GST Reforms / GST Council Removes Arrest Powers of Tax Officers, Raises Prosecution Threshold to Rs5 Crore

New Delhi, Oct 8: In a major overhaul of the Goods and Services Tax (GST) compliance framework, the GST Council on Thursday approved a series of taxpayer-friendly measures, including the removal of arrest powers from GST officers and a fivefold increase in the threshold for prosecution from Rs1 crore to Rs5 crore.

The decisions were taken at the 57th GST Council meeting chaired by Union Finance Minister Nirmala Sitharaman, with the Centre and states agreeing on a set of reforms aimed at easing compliance and reducing the burden on businesses.

Focus on Procedures

Addressing the media after the meeting, Sitharaman said the Council's discussions were centred on process reforms rather than tax rate changes.

“No rate changes have been made. The rate structure is settled,” she said, emphasizing that the government's priority is to simplify procedures and improve the ease of doing business under the GST regime.

Major Relief for Taxpayers

One of the most significant decisions is the removal of the power of arrest from GST officers. The Council also raised the prosecution threshold to Rs5 crore from the existing Rs1 crore.

Further, the minimum punishment provision has been removed, leaving courts with the discretion to decide whether a case warrants a fine, imprisonment, or both. The general penalty applicable in cases where no specific penalty is prescribed has also been reduced from Rs25,000 to Rs10,000.

The Council clarified that taxpayers who file returns late, make genuine mistakes, or face payment delays will be subject only to recovery proceedings, interest, and proportionate penalties, with no additional punitive action.

Faster Refunds, Simplified Compliance

The Council also approved automatic acceptance of routine changes in GST registrations, a move expected to reduce delays and administrative hurdles.

To improve cash flow for businesses, the acknowledgement period for refund applications has been reduced from 15 days to 10 days. Additionally, 90 per cent of eligible refunds will be processed within three working days.
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In another key decision, businesses will be allowed to claim input tax credit (ITC) on additional expenditure categories, including telecom towers and employer-provided insurance coverage.

The reforms are expected to enhance taxpayer confidence, improve liquidity, and make the GST system more business-friendly while maintaining compliance standards.