GST Council bets on easier compliance, removes arrest powers and raises prosecution threshold to ₹5 crore

The GST Council on Thursday (Oct 08) approved a series of measures to simplify compliance, reduce litigation and ease the burden on taxpayers. The key decisions include removing GST officers’ power to arrest taxpayers, raising the prosecution threshold from ₹1 crore to ₹5 crore and reducing the general penalty.

The 57th GST Council meeting, chaired by Finance Minister Nirmala Sitharaman, did not announce any new GST rate revisions.

The Council recommended removing the power to arrest taxpayers under GST. It also raised the prosecution threshold from ₹1 crore to ₹5 crore. This means cases involving amounts below ₹5 crore will not lead to prosecution under the revised threshold.

"The Council recommended removing arrest powers under GST. Council recommended raising the prosecution threshold from Rs 1 crore to Rs 5 crore. Anything below Rs 5 crore, no prosecution, and reducing the general penalty from Rs 25,000 to Rs 10,000," Sitharaman said during a press conference.

The Council has also removed the minimum punishment for GST offences. Any punishment, including a fine, imprisonment or both, will now be decided by the judiciary based on each case.

The general penalty, applicable where no specific penalty is prescribed, has been reduced from ₹25,000 to ₹10,000.

The Council also decided that taxpayers who file returns late, make mistakes or delay tax payments will face recovery, interest and a proportionate penalty, with nothing beyond that.

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No show-cause notice below ₹10,000

The Council has decided that no show-cause notice will be issued where the amount involved is below ₹10,000.

The move is aimed at reducing unnecessary litigation and making GST compliance easier for taxpayers.

GST refunds to become faster

The Council has reduced the time limit for acknowledging a refund claim 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 per cent of the claim based on a risk assessment, with the order issued within three working days of acknowledgement. Earlier, the order was issued within seven days.

Refunds of excess balances in the cash ledger will also become fully automatic, without officer involvement.

Faster registration for low-risk applicants

The Council has decided to continue automated GST registration within three working days for low-risk applicants.

The facility will also cover applicants whose output tax on supplies to registered persons does not exceed ₹2.5 lakh a month.

Around 61 per cent of registrations already come through the automated route, while the remaining applications are sent to an officer.

New compliance option for small taxpayers

The Council approved in principle an optional compliance scheme for taxpayers with turnover of up to ₹5 crore who supply only to consumers.

Under the proposed system, eligible taxpayers would file returns once a year while paying tax quarterly.

The detailed framework and required amendments will be brought before the Council at its next meeting.