The GST regime is set for a significant shift in how tax violations are handled, with the GST Council approving a series of measures aimed at reducing the fear of criminal action and easing compliance for businesses.
At its meeting chaired by Union Finance Minister Nirmala Sitharaman on Thursday, the Council approved the removal of arrest powers available to GST officers. It also raised the monetary threshold for initiating prosecution from ₹1 crore to ₹5 crore, effectively limiting criminal proceedings to more serious cases.
Another important change concerns punishment. The mandatory minimum sentence has been done away with, giving courts greater flexibility to decide the appropriate penalty in each case. Depending on the circumstances, the punishment could involve a fine, imprisonment, or both.
The government has also reduced the general penalty, applicable in cases where the law does not prescribe a specific penalty, from ₹25,000 to ₹10,000.
In practical terms, the changes mean that taxpayers who make genuine compliance mistakes, file returns late or delay tax payments will primarily face financial consequences such as tax recovery, interest and proportionate penalties, rather than automatically being exposed to criminal proceedings.
The reforms come amid persistent concerns from businesses over stringent GST enforcement practices and the compliance burden faced by taxpayers. Industry has repeatedly sought a tax administration framework that distinguishes between deliberate tax evasion and routine or inadvertent compliance failures.
Speaking to reporters after the meeting, Sitharaman said the Council had deliberately focused on process-oriented reforms rather than altering GST rates. The objective, she said, was to simplify procedures, reduce compliance pressures and improve the overall ease of doing business.
