Centre and States to Review GST Process Reforms Ahead of the April 2027 Rollout
The Centre will review, together with the states, how the GST reforms recommended by the GST Council are being put into practice. The aim is to find gaps within about three months, before the reforms take effect on 1 April 2027.
The review will check whether the reforms are actually reaching businesses and making compliance easier, as intended.
The reforms were recommended at the 57th GST Council meeting in New Delhi on 8 October 2026. They focus on GST processes (registration, refunds, notices and enforcement), not on tax rates.
The biggest proposal is the complete removal of GST officers' power to arrest taxpayers, by deleting Section 69 of the CGST Act, 2017. Prosecution in court for real fraud will continue.
Other proposals include raising the money limit for criminal prosecution to ₹5 crore (reported as up from ₹1 crore), cutting the maximum general penalty from ₹25,000 to ₹10,000, no show-cause notices for tax below ₹10,000, and system-based refunds where 90% of zero-rated and inverted-duty refund claims are sanctioned automatically, with most refunds cleared within three working days.
On the road, only the state where goods start and the state where they end up can inspect a goods vehicle. Vehicles can be stopped only on specific intelligence, with approval from an officer of at least Joint Commissioner rank.
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, procedures and model laws. It was created by the Constitution itself, through Article 279A. Because both the Centre and the states give up some of their own taxing freedom to it, it is often called the best example of cooperative federalism in India.
The 57th Council meeting recommended these process reforms. Since GST is a shared tax, both the Centre and the states must change their laws and systems, so the planned joint review is about making sure all of them are ready by 1 April 2027.
GST Act Provisions on Offences and Arrests
The GST law punishes wrongdoing in two ways. 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, called prosecution. Arrest is a step taken during the criminal route. Today, Section 69 of the CGST Act lets a Commissioner authorise an officer to arrest a person suspected of serious GST fraud, such as issuing fake invoices to claim credit.
Removing arrest powers is the headline reform the Centre and states will track. Some states had argued that arrest is a useful deterrent, so the review will also watch whether fake-invoice fraud rises once the power goes.
Inverted Duty Structure Under GST
An inverted duty structure means the tax on what a business buys (its inputs) is higher than the tax on what it sells (its output). For example, a fabric maker may pay a higher GST rate on dyes and chemicals than the rate it charges on fabric. Because it collects less tax than it has already paid, unused tax credit piles up, and the business needs a refund to get its money back. Slow refunds lock up the working capital of such businesses, especially small ones.
Faster, system-based refunds are one of the reforms the Centre and states will review. For exporters and businesses stuck with inverted duty, quicker refunds mean money returns to the business sooner.
- 57th GST Council meeting: 8 October 2026, New Delhi; process reforms effective 1 April 2027
- Arrest powers: complete withdrawal, by omitting Section 69 of the CGST Act, 2017
- Prosecution money threshold: ₹5 crore (reported as raised from ₹1 crore)
- Maximum general penalty (Section 125): cut from ₹25,000 to ₹10,000
- No show-cause notice where tax involved is below ₹10,000
- Refunds: 90% provisional sanction automatically for zero-rated and inverted-duty claims; most refunds within 3 working days
- Acknowledgement or deficiency memo time limit: 15 days to 10 days
- Vehicle checks only on specific intelligence, authorised by an officer not below Joint Commissioner; only source and destination states may inspect
- GST rate changes to be taken up once a year
- GST Council voting: Centre 1/3 weight, states 2/3; decisions need a 3/4 majority of weighted votes