GST Council scraps arrest powers of GST officers, ups prosecution threshold to ₹5 crore

The GST Council recently abolished the arrest power of tax officers, four days following a report in The Indian Express about the impending action. Concurrently, the Ministry of Finance revealed that the prosecution threshold has been elevated to Rs 5 crore, up from the previous limit of Rs 1 crore. The council's deliberation on the proposal was planned for their meeting on October 7, aimed at enhancing investor confidence and addressing apprehensions about potential overreach by tax authorities, according to two sources familiar with the matter.

Finance Ministry officials explained that the GST rate structure is now fixed, prompting the council to focus on the practical application of the tax. Moving forward, GST rate adjustments will occur only once annually. While the minimum punishment for violations has been eliminated, the nature of the penalty, whether a fine, imprisonment, or both, remains at the discretion of the judiciary in each case.

The general penalty has been reduced from Rs 25,000 to Rs 10,000 for offenses without a prescribed penalty. This adjustment is expected to foster a more favorable environment for businesses and traders, who have expressed concerns over recent high-profile arrests under GST provisions, which were perceived by industry leaders as an unwarranted intrusion.