The 57th GST Council meeting concluded with a decisive shift away from punitive enforcement. Finance Minister Nirmala Sitharaman confirmed that the Council removed the power of tax officials to make arrests for GST defaults. The prosecution threshold has simultaneously jumped fivefold, from ₹1 crore to ₹5 crore, a move designed to shield small and medium enterprises from aggressive legal action over minor discrepancies.
Sitharaman emphasized that the general penalty for non-compliance will drop from ₹25,000 to ₹10,000. No notices will be issued for cases involving amounts below ₹10,000. The Council also scrapped minimum punishment mandates, leaving the nature of penalties—whether fines or imprisonment—to judicial discretion. This structural change aims to eliminate the fear factor that has long plagued Indian businesses.
Refunds are getting faster and broader. The Council extended the inverted duty structure refund facility to input services, applying to credit availed on or after November 1, 2026. Faceless tax assessment will be introduced for Central GST taxpayers registered across multiple states, reducing human interference and potential bias. These procedural tweaks are already drawing praise from industry veterans.
Sohrab Bararia, Partner at Grant Thornton Bharat, called the refund measures a welcome relief for working capital concerns. Bipin Sapra, Indirect Tax Policy Leader at EY India, noted that extending refunds to input services restores GST's founding promise of seamless credit. “The message is unmistakable: GST administration is moving from suspicion to trust,” Sapra said, highlighting the removal of arrest powers as a key confidence builder.
Sitharaman declared that 99% of fundamental GST issues regarding rates and processes have now been addressed. The new framework takes effect on April 1, 2027, giving businesses time to adjust their compliance strategies. The immediate next step is the drafting of detailed procedural rules to implement the faceless assessment and automated refund mechanisms.