In a landmark decision pushing the transition toward “GST 2.0,” the 57th GST Council, chaired by Union Finance Minister Nirmala Sitharaman, approved sweeping structural reforms on Thursday, October 8.
The Council revoked the arrest powers previously held by GST tax officers and increased the minimum threshold for launching criminal prosecution from ₹1 crore to ₹5 crore.
The meeting, held at Bharat Mandapam in New Delhi, signaled a clear pivot from rate-setting toward administrative simplification, taxpayer trust-building, and reducing compliance-related anxiety for small businesses and MSMEs.
Decriminalisation & Limits on Tax Enforcement
Under the new framework, tax officers will focus strictly on tax recovery and civil compliance, leaving criminal legal proceedings to dedicated law enforcement authorities.
Key enforcement adjustments approved by the Council include:
- Scrapping Arrest Powers: Revocation of officers’ powers to execute arrests in cases of tax evasion, delayed filings, or cash-flow disputes.
- Higher Prosecution Threshold: Criminal prosecution will now apply only to major fraud or tax evasion cases exceeding ₹5 crore.
- Judicial Discretion on Penalties: The mandatory minimum punishment has been removed, leaving sentencing, fines, or imprisonment entirely to judicial discretion.
- General Penalty Reduction: The standard general penalty for minor procedural lapses where no specific penalty is defined has been slashed from ₹25,000 to ₹10,000.
- No Notices Below ₹10,000: Tax authorities will no longer issue notices or demand notices for tax amounts of ₹10,000 or below, resolving roughly 20% of low-value pending disputes.
Relief for MSMEs, Exporters, and E-Commerce Sellers
The Council introduced several trade-facilitating measures to promote seamless logistics and expand national market access:
”The rate structure is now settled, so the Council has turned its focus to day-to-day administrative ease and building trust with compliant taxpayers,” the Ministry of Finance noted in its official briefing.
- E-Commerce Warehouse Sharing: Small online sellers can now utilize an e-commerce platform’s local warehouse as their registered place of business without establishing separate physical offices across multiple states.
- Faster Refund Sanctions: The timeline for acknowledging refund claims has been reduced from 15 days to 10 days, with 80% of risk-verified refund claims sanctioned within three working days.
- Input Tax Credit on Employee Insurance: Employers purchasing group health or life insurance coverage for their staff will now be eligible to claim Input Tax Credit (ITC).
- Annual GST Rate Adjustments: Moving forward, GST rate modifications will be restricted to once a year, taking effect at the beginning of each financial year to ensure market predictability.
The proposed statutory amendments and legislative changes will be implemented in phases beginning early next year.
