GST Council meeting: Arresting powers of tax officers scrapped, prosecution threshold raised to Rs 5 crore
The Goods and Services Tax (GST) Council on Thursday recommended a series of changes aimed at easing compliance, reducing procedural burdens and simplifying the GST regime, while leaving the existing tax rate structure unchanged.Among the key decisions, the Council scrapped the arrest powers of tax officers and raised the threshold for prosecution to Rs 5 crore from Rs 1 crore. It also recommended common standards for GST notices and proceedings and decided that no notices would be issued for monetary amounts of Rs 10,000 or below. Pending notices below the threshold will also be withdrawn.The Council approved easier compliance norms for small sellers on e-commerce platforms and recommended allowing employers to claim input tax credit on GST paid on employee insurance cover. It also shortened the time limit for acknowledging refund claims from 15 days to 10 days.Talking about the reform finance minister Nirmala Sitharaman “Expects this set of GST process reforms to stabilise over next one year”.“About 99 pc issues related to rate, processes have been addressed by next-generation GST reforms,” FM added.Following are the key decisions taken at the 57th GST Council meeting chaired by FM Nirmala Sitharaman
- Arrest powers: GST officers’ powers to arrest have been revoked.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proceedings, with no notices issued for amounts of Rs 10,000 or below; pending notices below the threshold will also be withdrawn. “GST Council today has recommended common standards for notices and proceedings and no notices below the prescribed monetary threshold of Rs 10,000 rupees, including withdrawal of pending notices below the said threshold. We will not be issuing any notices for monetary thresholds of Rs 10,000 or below. But equally, we will be withdrawing pending notices below the said threshold. If it was issued, it will be withdrawn,” said Sitharaman after the meeting.
- 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. “The rate structure is settled, so the Council has turned to how the tax works day to day,” the finance ministry said, adding that GST rate changes will now happen 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. About 61 per cent of registrations are already approved within three working days without officer intervention, while around 66 per cent of amendment applications are proposed to be processed automatically. Registrations suspended over procedural lapses could also be restored automatically once the lapse is corrected, while cancellation of registration after business closure is proposed to be simplified.
Prime Minister Narendra Modi hailed the reforms. “I welcome the new round of GST reforms approved by the GST Council. The Council’s recommendations on removal of arrest provisions, greater decriminalisation and simpler procedures will have a very positive impact,” he said on X.“The focus is clear: Faster decisions. Lower compliance costs. Automated refunds. Trust-based administration. These are in line with our constant efforts to make GST more efficient, transparent and citizen-friendly,” he added.Industry experts reactReacting to decisions, Pratik Jain, partner at PwC, said, “The reforms announced are progressive and forward looking, ranging from unlocking capital to input tax credit rationalisation and ease of doing business. The inclusion of input services and capital goods in the scope of refunds will help sectors that were induced in inverted rate structure. Additionally, the decision to automate the provisional grant of 90% will provide a significant boost to the industry that can put liquidated capital back into business, promoting make-in-India.““Overall, the reforms will strike positivity amongst the industry, a welcome news amidst continued global uncertainties. Much more can be expected as GST completes 10 years in 2027,” he added.Additionally, Abhishek Jain, partner and national head – indirect tax, KPMG India said, “It will be interesting to see what the committee decides on ITC being denied to buyers when a vendor in the supply chain passes on fake credit or fails to pay tax. This is a big issue, and a large share of GST litigation is linked to it, so a fair solution would bring major relief to genuine businesses. Equally, the public consultation paper on centralised tax administration for companies with multiple registrations will be keenly watched.““The GST Council’s decisions mark a clear shift toward trust-based tax administration and greater ease of doing business. Rationalising arrest powers, raising the monetary limit for prosecution and restricting random roadside inspections will bring much-needed certainty for businesses. Allowing inverted duty refunds on input services and plant and machinery will help monetise accumulated credit and free up working capital for sectors like FMCG, pharma and food, though it will be interesting to see whether this applies only to credits availed after the effective dates or to past accumulated credit as well,” he added.Mahesh Jaising, partner and indirect tax leader, Deloitte India also drew attention to the evolution of GST with GST 2.0, saying, “The 57th GST Council meeting marks a defining moment in India’s indirect tax journey. Coming after a gap of more than a year, the Council has largely delivered on the expectations of the Industry, with recommendations that reflect the continued evolution of GST 2.0, with a clear focus on simplification, greater certainty, and a more taxpayer-centric approach to compliance.““As GST enters its tenth year, these decision send a strong signal that the next phase of reform will be driven by simplification, certainty, and strengthening confidence in the GST framework and advancing India’s ease of doing business agenda. We are clearly in a the phase of GST moving from stabilisation to optimisation!” he added.
Source: timesofindia.indiatimes.com