The GST Council may consider a package of GST process and enforcement reforms at its October 7 meeting, including a proposal to take away the power of tax officers to arrest taxpayers and require judicial authorisation for any arrest.The Council may also consider raising the threshold for launching prosecution from Rs 1 crore to Rs 5 crore and narrowing the scope of offences that can trigger criminal proceedings. Other proposals include protecting genuine buyers’ input tax credit, easing GST registration for small e-commerce sellers and reducing low-value litigation, as per PTI sources.The proposals are part of the government’s next phase of GST reforms, with the focus shifting from rate rationalisation to simpler compliance, faster administration and more proportionate enforcement.Arrest powers removed?At the centre of the proposed changes is Section 69 of the Central GST Act, which allows the Commissioner to authorise an officer to arrest a person when statutory conditions are met and there are reasons to believe specified offences have been committed.The proposal would remove this power from GST officials, with any arrest instead requiring judicial authorisation. Tax recovery, interest and financial penalties would continue to apply, while serious cases involving deliberate evasion or fraud could still be prosecuted through courts.AMRG Global Managing Partner Rajat Mohan said the proposal marks a shift from arrest-led deterrence to technology-led detection. “With arrest removed and prosecution reserved for more serious cases, the focus is increasingly on using GSTN’s data capabilities to detect fraud rather than relying on coercive powers,” Mohan said.Prosecution threshold may rise to Rs 5 croreThe Council is also likely to consider raising the prosecution threshold from Rs 1 crore to Rs 5 crore.“The threshold for prosecution is proposed to be raised from Rs 1 crore to Rs 5 crore. That would reserve the criminal process for cases whose scale warrants it,” a PTI source said.The proposals seek to keep routine disputes over classification, valuation and input tax credit outside the criminal process. Of the 24 offences currently covered by prosecution provisions, nine are proposed to be removed, 11 retained and the remaining offences softened.Input tax credit, e-commerce and litigationAnother proposal seeks to protect genuine buyers from losing input tax credit when an upstream supplier fails to pay tax. Under the proposal, recovery action would instead be directed at the defaulting seller.The Council may also allow employers to claim ITC on premiums paid for employee insurance. Group insurance policies currently attract 18 per cent GST, which businesses cannot claim as credit.For small e-commerce sellers, the Council may consider allowing platform warehouses to be used as registered places of business in states where sellers do not have their own premises. Sources said the move could help around 9.5 lakh small sellers access wider markets.To reduce litigation, the Council may consider barring GST notices where the tax demand is below Rs 10,000. Such cases account for around 20 per cent of cases by number, according to the proposal.Other proposalsThe Council may also consider simpler GST registration and annual returns, quarterly tax payments for some MSMEs, intelligence-led checks on goods vehicles and a single 5 per cent GST rate without ITC for delivery of goods ordered through e-commerce platforms.A separate proposal seeks to withdraw the IGST exemption available to banks and nominated agencies importing gold, silver and platinum.The proposals are part of the broader GST 2.0 process reforms following the September 2025 rate rationalisation, which simplified the tax structure around 5 per cent and 18 per cent rates, with a 40 per cent rate for select luxury and demerit goods.
