

2. Clarifications that may unlock credit

ITC on demo vehicles (Circular 262/08/2026-GST)

CBIC has clarified that authorised dealers can claim ITC on demo vehicles under the dealer-agency model, even where the manufacturer sells directly to the customer and the dealer acts as its agent. Dealers who had held back such credit should review their position.

Classification and ITC clarifications (Circular 265/11/2026-GST)

• Used motor vehicles (margin scheme): the bar on ITC applies only to tax on second-hand vehicles bought for resale. Credit on spares, repairs, rent, technology and marketing services is available, subject to the usual conditions.
• Toys (heading 9503): non-electronic toys at 5% and electronic toys at 18%.
• Sublimation paper: classified under heading 4809 at 18%; past periods regularised on an “as is where is” basis.
• Seaweed extract bio-stimulants: classified as fertilisers under heading 3101 where registered under the Fertiliser Control Order; past periods regularised on an “as is where is” basis.

3. Delivery services through e-commerce operators

Notification 09/2026-Central Tax (Rate) revises the services for which an e-commerce operator pays tax under Section 9(5), with effect from 1 November 2026.

• A new entry covers delivery services supplied through an e-commerce operator, replacing the earlier entry for “local delivery”. Postal and courier services are excluded.
• The operator is liable only where the delivery service provider is not liable for registration under Section 22(1).
• Such delivery services attract GST at 5% without input tax credit (Notification 06/2026-Central Tax (Rate)).
• Where the provider is liable for registration, the provider pays tax itself at the same rate.

E-commerce platforms that onboard delivery partners should update their onboarding checks, tax codes and invoicing flows.

4. Export refunds: the 1.5x cap goes

Rule 89(4)(C) limited the value of zero-rated goods considered for refund to 1.5 times the value of similar goods supplied domestically. This cap often led to disputes and reduced refunds. It has been omitted from 1 November 2026.

5. Coming on 1 April 2027: capital goods in refunds and a fair process for ITC blocking

Notification 05/2026-Central Tax also contains two changes that take effect from 1 April 2027. They are worth planning for now.

a) Capital goods ITC in refunds

From 1 April 2027, ITC on capital goods attributable to inverted-rated or zero-rated (LUT) supplies will be included in the refund formula, spread at 1/60th per month over 60 months. Capital-intensive manufacturers and exporters should start tracking capital goods credit by product line.

b) Blocking of ITC under Rule 86A

Blocking of the electronic credit ledger will require a formal order in DRC-26, will last up to one year unless lifted earlier, and can be objected to in DRC-27, with a hearing and an order in DRC-28. This brings much-needed process and transparency to a power that has often been used without notice.

6. Faster refund processing

From 1 November 2026, the refund rules also change how quickly claims move through the system:

• Rule 90: the officer must acknowledge the refund application or point out deficiencies within 10 days, instead of 15. If neither happens, the application is deemed acknowledged.
• Rule 91: the portal may generate the provisional refund order (RFD-04) within 3 working days of acknowledgement, based on system risk assessment.
• Rule 92: final sanction orders and payment advices can now be generated by the portal, enabling automated processing and adjustment against outstanding demands.

Order of debit: Refunds sanctioned are now debited first from IGST credit, and then equally from CGST and SGST/UTGST credit (amended Rule 89(3)).

7. Input services now count in inverted duty refunds

For years, the inverted duty refund formula under Rule 89(5) considered only ITC on inputs (goods). ITC on input services such as freight, job work, professional fees and maintenance was left out, even where it was a large part of the accumulated credit.

What has changed: From 1 November 2026, “Net ITC” in the formula includes ITC on eligible input services, for credit availed on or after that date. Manufacturers with a significant services cost base should see a higher refundable amount.

This sits alongside the 90% provisional refund for inverted duty claims under Section 54(6), covered in our earlier update.

What this means for you

If you file inverted duty refunds, revisit your computation from the November 2026 period onwards to include eligible input services. Keep the input services ledger clean and supported by invoices, since these will now be examined in the refund.

8. Other changes worth noting

• Non-resident taxable persons: the due date for GSTR-5 moves from the 20th to the 13th of the following month.
• Road projects: Notification 10/2026-Integrated Tax (Rate) prescribes a special procedure for operation and maintenance services under the Toll-Operate-Transfer model.
• Revised refund form: a revised FORM GST RFD-01 applies from 1 December 2026.

Your action checklist

1. Ask your ERP or billing provider about e-invoice schema 1.2 and RCM self-invoice support; test on the GSTN sandbox.
2. List recurring RCM purchases and import of services transactions that will need an IRN from 1 January 2027.
3. Auto dealers: review ITC on demo vehicles and, for used cars, on repairs and service costs.
4. Check HSN mapping and rates for toys, sublimation paper and bio-stimulants.
5. E-commerce platforms: update delivery partner onboarding, tax codes and Section 9(5) reporting.
6. Exporters under LUT: review refunds that were earlier restricted by the 1.5x cap, for periods from November 2026.
7. Start tracking capital goods ITC by product line ahead of April 2027.
8. Track refund acknowledgements against the new 10-day timeline; follow up where deemed acknowledgement applies.
9. Recompute inverted duty refunds from November 2026 to include eligible input services.

In summary

These quieter changes are, in many ways, as valuable as the headline ones. The one change that needs early preparation is e-invoicing for RCM purchases and import of services from 1 January 2027, and two months is enough time to get systems ready comfortably. Beyond that, several long-standing credit questions have been settled in the taxpayer’s favour, and refunds become wider, faster and simpler.

If you would like us to recompute your refund claims, review your ERP readiness for RCM e-invoicing or examine whether any of the clarifications apply to your business, please get in touch with our team.

Disclaimer: This article is for general information only and is based on notifications, circulars and commentary available as on 3 November 2026. It does not constitute professional advice. Please refer to the official notifications and consult your tax advisor before acting on any of the above.