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The GST Council has ushered in significant reforms, including the removal of tax officials’ arrest powers, a fivefold increase in the prosecution threshold, and the introduction of faster, automated refunds, all set to enhance ease of doing business and foster trust among taxpayers.
IMAGE: Union Finance Minister Nirmala Sitharaman, Jammu and Kashmir Chief Minister Omar Abdullah, Karnataka Chief Minister DK Shivakumar during the 57th Goods and Services Tax Council Meeting at Bharat Mandapam, in New Delhi. Photograph: Naveen Sharma/ANI
Key Points
- The GST Council has removed the power of tax officials to arrest and raised the prosecution threshold from Rs 1 crore to Rs 5 crore.
- Faster and largely automated refunds for taxpayers have been approved, along with an extension of refunds under the inverted rate structure to input services.
- The general penalty for GST violations will be reduced from Rs 25,000 to Rs 10,000, and no notices will be issued for cases below Rs 10,000.
- The reforms, which also include removing minimum punishment and leaving penalties to judicial discretion, are set to be implemented from April 1, 2027.
- Finance Minister Nirmala Sitharaman stated that 99 per cent of GST issues, both rate and process-related, have been addressed, moving towards a ‘next generation GST’ based on trust.
The high-powered GST Council on Thursday approved removing the arrest power of tax officials and raising the threshold for prosecution fivefold to Rs 5 crore, while introducing faster and largely automated refunds for taxpayers.
Announcing the decisions taken at the 57th meeting of the GST Council, Finance Minister Nirmala Sitharaman said it also decided to bring down the general penalty from Rs 25,000 to Rs 10,000.
Key Reforms and Implementation
The changes approved by the GST Council will be implemented from April 1, 2027.
The Council also cleared a proposal that a taxpayer who files late, makes a mistake or falls behind on payment will face recovery, interest and a proportionate penalty, and nothing beyond that.
Another key recommendation was about extending refunds under the inverted rate structure to input services. The change will be available for credit availed on or after November 1, 2026, Sitharaman said.
The Finance Minister also said that the government intends to introduce faceless tax assessment for Central Goods and Services Tax (CGST) taxpayers registered in multiple states.
Easing Compliance and Penalties
Sitharaman said the power of arrest will be removed from GST and the threshold for prosecution will be raised from Rs 1 crore to Rs 5 crore.
Also, no notices will be issued in cases below a monetary threshold of Rs 10,000.
The Council, comprising Union and state finance ministers, also recommended removing the minimum punishment.
Also, the punishment, whether fine or imprisonment or both, will be left to judicial discretion in every case.
Sitharaman further said the general penalty, applicable where no specific penalty is provided, will also be reduced from Rs 25,000 to Rs 10,000.
She also said no GST rates have been changed at the meeting.
The recommendations of the Council will come into effect from April 1.
Towards ‘Next Generation GST’
Replying to a query, Sitharaman said the GST Council had mostly addressed the aberrations because of ITC and addressed the duty inversion.
“So, I don’t think there are many outstanding issues which are fundamental to ease of doing business or fundamental to anomalies and rates remain. So, yes, you can say GST next generation GST, 99 per cent issues have been addressed, rate or process,” Sitharaman said.
The GST reform Process has been driven from the principle of trust, the Minister said.
“Business has to be trusted. Taxpayers have to be trusted. And businesses among themselves, with trust, if they do it, we shouldn’t be too intrusive,” she added.
