Source : INDIA TODAY NEWS
The GST Council on Thursday approved a sweeping set of enforcement and procedural reforms aimed at easing compliance for businesses, with key decisions including the removal of arrest powers under GST, a five-fold increase in the prosecution threshold and a series of measures to simplify registration, returns, refunds and input tax credit.
The Council has raised the threshold for prosecution from Rs 1 crore to Rs 5 crore and removed the power of arrest under GST. The general penalty has also been reduced from Rs 25,000 to Rs 10,000. GST Meeting notes
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The decisions form the second phase of GST 2.0, with the focus now shifting from tax rates to how the system works for businesses and taxpayers on a day-to-day basis. The government said no GST rates were changed at Thursday’s meeting. Rate-related matters will be taken up once a year at a meeting dedicated to them. GST Meeting notes
The Council’s latest decisions come about a year after the major GST rate rationalisation exercise. The government said taxable supply has risen 25.8% to Rs 50.58 lakh crore a month from Rs 40.19 lakh crore, while GST revenue has grown 11% in FY27 so far. GST Meeting notes
GST ARREST POWERS REMOVED
One of the biggest changes approved by the Council is the removal of the power of arrest under GST.
The move is aimed at shifting enforcement towards detection of tax evasion rather than deterrence through criminal action. The government said the GST system now has the ability to match seller and buyer invoices and identify fake credit closer to where it is created, allowing enforcement to rely more on data and analytics. GST Meeting notes
The Council has also raised the prosecution threshold from Rs 1 crore to Rs 5 crore. The minimum punishment has been removed, with the punishment — whether fine, imprisonment or both — left to judicial discretion in each case. GST Meeting notes
The changes address one of the key concerns raised by businesses ahead of the meeting around the criminalisation of routine GST disputes and compliance issues.
BIG PUSH FOR EASIER COMPLIANCE
The Council has approved a range of measures aimed at reducing the paperwork and friction involved in GST registration and return filing.
GST registration is already being granted within three working days without officer intervention for low-risk applicants and those whose output tax on supplies to registered persons does not exceed Rs 2.5 lakh a month. The government said 61% of registrations already come through this automated route. GST Meeting notes
The application form will also be redesigned to show applicants only the fields relevant to them and explain the purpose of each document.
For returns, businesses will be allowed to correct earlier periods and errors such as an incorrectly entered buyer registration number. The Invoice Management System will also be used for settling credit, with the government saying what a buyer accepts will enter the return. GST Meeting notes
REFUNDS TO GET FASTER
The Council has also approved measures to speed up GST refunds, which could provide relief to exporters and businesses facing inverted duty structures.
The time limit for acknowledging a refund claim will be reduced from 15 days to 10 days. If neither an acknowledgement nor a deficiency memo is issued within 10 days, the claim will be treated as acknowledged.
The system will sanction 90% of the claim based on risk assessment, with the order to be issued within three working days of acknowledgement, compared with seven days currently. Refunds of excess balances in the cash ledger will also become fully automatic. GST Meeting notes
The Council has also expanded refund eligibility for input services in cases involving inverted duty structures from November 1, 2026. Refunds related to plant and machinery will also be allowed from April 1, 2027, with the credit spread over the working life of the asset. GST Meeting notes
The government said the changes could help sectors such as pharmaceuticals and FMCG improve working capital management.
RELIEF FOR GENUINE BUYERS ON INPUT TAX CREDIT
The Council has not yet finalised a blanket protection for genuine buyers whose suppliers default on their GST obligations.
Instead, it has decided to constitute a committee of officers to examine how a genuine buyer holding a proper invoice, having received the goods and paid the supplier in full can be protected.
The committee has three months to complete its study, after which the issue will be placed before the next GST Council meeting. GST Meeting notes
At the same time, the Council has approved ITC on several categories of ordinary business spending, including health and life insurance taken for employees, telecommunications towers and pipelines outside factories, free samples and stock written off after expiry where destruction is required by law. GST Meeting notes
SMALL BUSINESSES, E-COMMERCE GET RELIEF
The Council has also approved in principle an optional compliance scheme for small taxpayers with turnover of up to Rs 5 crore who supply only to consumers.
