GST Officers Lose Arrest Powers, Criminal Prosecution Threshold Raised To Rs 5 Crore, Minor Tax Evasion Gets Relief

09 October, 2026
GST Officers Lose Arrest Powers, Criminal Prosecution Threshold Raised To Rs 5 Crore, Minor Tax Evasion Gets Relief

Winning Bizness Desk

Mumbai.The GST Council has raised the threshold for criminal prosecution in tax-related offences from Rs 1 crore to Rs 5 crore, offering relief to businesses over smaller tax disputes. The decision was taken at the Council’s 53rd meeting chaired by Union Finance Minister Nirmala Sitharaman on Thursday.

Under the revised framework, tax irregularities below Rs 5 crore will generally be dealt with through penalties and civil proceedings rather than criminal prosecution. The changes also ease compliance for small businesses and reduce the burden of minor tax violations.

The Council has also decided that businesses will not receive notices for tax evasion involving less than Rs 10,000. However, the existing GST tax slabs and rates remain unchanged.

Criminal Prosecution Threshold Raised Fivefold To Rs 5 Crore

The decision marks a significant change in the treatment of GST offences. Earlier, criminal prosecution could be initiated in cases involving tax irregularities of Rs 1 crore or more. The threshold has now been increased fivefold to Rs 5 crore. The move is expected to provide relief to businesses facing criminal proceedings over relatively smaller tax disputes.

Key changes include:

  • The criminal prosecution threshold has been raised from Rs 1 crore to Rs 5 crore.
  • Cases below the revised threshold will generally be handled through penalties and civil proceedings.
  • Tax evasion involving less than Rs 10,000 will not attract a notice under the announced provision.

Courts To Decide Punishment And Imprisonment In Cases

The Council has also changed the framework governing punishment in GST cases. The earlier provision requiring a minimum fixed sentence in certain cases has been removed.

Under the revised arrangement, decisions on the punishment to be imposed, including whether imprisonment is warranted, will rest with the courts. The changes are aimed at reducing the scope for automatic or rigid punishment in tax-related offences. The revised framework also withdraws the direct arrest powers previously available to tax authorities in the covered cases, as outlined in the Council's decisions.

Buyers’ Input Tax Credit Claims To Get Greater Protection

The Council has decided to examine safeguards for genuine buyers claiming input tax credit (ITC), particularly when their suppliers are found to have committed fraud.

An official committee will study whether buyers should be protected from losing ITC when they have fulfilled the required conditions, including possessing a valid invoice, receiving the goods and making full payment to the supplier.

The committee will submit its report within three months. Its recommendations will then be placed before the Council at its next meeting. The move seeks to address concerns among businesses that comply with tax requirements but face difficulties because of fraudulent suppliers.

General Penalty Reduced From Rs 25,000 To Rs 10,000

The Finance Ministry has also announced a reduction in the general penalty applicable to cases where no specific penalty has been prescribed. The maximum general penalty in such cases has been reduced from Rs 25,000 to Rs 10,000, lowering the financial burden on businesses for certain compliance-related violations.

The reduction forms part of the broader effort to make the GST framework more proportionate and easier to comply with.

Small Online Sellers To Benefit From Simplified Rules

The Council has approved measures to simplify rules for small traders selling goods online. The changes are intended to make compliance easier for smaller businesses operating through e-commerce platforms. The move comes alongside the relaxation of provisions governing prosecution and penalties. However, the Council has not changed the existing GST rate structure.

GST Rates To Remain Stable With Annual Changes

The Finance Ministry said the GST rate structure had stabilised and the Council was now focusing more on the day-to-day functioning of the tax system. Under the announced approach, changes to GST rates will be made only once a year. The decision is intended to provide businesses with greater predictability in tax planning and compliance.

The latest measures focus on easing procedural burdens, protecting genuine buyers and reducing the severity of action in smaller tax cases, while leaving the existing GST tax slabs and rates unchanged.