Noida, Oct 9 (APAC Media): The GST Council on Oct 8 recommended scrapping arrest provisions under GST law, raising the prosecution threshold from ₹1 crore to ₹5 crore and reducing the maximum general penalty from ₹25,000 to ₹10,000, as part of a broader set of reforms aimed at easing compliance, reducing litigation and improving the ease of doing business.
The recommendations were made at the Council’s 57th meeting, chaired by Union Finance Minister Nirmala Sitharaman in New Delhi. The meeting focused on simplifying registration, streamlining return filing, expediting refunds and reducing litigation faced by businesses.
In a major relief for taxpayers, the Council recommended omitting Section 69 of the Central Goods and Services Tax (CGST) Act, 2017, which provides for arrest powers under GST.
It also proposed rationalising offences and punishments under Section 132 while retaining deterrence against fraud and deliberate tax evasion.
The proposed changes reflect a shift towards a more trust-based tax administration, with greater emphasis on transparency and proportionate enforcement.
“The objective is to reduce unnecessary compliance burdens, minimise disputes and provide greater certainty to taxpayers while maintaining safeguards against tax evasion,” the recommendations said in substance.
The Council also proposed a minimum threshold of ₹10,000 for issuing show-cause notices and a reduced penalty of 5 per cent in specified non-fraud cases where tax and interest are paid within the prescribed period after an adjudication order.
To ease the financial burden of litigation, it recommended capping pre-deposits at ₹40 crore for appeals involving only penalties and no tax demand.
Faster refunds, wider input tax credit
The Council recommended automated processing of eligible GST refunds to improve businesses’ cash flows. Under the proposed first phase, excess balances in electronic cash ledgers would be refunded automatically, while 90 per cent of eligible claims involving zero-rated supplies and inverted duty structures could be sanctioned provisionally through system-based risk assessment.
The deadline for issuing refund acknowledgements or deficiency memos is proposed to be reduced from 15 days to 10 days.
It also recommended expanding input tax credit (ITC) eligibility by removing specified restrictions relating to expenses such as outdoor catering, health and life insurance, telecommunication towers and pipelines outside factory premises.
Simpler registration and transport rules
Small sellers using e-commerce platforms could benefit from simplified GST registration, allowing eligible suppliers to expand into other states without establishing a physical place of business in each state.
The Council further recommended that vehicles transporting goods be intercepted only on the basis of specific intelligence and with authorisation from an officer of at least the rank of Joint Commissioner, subject to specified exceptions.
An optional Annual Return Quarterly Payment (ARQP) scheme received in-principal approval for taxpayers with turnover of up to ₹5 crore who exclusively supply goods or services to unregistered consumers.
“The 57th GST Council meeting marks a decisive move towards a trust-based tax regime. Removing the power of arrest, raising the prosecution threshold to ₹5 crore and reducing penalties sends a strong signal that genuine taxpayers will not be treated as offenders,” PHDCCI said.
The Council also recommended relief from late fees for eligible small taxpayers who file delayed returns by the end of the month in which they were due.
Boost for service exports
To support India’s services sector, the Council proposed changes to the definition of the export of services, potentially enabling more Indian businesses to claim refunds on eligible supplies involving foreign offices and branches.
It also recommended measures to improve dispute resolution, standardise tax notices and clarify GST provisions affecting businesses across sectors.
The recommendations will require the necessary legislative amendments, rule changes and notifications before implementation. A revised mechanism for correcting tax liabilities and ITC in returns is proposed to take effect from the April 2027 return period, subject to consultation and final approval.
The proposed reforms seek to make GST administration more predictable, reduce avoidable litigation and improve working capital availability for businesses, particularly small enterprises.
-ENDS–
Disclaimer: This article is for informational purposes only and is based on publicly available information. APAC Media is not responsible for investment decisions or losses. Please conduct your own research or consult a financial adviser before investing.
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