GST Council Recommends Ending Arrest Powers, a ₹5 Crore Prosecution Threshold and Faster Refunds
At its 57th meeting on 8 October 2026, the GST Council recommended removing the power of GST officers to arrest people (Section 69 of the CGST Act).
The Council recommended raising the minimum tax amount for prosecution (a criminal case in court) fivefold, from ₹1 crore to ₹5 crore. No notices will be issued in cases below ₹10,000.
The minimum jail term will be removed, leaving it to the judge to choose jail, fine or both. The general penalty (used when no specific penalty is fixed) will fall from ₹25,000 to ₹10,000.
For late filing, mistakes or late payment, a taxpayer will face only recovery of tax, interest and a proportionate penalty, and nothing beyond that.
Refunds will be faster and largely automated. Refunds under the inverted duty structure (where inputs are taxed more than the final product) will now cover input services, for credit taken on or after 1 November 2026.
No GST rates were changed. The offence and penalty changes need amendments to the GST laws and are expected to apply from 1 April 2027.
The GST Council (Article 279A)
The GST Council is a joint body of the Union Finance Minister and the finance ministers of all states. It recommends the main rules of the Goods and Services Tax (GST): rates, exemptions, and the law and procedure. It was created by Article 279A of the Constitution, added by the 101st Constitutional Amendment Act, 2016. Because both the Centre and the states sit at one table, it is often called a model of cooperative federalism.
The 57th meeting shows the Council's role in reshaping GST law, not just rates. Its recommendations on arrests, prosecution and penalties will take effect only after Parliament and the state legislatures amend their GST Acts, which is why a later date of 1 April 2027 has been given.
GST Act Provisions on Offences and Arrests
GST law has two kinds of punishment. The first is money punishment: tax, interest and penalty, decided by tax officers. The second is criminal punishment: jail, decided only by a court after a trial (prosecution). Jail is meant for serious, deliberate frauds such as fake invoices and large tax evasion, and for such cases the law also lets senior officers arrest a person before trial.
Removing Section 69, raising the prosecution threshold to ₹5 crore and dropping the minimum jail term would make GST a largely civil (money-based) system. Deliberate, large frauds can still be taken to court, but officers would no longer be able to arrest under GST law. This follows the wider push to decriminalise minor business offences.
Inverted Duty Structure Under GST
An inverted duty structure is when the GST on what a business buys (inputs) is higher than the GST on what it sells (output). For example, a fabric maker may pay 18% on dyes but charge only 5% on fabric. The unused tax credit then piles up and stays stuck with the government, blocking the business's cash.
Many goods moved to the 5% slab in September 2025 while some inputs stayed at 18%, so stuck credit grew. By letting businesses get refunds of tax paid on input services and machinery, and by speeding up refunds, the Council aims to free up working capital, especially for sectors like textiles, pharmaceuticals and food processing.
- 57th GST Council meeting: 8 October 2026, New Delhi
- Arrest power under Section 69 of the CGST Act recommended for removal
- Prosecution threshold: ₹1 crore to ₹5 crore (fivefold); no notices below ₹10,000
- Minimum punishment to be removed; jail, fine or both left to the court
- General penalty: ₹25,000 to ₹10,000 (Section 125)
- Inverted duty refund extended to input services: credit availed on or after 1 November 2026
- Plant and machinery refund: credit availed on or after 1 April 2027, at 1/60 per month
- Refund acknowledgement: 15 days to 10 days; 90% provisional refund within 3 working days
- No change in GST rates; offence and penalty changes expected from 1 April 2027
- GST Council: Article 279A (101st Amendment, 2016); three-fourths weighted vote (Centre 1/3, states 2/3); quorum one-half