GST Council reforms raise prosecution limit to Rs 5 crore and scrap arrest powers

The Goods and Services Tax Council concluded its 57th meeting in New Delhi by approving a sweeping package of administrative measures designed to streamline compliance, expedite refunds, and curtail litigation across the country. Union Finance Minister Nirmala Sitharaman stated that nearly 99 percent of rate and procedural concerns have now been addressed under the ongoing tax overhaul.

The wide-ranging decisions mark a definitive pivot toward administrative simplification and institutional trust-building for businesses and traders. All proposed modifications are scheduled to come into effect from April 1, 2027, following a comprehensive stabilization window over the next financial year.

Among the principal changes, the Council recommended removing arrest provisions under the indirect tax framework and raising the statutory threshold for criminal prosecution from ₹1 crore to ₹5 crore. Additionally, the maximum general penalty applicable where no specific fine is prescribed will be reduced from ₹25,000 to ₹10,000. Tax authorities have also been advised to drop demand notices involving tax dues under ₹10,000.

To address long-standing grievances regarding transit delays, the Council restricted vehicle inspections, detentions, and seizures strictly to officers of the originating or destination state. Under the revised guidelines, intercepting a transport vehicle will require specific intelligence inputs and prior written authorization from an official holding at least the rank of Joint Commissioner.

Refund processing timelines have also been significantly compressed. The period for issuing an acknowledgment or deficiency memo will drop from 15 days to 10 days, while 90 percent of eligible refund claims related to zero-rated supplies and inverted duty structures will be sanctioned provisionally through an automated risk-based system without requiring direct officer intervention.

Registration procedures will undergo automation for routine updates and cancellations, provided applicants have cleared their pending returns and dues. Furthermore, small retail sellers operating through e-commerce platforms gain an easier compliance route by utilizing warehouse facilities of operators as principal business addresses under defined conditions.

The Ministry of Finance noted that future rate-related adjustments will be evaluated only once a year during dedicated sessions. State ministers and senior revenue officials participated in the deliberations leading to the latest policy announcements.