57th GST Council Meeting: Arrest Powers Removed, Prosecution Threshold Raised to ₹5 Crore, No Rate Changes
The 57th meeting of the GST Council was held on 8 October 2026. It did not change any GST rates. It decided that rate matters will be taken up only once a year, at a meeting kept only for rates.
The Council decided to remove the power of GST officers to arrest a person. Prosecution (a criminal case in court) will still be possible where there is real criminality, but an officer can no longer arrest someone only on suspicion.
The money threshold for starting prosecution was raised fivefold, to ₹5 crore of tax involved (reported as a rise from ₹1 crore). The minimum jail term was removed, so courts will decide the fine, jail or both in each case.
Penalties were softened: the general penalty falls from ₹25,000 to ₹10,000, and no notice will be issued for amounts below ₹10,000. Pending notices below this amount will be withdrawn.
Refunds and registration will be faster and largely automatic. Refunds for an inverted duty structure will also cover tax paid on input services (for credit taken from 1 November 2026), and on plant and machinery (from 1 April 2027, at one-sixtieth of the credit per month).
Small sellers on e-commerce platforms can declare the platform's warehouse in another state as their place of business there, with the platform's consent. An optional scheme was approved in principle for sellers with turnover up to ₹5 crore who sell only to consumers: one return a year and quarterly tax payment.
These changes need amendments to GST laws before they apply. Several are targeted for 1 April 2027.
GST Act Provisions on Offences and Arrests
The GST law punishes wrongdoing in two ways. Most mistakes (late filing, wrong claims, short payment) attract money consequences: tax demand, interest and penalty. Serious fraud, like fake invoices or deliberate tax evasion, can also lead to prosecution in a criminal court, which can end in jail. Section 132 of the Central GST (CGST) Act, 2017 lists the offences and punishments, and Section 69 gives the power of arrest.
The 57th Council has recommended removing the arrest power under Section 69 and raising the prosecution threshold to ₹5 crore. This continues the shift seen in 2023: treating most GST failures as civil (money) matters, and keeping criminal courts for large, deliberate fraud. Tax recovery, interest and penalties remain fully in place.
The GST Council (Article 279A)
The GST Council is a constitutional body made up of the Union Finance Minister and the finance ministers of all states. It recommends GST rates, exemptions, thresholds and the main rules of the tax. It was created by the 101st Constitutional Amendment Act, 2016, which inserted Article 279A. Because both the Centre and the states sit at one table, it is often called an example of "cooperative federalism".
The Council's 57th meeting shows its role beyond tax rates: it also recommends changes to enforcement, refunds and registration. Because these are recommendations, Parliament and state legislatures must amend the GST laws before the arrest power is actually removed.
Inverted Duty Structure Under GST
An inverted duty structure happens when the tax a business pays on what it buys (inputs) is higher than the tax it charges on what it sells (output). The business then keeps collecting unused tax credit that it cannot use up, which blocks its working capital (money needed to run daily business). Section 54(3) of the CGST Act allows a refund of this unused credit in such cases.
The Council has now decided to include tax paid on input services in inverted duty refunds (for credit taken from 1 November 2026), and plant and machinery from 1 April 2027. This answers the gap the Supreme Court pointed to in VKC Footsteps and helps sectors such as FMCG and pharma free up working capital.
- Meeting: 57th GST Council meeting, 8 October 2026
- No change in GST rates; rate matters to be considered once a year at a dedicated meeting
- Arrest power of GST officers to be removed (Section 69, CGST Act)
- Prosecution threshold raised to ₹5 crore of tax involved; minimum punishment removed
- General penalty cut from ₹25,000 to ₹10,000; no notices for amounts below ₹10,000 (about 12 lakh taxpayers benefit)
- Refund acknowledgment window cut from 15 to 10 days; refund orders within 3 working days of acknowledgment; about 90% of refunds to be sanctioned automatically on risk assessment
- Inverted duty refund on input services: credit availed from 1 November 2026; on plant and machinery: from 1 April 2027, at 1/60th per month
- Low-risk registration applicants (B2B output tax up to ₹2.5 lakh a month) get registration within 3 working days
- Optional scheme (in principle) for B2C-only taxpayers with turnover up to ₹5 crore: one annual return, quarterly tax payment; 16.85 lakh taxpayers report only consumer supplies, out of 1.05 crore active taxpayers
- Vehicles carrying goods may be stopped only on specific intelligence, with approval of an officer of Joint Commissioner rank or above
- Effective domestic GST rate fell from 14.55% to 13.13% after the September 2025 rate rationalisation
- GST Council: Article 279A, inserted by the 101st Amendment Act, 2016; three-fourths weighted majority (Centre one-third, states two-thirds)