GST Council Meeting 2026: Big Relief For Businesses As Prosecution Limit Rises To Rs 5 Crore

The 57th GST Council meeting has shifted the focus of GST reforms from tax rates to tax administration, with the Centre and states clearing a series of measures aimed at making compliance simpler and reducing the fear of punitive action among businesses. The meeting, chaired by Union Finance Minister Nirmala Sitharaman in New Delhi on Thursday, October 8, focused on registration, returns, refunds, input tax credit and enforcement procedures.

57th GST Council Meeting 2026: Check Key Decisions On Prosecution, ITC, Registration And Refunds

The decisions come after the 56th GST Council meeting, which focused largely on rate rationalisation and reduction of GST rates. In contrast, the latest meeting concentrated on what the government has described as the next phase of GST process reforms, with the objective of making the system more predictable and easier for businesses to navigate.

Among the biggest decisions was the recommendation to raise the threshold for criminal prosecution under GST from Rs 1 crore to Rs 5 crore. The Council also recommended removing the arrest provisions under GST, signalling a significant change in the way tax enforcement will operate.

GST Prosecution Threshold Raised From Rs 1 Crore To Rs 5 Crore

The GST Council has recommended increasing the minimum threshold for prosecution from Rs 1 crore to Rs 5 crore. This means criminal prosecution would be reserved for cases involving higher-value tax evasion, while smaller disputes and compliance-related lapses would generally be dealt with through tax recovery, interest and proportionate penalties.

The change is significant for companies, MSMEs and tax professionals because GST disputes can arise from issues such as invoice mismatches, input tax credit claims, interpretation of tax provisions and procedural errors. Raising the threshold could help distinguish serious tax evasion from lower-value commercial or compliance disputes.

However, the higher prosecution threshold does not mean that tax dues below Rs 5 crore will be ignored. Taxpayers can still face recovery proceedings, interest and applicable penalties where a tax liability is established. The change primarily relates to the threshold for criminal prosecution.

GST Officers To Lose Arrest Powers

Another major decision is the removal of arrest powers of GST officers. The Council has recommended scrapping the arrest provisions under GST as part of the broader move towards a more trust-based tax administration.

The move addresses a long-standing concern among sections of the business community over the use of coercive enforcement measures. By removing the arrest provision, the government is seeking to ensure that routine tax disputes and compliance issues are handled through the tax administration and judicial process rather than criminal enforcement.

The Council has also recommended common standards for GST notices and proceedings, along with a monetary threshold below which notices will not be issued. According to the Finance Ministry, notices will not be issued for amounts of Rs 10,000 or below, while pending notices below that threshold will also be withdrawn.

GST Council Focuses On Easier Compliance For Businesses

The enforcement changes are part of a wider package of process reforms cleared by the Council. The recommendations cover GST registration, returns, refunds and adjudication, with the government also proposing measures to widen eligibility for input tax credit and improve the refund process.

The Council has also recommended simplified GST registration for small sellers operating through e-commerce platforms. Other measures seek to facilitate exports of services and improve the movement of goods between states through more targeted enforcement.

Input Tax Credit And Refund Process in Focus

Input tax credit remains one of the most important areas of GST compliance for businesses. The Council has recommended measures to widen ITC eligibility and improve the process for claiming refunds, which could help businesses manage their working capital more efficiently.

Faster refunds are particularly important for exporters and businesses with large amounts of input tax credit locked up in the system. The Council's latest recommendations are aimed at reducing delays and making the overall process more streamlined.