Upcoming GST Council Meeting on October 7: Key Proposals on Arrest Powers, ITC, and Prosecution Threshold
The GST Council is set to review a series of reforms aimed at overhauling GST processes and enforcement during its meeting on October 7. Key proposals include removing tax officers’ power to arrest taxpayers and requiring judicial authorization for any arrests. Additionally, the Council may consider raising the prosecution threshold from Rs 1 crore to Rs 5 crore and narrowing the scope of offences that can lead to criminal proceedings.
Proposed Changes to Arrest Powers
Central to the proposed reforms is Section 69 of the Central GST Act, which currently allows the Commissioner to authorize arrests under certain conditions. The new proposal would eliminate this power from GST officials, mandating that any arrest must receive judicial approval. While tax recovery, interest, and financial penalties would remain applicable, serious cases involving deliberate evasion or fraud could still be prosecuted in court.
Rajat Mohan, Managing Partner at AMRG Global, noted that this shift indicates a move from arrest-led deterrence to technology-led detection. He emphasized that with the removal of arrest powers, the focus will increasingly be on utilizing GSTN’s data capabilities to identify fraud rather than relying on coercive measures.
Changes to Prosecution Threshold
The Council is also likely to consider increasing the prosecution threshold from Rs 1 crore to Rs 5 crore. A source indicated that this adjustment would reserve criminal proceedings for cases of a scale that justifies such action. The proposals aim to keep routine disputes regarding classification, valuation, and input tax credit outside the criminal justice system. Of the 24 offences currently subject to prosecution, nine are proposed to be removed, while 11 would be retained and the remaining offences softened.
Input Tax Credit and E-commerce Proposals
Another significant proposal seeks to protect genuine buyers from losing their input tax credit if an upstream supplier fails to pay tax. Instead, recovery actions would target the defaulting seller. Additionally, the Council may allow employers to claim input tax credit on premiums paid for employee insurance, as current group insurance policies attract an 18 percent GST that businesses cannot reclaim.
For small e-commerce sellers, the Council may consider permitting platform warehouses to serve as registered places of business in states where sellers lack their own premises. This change could potentially benefit around 9.5 lakh small sellers by providing them access to broader markets. To mitigate litigation, the Council may also propose barring GST notices for tax demands below Rs 10,000, which currently represent about 20 percent of all cases.
Other Proposed Reforms
Further proposals include simplifying GST registration and annual returns, allowing quarterly tax payments for certain MSMEs, and implementing intelligence-led checks on goods vehicles. The Council is also considering a single 5 percent GST rate without input tax credit for goods ordered through e-commerce platforms. Additionally, there is a proposal to withdraw the IGST exemption for banks and nominated agencies importing gold, silver, and platinum.
Observer Voice is the one stop site for National, International news, Sports, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.
