New Delhi: The Goods and Services Tax (GST) Council on Thursday recommended removing GST officers’ arrest powers and increasing the threshold for criminal prosecution to ₹5 crore at its 57th meeting. The proposals, agreed in New Delhi, aim to keep more lower-value disputes outside the criminal process while retaining enforcement against serious tax evasion.
The prosecution threshold concerns specified offences under GST law, not liability to pay tax. Businesses can still face recovery proceedings, interest and applicable penalties, while removing arrest powers from GST officers does not provide immunity from action under other criminal laws.
The council also backed removing mandatory minimum jail terms, leaving sentencing within statutory limits to courts, and lowering the ceiling for the general penalty from ₹25,000 to ₹10,000. Although the change was announced as an increase from ₹1 crore, existing law has differentiated between fake-invoice cases, carrying a ₹1 crore threshold, and other covered offences with a ₹2 crore threshold. The amended law will need to clarify precisely which offences come under the new limit.
Reducing routine disputes
The council recommended common standards for GST notices and proceedings, with no notices to be issued for amounts of ₹10,000 or below. Existing notices involving amounts within the threshold will also be withdrawn. “We will not be issuing any notices for monetary thresholds of Rs 10,000 or below. But equally, we will be withdrawing pending notices below the said threshold,” the finance minister, Nirmala Sitharaman, said after the meeting. The changes are intended to reduce disputes over small sums without automatically cancelling underlying tax liabilities.
Refund acknowledgements would be issued within 10 days instead of 15. A risk-based system is expected to provisionally sanction 90 per cent of eligible refund amounts within three working days of acknowledgement, potentially easing pressure on exporters’ working capital.
Registration is also set to become more automated. Already, 61 per cent of registrations are approved within three working days without officer intervention, while automated processing is proposed for roughly 66 per cent of routine amendment requests. Suspended registrations could be restored once procedural lapses are corrected, while cancellation on business closure would be simplified.
Small online sellers would be able to use a consenting e-commerce operator’s warehouse as their registered place of business in another state. Businesses supplying directly to consumers with turnover up to ₹5 crore could opt for annual returns and quarterly tax payments.
The council backed input tax credit on employee insurance. It also referred to a committee the question of protecting buyers who hold valid invoices, have received goods and paid suppliers but risk losing credit because suppliers did not deposit GST. The committee will report within three months.
Why the enforcement shift matters
Government figures presented to Parliament show that central GST formations recorded 72,393 offence cases and 887 arrests between April 2021 and December 2024. The figures illustrate the scale of enforcement activity, although the cases cannot be equated with prosecutions or wrongdoing established in court.
The government says improved invoice matching and data analysis make it easier to identify suspicious input tax credit near its source. That could support more targeted investigation rather than broad procedural intervention, although the effect will depend on implementation.
No change was announced to the main GST rate structure. Following the September 2025 rate rationalization, the Council is now concentrating on administration and compliance, with rate proposals to be considered separately each year.
The finance minister, Nirmala Sitharaman, indicated that the wider process reforms are planned for April 1, 2027. The arrest and prosecution changes will require legislative amendments and any necessary notifications before taking legal effect