Under the proposed framework, these taxpayers would file returns once a year while paying tax quarterly. The detailed framework and required amendments will come before the Council at its next meeting. GST Meeting notes
The Council has also eased rules for small sellers operating through e-commerce platforms.
A seller will be able to declare an e-commerce operator’s warehouse in another state as its principal place of business there, with the operator’s consent given automatically through the system. The facility will be available to sellers below the specified risk threshold, while those crossing it will move to ordinary registration. GST Meeting notes
GOODS IN TRANSIT TO FACE FEWER CHECKS
The Council has also changed the rules governing physical checks of goods in transit.
A vehicle can now be stopped only on the basis of specific intelligence, with prior authorisation from an officer not below the rank of Joint Commissioner.
Only the state from which the goods originate and the destination state will be able to inspect the consignment. States along the route will not be able to stop the vehicle.
The government gave the example of a consignment crossing five states: instead of being open to checks in each state, it will now be checked only at the origin and destination. GST Meeting notes
BOOST FOR SERVICES EXPORTS AND MANUFACTURING
The Council has also approved changes that could benefit India’s services exporters and contract manufacturers.
An Indian company serving a foreign client through its own overseas branch will get export benefits, while work done in India on goods belonging to a foreign client — including testing, repair, certification, research or processing — will also qualify as an export of service even if the goods do not leave India. GST Meeting notes
The move could benefit sectors such as analytics, design, engineering and contract manufacturing.
Ahead of the meeting, Karthik Mani, Partner & Leader – Indirect Tax: South, Tax & Regulatory Advisory at BDO India, had said extending export treatment to work done in India for overseas customers could benefit emerging sectors such as semiconductors and electronics.
STATES WELCOME GST REFORMS
Several state representatives welcomed the outcome of the meeting.
Goa Chief Minister Pramod Sawant said the reforms addressed difficulties that people had faced earlier.
“I welcome the reforms brought about in today’s GST meeting. The measures introduced address the difficulties many people previously faced; this time, the GST Council has taken steps to resolve those issues. I extend my sincere appreciation to the Finance Minister,” Sawant said, according to ANI.
Delhi Chief Minister Rekha Gupta also welcomed the changes, saying the Council had focused on simplifying the GST framework and improving its implementation.
“Everything about this is special. It is excellent that all the states come together for the GST Council meeting. Discussions were held on how to provide even better facilities to Indian citizens, how to simplify the entire GST framework and make it more user-friendly, and how to ensure better implementation; the results have been very positive,” Gupta said, according to ANI.
West Bengal Finance Minister Swapan Dasgupta said GST was particularly important for the state as a large portion of its revenue comes from the tax.
“GST is always very useful for a state like West Bengal. A large portion of our revenue is accrued through GST. In this context, the rationalization of various proposals—particularly regarding ‘Ease of Doing Business,’ which I believe was a major focus of the structural reforms this time—will ultimately, in the long run, benefit a state like West Bengal by making it easier for us to operate,” Dasgupta said, according to ANI.
On compliance, he added that while it has often been a challenge in West Bengal, there is now greater awareness about it, calling the meeting “very positive”.
NO GST RATE CHANGES THIS TIME
Unlike the previous major GST exercise, Thursday’s meeting did not change any GST rates.
The government said the rate structure is now settled and the Council will focus on resolving inconsistencies and ambiguities that remain after last year’s exercise. Rate matters will be taken up once a year at a meeting dedicated exclusively to them. GST Meeting notes
The latest decisions therefore mark a shift in GST 2.0 from rate rationalisation to process rationalisation — with the emphasis now on making registration, filing, refunds, credit claims and enforcement simpler for businesses while using data and analytics to target genuine tax evasion.
– Ends
SOURCE :- TIMES OF INDIA
