New Delhi: India’s Goods and Services Tax (GST) Council on Thursday, 8 October 2026, agreed on a big set of process reforms. The Council recommended removing arrest powers of GST officers. It also raised the money threshold for prosecution from Rs 1 crore to Rs 5 crore. Finance Minister Nirmala Sitharaman, who chairs the Council, said the changes are built on trust in taxpayers. Prime Minister Narendra Modi welcomed the move.
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What the GST Council decided
The 57th GST Council meeting was held at Bharat Mandapam in New Delhi. It was the Council’s first meeting in more than a year after the September 2025 session that cut many GST rates and reduced the number of tax slabs.
This time, the Council did not change GST rates. Ms Sitharaman said about 99 per cent of rate and process issues have now been addressed, though further reforms can still come if needed. Rate decisions will now come up only once a year.
All the process changes announced after this meeting are expected to take effect from 1 April 2027, she said, so that the law and computer systems can be updated.
Arrest powers scrapped and prosecution threshold raised
One of the biggest decisions is on arrests. The Council recommended removing arrest powers under GST. The Times of India reported that this refers to powers under section 69 of the Central GST Act. Arrest powers were not available under the older state VAT system, but businesses have long said the threat of arrest made compliance stressful.
Separately, the threshold for prosecution was raised five times, from Rs 1 crore to Rs 5 crore. The general penalty is also proposed to fall from Rs 25,000 to Rs 10,000. Together, these steps are meant to cut criminal fear for honest taxpayers while keeping action open for large fraud.
PM Modi welcomes trust based reforms
Prime Minister Narendra Modi welcomed the recommendations on the same day. In a message carried on the Prime Minister’s Office website and on social media, he called them a step towards a simpler, more efficient and citizen friendly GST.
He said the focus is clear: faster decisions, lower compliance costs, automated refunds, and trust based administration. He also said the recommendations on removal of arrest provisions, greater decriminalisation and simpler procedures will have a very positive impact.
Faster refunds, easier registration and more ITC
Refunds are a common pain point for businesses. The Council proposed that refund claims be acknowledged within 10 days, down from 15 days. Based on risk checks, the government estimates that about 90 per cent of claims will be released within three working days of acknowledgement. A system of deemed acknowledgement is also being introduced, The Times of India reported.
On registration, the government said 61 per cent of taxpayers already get automatic registration within three working days. The upgraded system aims to smooth the path for other low risk taxpayers. Small sellers on e commerce platforms will be able to register in a single state rather than in every state where they sell.
Input tax credit, or ITC, is the tax credit a business can claim on what it has already paid on purchases. The Council recommended allowing ITC for more business costs, including employee health and life insurance. From 1 November 2026, input services will also be eligible for refunds under the inverted duty structure. The Times of India said ITC curbs are also being eased for outdoor catering, free samples, telecom towers and factory pipelines.
Fewer notices, fewer truck stoppages
To cut small disputes, the Council set common standards for notices. No notice will be sent when the tax amount is below Rs 10,000. Pending notices already issued below that level will be withdrawn. The Times of India said this could cover around 12 lakh ongoing cases.
Goods moving between states can now be inspected, detained or seized only by officers of the supplier state or the destination state, not by officers in between. Interception will need specific intelligence and authorisation from an officer of joint commissioner rank. Ms Sitharaman said this should make the movement of goods easier.
What it means for businesses and MSMEs
For small and medium firms, the package aims to lower fear and paperwork. Faster refunds free up cash. Easier registration and fewer multi state filings help e commerce sellers. Higher prosecution thresholds and the end of arrest powers reduce the risk of heavy handed action over smaller errors.
Larger firms also gain from clearer ITC rules. The Council eased norms for service exports, including cases where an Indian firm sells services abroad through its own overseas branch.
If you run a business and feel stuck on GST filings or refunds, our guide on navigating GST bills in India and our piece on benefits of hiring tax experts may help you plan the next steps. For owners hunting for fresh market ideas while compliance gets simpler, see smart ways to find business ideas on social media.
What happens next
Two items were deferred. One is a plan to stop ITC only when a supplier has collected tax but not deposited it, while letting others in the chain keep their credit. That issue was sent to a panel of officers, which has about three months to report back so a decision can be ready by April 2027.
The Centre also shared a concept note, approved in principle, for an optional scheme for businesses with turnover up to Rs 5 crore that sell only to consumers. They could file returns once a year instead of every quarter. The final call will come at the next Council meeting.
Short FAQ
When do these GST reforms start?
Most process changes from this meeting are expected from 1 April 2027. Some ITC refund changes for inverted duty on input services are proposed from 1 November 2026.
Can GST officers still arrest people?
The Council has recommended removing arrest powers under GST. The change still needs to be written into law and systems before it fully applies.
Did GST rates change at this meeting?
No. Ms Sitharaman said no rates were changed this time. Rate decisions will now be taken once a year.
What is trust based tax administration?
In plain words, it means treating most taxpayers as honest by default, cutting intrusive checks, speeding refunds, and using risk based systems instead of wide net pressure.
Sources
- The Hindu, GST Council unveils reforms to ease refund, registration and reduce litigation, 8 October 2026
- The Times of India, GST Council scraps tax officers’ arrest powers, eases refund rules, 9 October 2026
- Prime Minister’s Office, PM welcomes GST Council’s recommendations for simpler, trust based tax administration, 8 October 2026