The GST Council, meeting in New Delhi, will vote on October 7 to strip tax officers of arrest powers and raise the prosecution threshold to ₹5 cr. The move, anchored in Section 69 of the Central GST Act, would strip officers of the authority to detain taxpayers on statutory grounds. Arrests would now require judicial approval, ensuring a higher check on enforcement. The change signals a shift from coercive tactics to data‑driven detection, a sentiment echoed by GSTN chief Rajat Mohan.
Of the 24 current offence categories, nine would be excised, eleven retained, and two softened, narrowing the scope for criminal action. The proposal further proposes a jump in the prosecution threshold from ₹1 cr to ₹5 cr, reserving criminal proceedings for high‑scale evasion. This move could reduce the backlog of low‑value cases that clog the judiciary.
The bill also aims to protect genuine buyers from losing input tax credit when suppliers default. Recovery would shift to the defaulting seller, and employers could claim ITC on employee insurance premiums, an 18 % GST‑taxed expense. For small e‑commerce sellers, the council may allow platform warehouses to serve as registered business premises in states where the sellers lack their own. Around 9.5 lakh sellers could see wider market access, a benefit that could ripple through the informal economy. One such seller, 27‑year‑old Anju from Jaipur, told us she would no longer fear losing credits when a supplier fails to pay.
Other proposals aim to curb low‑value litigation and simplify compliance. Notices for tax demands below ₹10,000 would be barred, cutting roughly 20 % of cases. The council may also introduce quarterly tax payments for MSMEs, intelligence‑led checks on goods vehicles, and a single 5 % GST rate for e‑commerce deliveries without ITC. A separate note seeks to withdraw the IGST exemption for banks and agencies importing gold, silver and platinum, tightening the fiscal net on precious metals.
These reforms are part of GST 2.0, the next phase of the tax system following the September 2025 rate rationalisation that set 5 % and 18 % tiers. If the council’s motion passes, enforcement will pivot from arrest‑driven deterrence to judicial oversight and data analytics. The decision will be announced on October 7, and the new framework is slated for implementation in early 2027, pending parliamentary approval.