GST & Income Tax Compliance Changes for FY 2026-27: Invoice Series, LUT, IMS, E-Invoicing, New TDS Sections and Practical Action Plan
1. GST Changes and Compliance Points for FY 2026-27
Some GST items for FY 2026-27 are not brand-new law changes, but they remain important from day one of the new financial year. Businesses should separate annual process resets from actual statutory amendments.
(A) Invoice Series From 1 April 2026
Under Rule 46 of the CGST Rules, a tax invoice must carry a consecutive serial number that is unique for a financial year. This means businesses must ensure a fresh financial-year-wise control over invoice numbering from 1 April 2026.
Example: If a business used FY26/INV/001 to FY26/INV/458 in FY 2025-26, it may begin FY 2026-27 with FY27/INV/001. It may also use a different compliant format, provided uniqueness for FY 2026-27 is maintained.
(B) LUT for Export and SEZ Supply Without Payment of IGST
Businesses making zero-rated supplies without payment of IGST should furnish LUT in Form GST RFD-11 before making such supplies.
- Export of goods without payment of IGST
- Export of services without payment of IGST
- Supply to SEZ unit or SEZ developer without payment of IGST
Example: If an exporter makes supplies worth ₹25,00,000 and does not operate under LUT, the exporter may have to pay IGST first and claim refund later. At 18%, that can block ₹4,50,000 of working capital.
(C) E-Invoicing Threshold: ₹5 Crore
E-invoicing continues to apply where aggregate annual turnover exceeded ₹5 crore in any preceding financial year from FY 2017-18 onwards, subject to the notified framework and exemptions.
Example: If turnover crossed ₹6 crore in FY 2021-22 but is only ₹3 crore in FY 2025-26, e-invoicing can still remain applicable because the threshold test looks at any relevant preceding financial year.
(D) 30-Day IRN Reporting Restriction for ₹10 Crore and Above Taxpayers
For taxpayers with aggregate annual turnover of ₹10 crore and above, the 30-day reporting restriction for IRN generation is already in force from 1 April 2025. So it continues into FY 2026-27.
Effect: if a covered invoice, debit note or credit note is reported beyond the allowed time window, IRN generation may be blocked by the system.
(E) IMS: Invoice Management System
IMS is now a key GST reconciliation tool. Recipients can take action on supplier-uploaded records by marking them as:
- Accept
- Reject
- Pending
Why it matters: IMS helps recipients identify wrong invoices, duplicate uploads, amendment errors and ineligible ITC before filing GSTR-3B.
(F) ITC Validation Is Getting Tighter
Even where the law wording remains similar, practical GST compliance is increasingly data-driven. ITC review should include:
- GSTR-2B matching
- Supplier filing status
- RCM compliance where applicable
- Blocked credit review
- IMS actions for disputed or incorrect invoices
(G) GST Refunds Below ₹1,000
The widely repeated claim that the minimum refund limit has been removed is not supported by the current official rule position I could verify. The safer and more accurate position is that refund below ₹1,000 is still generally not payable in the situations covered by section 54(14).
(H) Intermediary Services
The statement that intermediary services are now generally treated as export and zero-rated could not be verified from current official GST sources. Existing place-of-supply issues around intermediary services remain sensitive and fact-specific, and businesses should not assume a blanket zero-rating benefit without checking the exact transaction structure.
2. Income Tax Changes Effective 1 April 2026
The biggest direct-tax change is the commencement of the Income Tax Act, 2025 from 1 April 2026. This means Tax Year 2026-27 runs under the new Act, while AY 2026-27 return filing for FY 2025-26 remains under the old framework where applicable.
(A) New TDS and TCS Section Structure
| Old Framework | New Framework from 1 April 2026 | Meaning |
|---|---|---|
| Section 192 | Section 392 | TDS on salary |
| Sections 194 series and related withholding provisions | Section 393 | TDS on other payments |
| TCS provisions under old law | Section 394 | TCS under new law |
Example: A professional fee paid on 5 April 2026 should not continue to be mapped in software as old section 194J. Under the new Act, it has to be reported under the appropriate item in section 393.
(B) Rates and Thresholds Are Largely Not Changed
The official position is that TDS and TCS rates and thresholds are broadly retained. The big change is structural simplification and section renumbering, not a complete rate overhaul.
(C) Transition Rule for TDS
TDS law during transition depends on the earlier of credit or payment.
- If the triggering event happens on or before 31 March 2026, old law applies.
- If it happens on or after 1 April 2026, new law applies.
Example: A contractor bill credited on 31 March 2026 but paid in April 2026 will still be governed by the old Act because the earlier trigger occurred before 1 April 2026.
(D) Payroll and Salary TDS Systems Must Be Updated
From April 2026 onward, salary withholding should be aligned to section 392. Employers should also reset salary-TDS computation for the new tax year from 1 April 2026.
(E) TCS Simplification Claim Needs Caution
The claim that all major TCS categories now move to a flat 2% rate could not be verified from current official sources. The more reliable position is that section 394 consolidates TCS, but businesses should continue rate-wise validation item by item instead of assuming a single uniform rate.
(F) Form Changes
The Income Tax Department has rolled out new forms under the Income Tax Rules, 2026. However, I could not verify an official source confirming that salary certificate Form 16 has already been universally replaced by Form 130. So it is safer not to publish that as a confirmed compliance rule unless separately verified from a specific official notification or portal release.
3. April 2026 Action Plan
First 10 Days of April 2026
- Review invoice series controls for FY 2026-27.
