The proposed overhaul would end arrest powers under Section 69, raise the prosecution threshold to ₹5 crore and introduce faster, system-led refunds and filings, subject to formal legal changes.
India’s Goods and Services Tax Council has backed one of the broadest overhauls of GST administration since the tax was introduced, recommending a shift away from punitive enforcement and towards a more automated, system-led compliance model. The package, cleared at the council’s 57th meeting on October 8, would end arrest powers under Section 69, raise the prosecution threshold to ₹5 crore and trim the general penalty to ₹10,000, according to reporting by the Economic Times, Mint and other Indian outlets.
The changes are still subject to the legal machinery that turns council recommendations into enforceable rules. That means notifications, amendments and portal updates will determine when each measure actually takes effect. But the direction of travel is clear: authorities are trying to reduce face-to-face discretion, improve certainty for taxpayers and make the system less intimidating for smaller businesses.
Refunds are set to become faster and more formula-driven. Reports on the council’s decisions say the new framework would allow system-based processing, with 90% provisional sanctioning in zero-rated and inverted duty cases during the first phase. The current 1.5 times cap on export turnover would go, while acknowledgements or deficiency memos would have to be issued within ten days. Input-service refunds are slated to begin on November 1, 2026, with capital-goods refunds following on April 1, 2027, spread over 60 months.
Compliance changes are also being pushed deeper into the return-filing process. The council’s proposals point to a revised reconciliation suite for GSTR-1, GSTR-2B and GSTR-3B, alongside the Invoice Management System, which would let recipients accept, reject or keep invoices pending before the 2B statement is generated. New statements for reversal, reclaim and reverse-charge reporting are also being readied, with applicability targeted from the return period of April 2027 after further consultation and system changes.
Registration and small-business rules are due for simplification as well. According to the reports, amendments to registration particulars would be auto-accepted online, except for the principal place of business, while cancellation would be triggered by the system rather than left largely to officer discretion. Small e-commerce sellers would be allowed to use an operator’s warehouse as their principal place of business, helping them expand across states more easily. An annual return quarterly payment scheme for B2C businesses with turnover of up to ₹5 crore has also received in-principle approval.
For tax professionals, the practical message is to prepare now rather than wait for the notifications. Chartered accountants are being urged to brief clients on the new enforcement thresholds, build objection procedures for input tax credit blocks, tighten reconciliation controls and identify businesses likely to benefit from faster refunds or quarterly payment options. The council’s recommendations are meant to reduce friction, but the transition will depend on how quickly governments and the GST Network convert them into working rules. As Prime Minister Narendra Modi wrote on social media, the goal is “Faster decisions. Lower compliance costs. Automated refunds. Trust-based administration.”
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