GST Council scraps arrest powers of GST officers, raises prosecution limit to Rs 5 cr

NEW DELHI: The GST Council, led by Finance Minister Nirmala Sitharaman, on Thursday approved the removal of arrest powers from GST officers and increased the prosecution threshold to Rs 5 crore from Rs 1 crore.

The minimum penalty has been removed, and the penalty — be it a fine, jail, or both — is now subject to judicial discretion in each instance, according to the council’s decision. The Ministry stated that the general penalty, applicable in the absence of a specific penalty, has been reduced from Rs 25,000 to Rs 10,000.

A taxpayer who submits late, commits an error, or postpones payment will face recovery, interest, and a corresponding penalty, but no more than that. Companies throughout India have expressed concerns regarding strict tax regulations and requested improved conditions for conducting business. The modifications sanctioned by the GST Council, which consists of Union and state finance ministers, will take effect on April 1, 2027.

Speaking to reporters post meeting, Sitharaman mentioned that the council concentrated on reforms related to processes intended to enhance the ease of doing business and alleviate compliance burdens instead of modifying GST rates.

“When we mention that arrest has been removed, it has been removed from the control of a tax officer,” Sitharaman explained, clarifying the choice.

She emphasised that criminal prosecution would still be an option under the GST law. “The law allows for the prosecution of individuals in cases of criminal activity,” she stated. In further support for taxpayers, the council suggested that notifications concerning sums under Rs 10,000 should not be sent out, and any outstanding notices below this limit would also be retracted.

“Similarly, we will be retracting outstanding notices under the specified threshold. If it has been issued, it will be revoked,” stated Sitharaman. According to the minister, the GST reform process has been motivated by the principle of trust.

Among the important decisions, the council approved the automatic acceptance of regular modifications in GST registration, a step anticipated to reduce administrative hold-ups and enhance compliance efficiency. In addition, the government will expedite the refund process by shortening the acknowledgment period for refund requests to 10 days instead of the current 15 days.

In a significant ease for taxpayers, FM Sitharaman declared that 90 per cent of qualifying refund claims will be processed within three working days, a measure designed to enhance liquidity for businesses and exporters.

Furthermore, the council expanded the accessibility of input tax credit (ITC), enabling companies to claim credits on extra spending categories, such as telecom towers and insurance coverage provided by employers.