- Furnish LUT if you plan zero-rated supplies without payment of IGST.
- Check e-invoicing applicability for all GSTINs under the PAN.
- Update ERP and accounting masters to new Income Tax Act, 2025 section references.
- Update payroll logic for section 392.
- Update vendor payment workflows for section 393 mapping.
- Update TCS mapping under section 394 wherever relevant.
- Train accounts and compliance staff on the old-law versus new-law transition.
By 7 April 2026
Deposit March TDS and TCS liabilities under the old law timeline where applicable.
Within April 2026
- Reconcile purchase register with GSTR-2B and IMS exceptions.
- Verify whether any e-invoice reporting is breaching the 30-day limit.
- Review export invoices for LUT endorsement and documentation.
- Recheck challans, utilities and return schemas under the new Income Tax Act, 2025 environment.
4. Major Risk Areas
1. Wrong Invoice Numbering Logic
The risk is not merely “not restarting from INV-001”. The actual risk is using a series that is not unique for the financial year, causing reconciliation and reporting issues.
2. LUT Not Filed Before Zero-Rated Supply
Where LUT is not in place, exporters may have to pay IGST first and claim refund later, causing unnecessary cash blockage.
3. E-Invoice Not Generated Within Time Window
For covered taxpayers, delayed IRN reporting can create downstream billing disputes, compliance failures and buyer-side credit concerns.
4. Wrong TDS Section Quoted After 1 April 2026
Even where rates remain same, quoting old section numbers in new-law periods may trigger utility or return validation errors.
5. Transition Mistakes Between Old Act and New Act
March 2026 liabilities and April 2026 liabilities cannot be blindly clubbed. Businesses need trigger-date based classification.
6. Overclaiming GST Benefits Based on Incorrect Viral Updates
Publishing or acting on unverified assumptions like “refund below ₹1,000 now allowed” or “all intermediary services are zero-rated” can lead to filing mistakes and notices.
5. Practical Examples
Example 1: Invoice Series
A taxpayer issued invoices up to FY26/458 in FY 2025-26. In FY 2026-27, the taxpayer starts with FY27/001. This is compliant because the invoice number remains unique for the financial year.
Example 2: LUT and Cash Flow
An exporter makes supplies of ₹15 lakh. Without LUT, IGST at 18% can temporarily block ₹2.7 lakh of working capital until refund.
Example 3: E-Invoice Delay
A taxpayer with AATO above ₹10 crore tries to report an invoice after the permitted reporting window. The IRN may be blocked by the system, creating commercial and GST compliance problems.
Example 4: Wrong TDS Section
A professional payment made on 6 April 2026 is still mapped in software to old section 194J. The rate may be same, but return filing can still face validation issues because the section reference belongs to the old Act.
Example 5: IMS Review
A supplier uploads an incorrect invoice amount. If the recipient reviews the record in IMS before filing, the mismatch can be identified early instead of surfacing later during reconciliation or scrutiny.
6. Compliance Checklist for FY 2026-27
- Ensure invoice series is unique for FY 2026-27.
- Do not assume invoice numbering must restart from INV-001.
- File LUT before zero-rated export or SEZ supplies without IGST.
- Check e-invoicing applicability based on any preceding financial year threshold test.
- Monitor 30-day IRN reporting where ₹10 crore and above rule applies.
- Review IMS dashboard regularly for mismatch control.
- Update ERP, payroll and TDS utilities to sections 392, 393 and 394.
- Classify March 2026 and April 2026 transactions under the correct Act.
- Do not assume small GST refunds below ₹1,000 are now allowable.
- Do not assume intermediary services automatically qualify as zero-rated exports.
7. Frequently Asked Questions
Is a new invoice series mandatory from 1 April 2026?
You must ensure invoice numbers are unique for FY 2026-27. Restarting from INV-001 is common practice, but not the only legally valid method.
Is LUT required for export of services without payment of IGST?
Yes. Businesses making zero-rated supplies without payment of IGST should furnish LUT in Form GST RFD-11 before such supplies.
What is the e-invoicing threshold now?
The notified threshold remains ₹5 crore, tested with reference to relevant preceding financial years under the notified framework.
Does the 30-day IRN rule still matter in FY 2026-27?
Yes. It continues for covered taxpayers with aggregate annual turnover of ₹10 crore and above.
What is IMS in GST?
IMS is the Invoice Management System that lets recipients accept, reject or keep records pending for better ITC reconciliation.
Is manual acceptance in IMS compulsory for every invoice?
No. Current portal guidance indicates that no-action invoices are generally treated as accepted for GSTR-2B generation, subject to system rules and eligibility conditions.
Has GST refund below ₹1,000 become allowable?
Based on the official sources reviewed, that claim is not safely supportable. The better view is that the minimum threshold restriction still continues in the relevant cases.
Have all intermediary services become zero-rated exports?
No blanket official change of that kind could be verified. Businesses should not assume automatic zero-rating for intermediary services.
Which TDS sections apply from 1 April 2026?
Section 392 applies to salary TDS, section 393 to other TDS categories, and section 394 to TCS under the new Act.
Have TDS and TCS rates changed completely under the new Income Tax Act, 2025?
No. The official position is that rates and thresholds are broadly retained, while the law has been reorganized and renumbered.
Can I still quote old section 194J or 194C after 1 April 2026?
For transactions governed by the new Act from 1 April 2026 onward, old section references should not be used in the new-law reporting framework.