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The people’s newsroom

EconomyGST

GST Council recommends ending arrest powers, lifts prosecution threshold to ₹5 crore

The 57th Council meeting left the 5% and 18% slabs alone and focused on enforcement, refunds and registration. Most changes need law amendments or notifications first.

From the editorial desk · New DelhiPublished
GST Bhavan, Thiruvananthapuram
GST Bhavan, ThiruvananthapuramAmitbalani / Wikimedia

Key points

  1. The Council recommended withdrawing GST officers' arrest powers by omitting section 69 of the CGST Act, and raising the prosecution threshold from ₹1 crore to ₹5 crore.
  2. No show cause notice would be issued for demands below ₹10,000, and the general penalty would fall from ₹25,000 to ₹10,000.
  3. 90% of zero-rated and inverted-duty refund claims would be sanctioned automatically and provisionally on the basis of system risk checks.
  4. The release says the recommendations take legal effect only through circulars, notifications and law amendments.

The GST Council has recommended taking away the power of GST officers to arrest taxpayers and raising the threshold for criminal prosecution from ₹1 crore to ₹5 crore. The 57th meeting, held on 8 October 2026 at Bharat Mandapam in New Delhi and chaired by Finance Minister Nirmala Sitharaman, kept the tax slabs unchanged and concentrated on enforcement and compliance.

The meeting was the Council’s first since the 56th meeting in September 2025, which approved the move to a two-rate structure of 5% and 18%.

The official release says the Council recommended “complete withdrawal of arrest powers under GST by omission of section 69 of CGST Act, 2017”. Because this means deleting a section of the law, it needs Parliament and state legislatures to amend their GST Acts before it takes effect.

Prosecution is narrowed as well as made rarer. Apart from the higher ₹5 crore threshold, the release proposes dropping some offences from section 132(1) of the CGST Act and limiting the fake-credit offence to cases where input tax credit is taken without receiving goods, services or an invoice.

Business has to be trusted. Taxpayers have to be trusted.

Nirmala Sitharaman, Union Finance Minister, at the post-meeting briefing on 8 October 2026, as reported by Deccan Chronicle

Taxscan reported the Finance Minister as saying that prosecution would continue where there is criminality.

Smaller demands, smaller penalties

No show cause notice would be issued where the total tax at stake (central, state and integrated GST plus cess) is below ₹10,000. Pending notices under that amount would be decided as if the threshold had applied when they were issued.

The general penalty under section 125, which applies where no specific penalty is set, would fall from ₹25,000 to ₹10,000. In cases without fraud, the penalty would drop to 5% if tax and interest are paid within 30 or 60 days of the order, depending on the section.

57th GST Council: key thresholds

  • ₹5 croreproposed prosecution threshold, up from ₹1 crore
  • ₹10,000minimum tax at stake before a show cause notice
  • 90%of zero-rated and inverted-duty refund claims to be sanctioned automatically and provisionally
  • 1 Nov 2026input services credit becomes refundable under the inverted duty structure

Refunds, credit and registration

The time to acknowledge a refund claim would fall from 15 days to 10, with deemed acknowledgement after that. Exporters and businesses with an inverted duty structure would get 90% of their claim sanctioned automatically and provisionally, based on a system risk assessment.

Refunds of accumulated credit on input services under the inverted duty structure would be allowed for credit taken on or after 1 November 2026. Credit on capital goods would become refundable for credit taken on or after 1 April 2027, spread over 60 months.

The Council also recommended removing restrictions on input tax credit for health and life insurance, outdoor catering, telecom towers, pipelines outside factory premises and free samples. Small e-commerce sellers without a physical presence in a state could register automatically by declaring the platform’s warehouse as their place of business.

Rates largely untouched

The release says process reform was the focus. The few rate decisions were item-specific: psyllium seeds move to NIL, passenger transport and rental by electric vehicles with operators gets an optional 5% rate with restricted credit, and delivery services through e-commerce operators are taxed at 5% without credit.

Prime Minister Narendra Modi welcomed the recommendations in a post on X: “The focus is clear: faster decisions, lower compliance costs, automated refunds and trust-based administration,” as quoted by Deccan Chronicle.

What happens next

The release states that the recommendations “would be given effect through the relevant circulars/ notifications/ law amendments”, and that only those carry the force of law. According to Deccan Chronicle and Taxscan, Sitharaman said the agenda items would be implemented from 1 April 2027.

The meeting came as collections stayed strong. Gross GST revenue in September 2026 was about ₹2.04 lakh crore, up 14.7% on a year earlier, according to provisional data reported by Business Today.

The documents