India
oi-Swastika Sruti
A set of significant reforms has been agreed upon by the GST Council to facilitate compliance among businesses as well as reduce unnecessary legal and procedural pressure on taxpayers.
The GST Council increased the prosecution threshold to Rs 5 crore, removed arrest powers for officers, and reduced penalties to improve compliance. Further process reforms are scheduled for implementation starting April 1, 2027.
As reported at its 57th meeting on October 8, Thursday, Union Finance Minister Nirmala Sitharaman said that the Council decided to strip GST officers of their powers of arrest and increase the threshold for prosecution from Rs 1 crore to Rs 5 crore.
It also lowered the general penalty to Rs 10,000 from Rs 25,000. These changes represent a significant step in changing the approach to GST to become more predictable and independent of physical intervention by the tax officers.
Sitharaman also stated that the GST rate structure is finalized now and further attention will be paid by the GST Council to its functioning..
GST Prosecution Threshold Raised From Rs 1 Crore To Rs 5 Crore
One of the biggest decisions is the increase in the GST prosecution threshold.
Earlier, prosecution could be initiated when the amount involved crossed Rs 1 crore. The Council has now recommended raising this limit to Rs 5 crore.
This means cases involving less than Rs 5 crore will not face prosecution under the revised threshold.
The Council has also removed the minimum punishment requirement. The nature of punishment – including a fine, imprisonment or both – will now be left to judicial discretion in individual cases.
The general penalty, which applies when no specific penalty is prescribed under GST law, has also been reduced from Rs 25,000 to Rs 10,000.
The changes are intended to distinguish serious tax evasion from routine compliance errors and reduce the possibility of criminal action in relatively smaller cases.
GST Officers Will No Longer Have Arrest Powers
The Council has also recommended removing the power of arrest available to GST officers.
The decision marks a major change in the enforcement approach under GST. The move is aimed at reducing fear among businesses and ensuring that criminal action is focused on serious cases of tax evasion rather than ordinary compliance disputes.
The reform was among the key proposals discussed at the 57th GST Council meeting and was ultimately approved as part of the wider process reforms.
Relief For Genuine Buyers Over Input Tax Credit
The Council also discussed a major concern related to Input Tax Credit (ITC).
At present, a genuine buyer can face problems if a supplier in the transaction chain fails to deposit the GST collected from the buyer. This can result in the buyer’s ITC being blocked even when the buyer has a valid invoice, has actually received the goods or services and has paid the supplier.
Sitharaman said the Council wanted to find a way to protect genuine taxpayers while preventing misuse of ITC.
However, the Council did not take a final decision on the issue. Instead, it decided to create a Committee of Officers to examine the matter.
The committee will submit its report within three months, after which the issue will be placed before the GST Council for a final decision.
Easier GST Rules For Small E-Commerce Sellers
Small businesses selling products through e-commerce platforms are also set to get easier compliance rules.
Under the approved framework, eligible small sellers will be able to declare an e-commerce operator’s warehouse in another state as their principal place of business, subject to the prescribed conditions and the operator’s consent through the system.
The seller will still need to maintain a physical presence in at least one state. The registration will apply to supplies made through the relevant e-commerce platform.
The move is expected to make it easier for small businesses to use warehouses in different states without having to maintain a separate physical establishment in every location.
Fewer Unnecessary Checks On Goods In Transit
The GST Council has also approved measures aimed at making the movement of goods smoother across states.
Sitharaman said goods can be intercepted only when there is specific intelligence and the interception is authorised by an officer of at least Joint Commissioner rank.
The Council has also recommended that inspection, detention or seizure of goods should be carried out only by officers from the supplier state or the destination state.
This is intended to reduce repeated checks when a truck carrying goods passes through several states.
GST Process Reforms To Start From April 1, 2027
Sitharaman said the process-related reforms approved at the meeting will be implemented from April 1, 2027.
The Council has also approved other measures to make GST compliance easier, including faster refunds and simpler registration procedures.
The acknowledgement period for refunds is being reduced from 15 days to 10 days, with the government saying that a large majority of refunds will be processed within three working days.
The Council has also decided that there will be no GST rate changes at this meeting. Going forward, GST rate-related matters will be taken up once a year at a dedicated meeting.
GST Council Shifts Focus From Rates To Ease Of Compliance
The latest decisions show a shift in the government’s approach to GST.
After the major GST rate rationalisation exercise, the focus has now moved towards improving the way the system works for businesses and taxpayers.
The latest reforms cover enforcement, prosecution, ITC, refunds, registration and the movement of goods. The broader objective is to reduce unnecessary disputes and physical intervention while retaining stronger action against serious tax evasion.
