Finance Minister Nirmala Sitharaman reported on Thursday that next-generation reforms in the GST system have addressed about 99 percent of issues related to tax rates and procedures. These latest changes are aimed at simplifying compliance and improving tax administration.
Speaking after the 57th GST Council meeting, Sitharaman emphasized that the reforms were based on a 'trust-based approach' and expected the new set of procedural changes to stabilize the situation over the next year.
The Council recommended abolishing arrest powers under GST and raising the threshold for criminal prosecution from 1 crore to 5 crore. Additionally, it was recommended to reduce the overall fine from 25,000 to 10,000.
Simplifying Goods Movement
Sitharaman also noted that the Council adopted measures to ensure smoother movement of goods by restricting checks, detentions, and seizures by the supplying or destination state's officials. She stated: 'No intermediate stops or checks,' adding that goods could only be intercepted based on specific intelligence and with permission from an officer at the level of Deputy Commissioner or higher.
She clarified that 'a casual GST official cannot stop a vehicle,' and added that this step would prevent arbitrary checks by GST law enforcement agencies and 'significantly improve the ease of goods movement.'
The Council also decided that a GST demand notice would not be issued if the tax amount is less than 10,000. It recommended establishing common standards for tax notices and disputes, including giving taxpayers the opportunity to respond before receiving an official notification.
The government is also simplifying GST registration for small businesses selling through e-commerce platforms. Sitharaman said this measure would allow small sellers to operate in different states without needing to establish a place of business in each one.
Regarding input tax credit, the Council discussed concerns about honest taxpayers losing credit due to non-compliance in other links of the supply chain. A special committee of officials will examine this issue and submit its report within three months for the Council's final decision.
Other measures include allowing employers to claim input tax credit on GST paid for employee insurance and reducing the claim confirmation period for refunds from 15 to 10 days. Sitharaman also announced that the government intends to implement contactless tax administration under the centralized GST regime.
At the 57th GST Council meeting, GST rates were not changed. The proposed procedural reforms will be implemented in phases, and the changes will be part of the implementation plan starting April 1, 2027.