GST officers lose arrest powers

New Delhi The GST Council on Thursday approved the removal of GST tax officers' powers to arrest individuals under the Goods and Services Tax (GST) law and raised the prosecution threshold fivefold from Rs 1 crore to Rs 5 crore, while leaving tax rates unchanged at its 57th meeting. The Council also approved reducing the general penalty from Rs 25,000 to Rs 10,000, accelerating tax refunds, simplifying registration for small e-commerce sellers and easing compliance requirements for businesses. Finance Minister Nirmala Sitharaman said the reforms announced on Thursday would be implemented from April 1, 2027, the beginning of the next financial year. The Council also decided that GST rate-related matters would be considered once a year at a meeting dedicated exclusively to tax rates. It removed the provision for minimum punishment, leaving decisions on fines, imprisonment or both to judicial discretion. Taxpayers who file returns late, make mistakes or delay payments will face tax recovery, interest and proportionate penalties, without additional punitive action for such defaults. Faster GST refunds approved The Council reduced the time limit for acknowledging refund claims from 15 days to 10 days. Claims will be deemed acknowledged if no acknowledgement or deficiency memo is issued within that period. Under the new system, 90% of eligible refund claims will be sanctioned automatically following risk assessment, with orders issued within three working days instead of seven. Refunds of excess balances in electronic cash ledgers will also become fully automatic. MSMEs, small sellers get compliance relief The Council approved in principle an optional annual return scheme for businesses with turnover of up to Rs 5 crore that supply exclusively to consumers. Eligible taxpayers will file returns annually while paying GST quarterly. It also approved a Rs 10,000 minimum threshold for issuing show-cause notices. Small sellers operating through e-commerce platforms will be allowed to use a platform operator's warehouse as their principal place of business in another state, subject to conditions, eliminating the need to establish separate physical premises. GST registration and amendments will also be simplified through automated approvals and technology-led processes. ITC relief and export reforms The Council approved input tax credit (ITC) on health and life insurance purchased by businesses for employees, along with telecommunications towers, certain pipelines, free samples and specified expired stock. It also extended refunds under the inverted duty structure to input services and removed the exclusion of plant and machinery from refunds for exporters and eligible businesses. Exporters and transporters get relief The Council approved clarifications allowing services provided through overseas branches and work undertaken in India on goods belonging to foreign clients to qualify for export benefits. It also restricted physical checks of goods in transit to cases involving specific intelligence and prior authorisation from an officer not below the rank of Joint Commissioner. Only the originating and destination states will be permitted to inspect goods in transit, reducing repeated checks along transport routes. No GST rate changes The Council made no changes to GST rates, with the Finance Ministry stating that the existing rate structure was settled. According to the ministry, taxable supplies have risen 25.8%, from Rs 40.19 lakh crore to Rs 50.58 lakh crore a month, following the introduction of the two-rate structure. The effective tax rate on domestic supplies declined from 14.55% to 13.13%, while GST revenue grew 11% in FY2026-27 compared with the previous year.

57th GST Council meet outcome • Arrest powers: GST officers' powers to arrest have been revoked. • Prosecution threshold: The threshold for launching prosecution has been raised to Rs 5 crore from Rs 1 crore. • Punishment: The minimum punishment for offences has been removed, with courts to decide whether to impose a fine, imprisonment or both. • General penalty: The general penalty, applicable where no specific penalty is prescribed, has been reduced to Rs 10,000 from Rs 25,000. • GST notices: Common standards will be followed for GST notices and proceedings, with no notices issued for amounts of Rs 10,000 or below; pending notices below the threshold will also be withdrawn. • E-commerce sellers: Small sellers operating through e-commerce platforms will get easier compliance norms. • Employee insurance: Employers will be allowed input tax credit on GST paid for employee insurance cover. • Refund claims: The time limit for acknowledging refund claims has been reduced to 10 days from 15 days. • GST rates: The existing GST rate structure has been retained, with rate changes to be considered once a year. • Input tax credit: A Committee of Officers will examine how to protect genuine buyers who have valid invoices, received the goods and paid their suppliers in full. The committee will submit its study within three months. • GST registration: The Council will consider further automation of GST registration and amendments. Registrations suspended over procedural lapses could be restored automatically once the lapse is corrected, while cancellation of registration after business closure is proposed to be simplified.