Union Finance Minister Nirmala Sitharaman on Thursday said the GST Council has scrapped the arrest power of tax officers and raised the prosecution threshold to Rs 5 crore from Rs 1 crore. She said the GST Council also approved easier norms for small sellers on e-commerce platform. “The rate structure is settled, so the Council has turned to how the tax works day to day,” she said, adding that GST rate changes will now happen once a year.
On input tax credit claims, she said the 57th GST Council decided to set up a Committee of Officers to examine how to protect a genuine buyer who holds a proper invoice, has received the goods, and has paid his supplier in full.
Threshold for prosecution goes up from Rs 1 crore to Rs 5 crore
The threshold for prosecution goes up from Rs 1 crore to Rs 5 crore and the minimum punishment stands removed, and the punishment- whether fine, imprisonment, or both- is left to judicial discretion in every case, as per the council decision. The general penalty, which applies where no specific penalty is provided, comes down from Rs 25,000 to Rs 10,000, the ministry said.
Sitharaman said there was an agenda on amending Section 16(2)(c) of the CGST Act, where the ITC passed on to the final genuine taxpayer was blocked or reversed. “When any one of the suppliers in the value chain allegedly failed to deposit the ITC accrued or passed on fake ITC…Currently, the ITC is blocked even when the recipient taxpayer is in possession of the invoice, has received the supply, and has himself paid the tax amounts to the suppliers, on the ground that if any supplier at any level in the supply chain is found non-compliant, the problem starts from there. This creates challenges for taxpayers. It needs to be rationalised. The Council today deliberated on the issue and discussed ways to address this anomaly. This involved balancing the concerns of genuine taxpayers while also curtailing the misuse of ITC. Upon the suggestions of several states, and in the spirit of cooperative federalism, it was decided to have an officers’ committee to examine this further…We proposed that we should limit it to the one next to the taxpayer and not go to the entire chain. But because today some states have requested, in the spirit of cooperative federalism, we’ve agreed to have an officers’ committee to examine this further…The committee of officers will submit its report within three months, and it will be immediately placed before the Council for a final decision, so that whatever the decision may be, I can’t pre-empt it. That also becomes a part of the 1 April 2027 onwards implementation agenda. No GST rates have been changed at this meeting, which I’ve already said earlier,” she said.
Everything of agenda items in the process reform will be implemented from April 2027: Sitharaman
Sitharaman added, “In today’s set of agenda, in fact, I can say all of them have been agreed to, except for two, where a committee is formed…If everything is agreed, on two, where we have agreed for a committee to look into it and come back. Even on those two, I have said within three months they should come back. We will hold a GST Council meeting immediately after that. That will also get implemented from 1st April 2027. Every one of the agenda items of today in the process reform will be implemented from 1st April 2027…”
Sitharaman added, “The Council recommended removing arrest powers under GST. Council recommended raising the prosecution threshold from Rs 1 crore to Rs 5 crore. Anything below Rs 5 crore no prosecution and reducing the general penalty from Rs 25,000 to Rs 10,000”.
Sitharaman says GST Council has taken decision for smoother movement of goods
Sitharaman also said the GST Council has taken a decision for smoother movement of goods. She said the Council recommended that goods can be inspected, detained, or seized only by the officer of the supplier state or the destination state. “Goods can be intercepted only on specific intelligence and with the authorization of at least a joint commissioner-level officer…The Council recommended removing arrest powers under GST. Council recommended raising the prosecution threshold from Rs 1 crore to Rs 5 crores. Anything below Rs 5 crores, no prosecution and reducing the general penalty from Rs 25,000 to Rs 10,000,” she said.
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