GST Council Meeting: GST officers power limited. Read further to know all changes announced

The Goods and Services Tax (GST) Council, a body of federal and state government officials, limited the punitive powers of tax officials in cases of GST offences.

Prosecution Threshold Raised to Rs 5 Crore

Scrapping the arrest powers of GST officers, the GST Council, chaired by Finance Minister Nirmala Sitharaman, raised the threshold for launching prosecution to Rs 5 crore from Rs 1 crore at the 57th meeting of the council on Thursday. The minimum punishment stands removed, and the punishment, where the fine, imprisonment or both are involved, is left to judicial discretion in every case, the council said.

Penalty Reduced, Late Payments Still Attract Interest

The general penalty has also been reduced from Rs 25,000 to Rs 10,000, the ministry added.

A taxpayer who files late, makes an error or delays payments will face recovery interest and a proportionate penalty. But nothing beyond that.

More Businesses to Get ITC Benefits

The council also decided that businesses will be able to claim input tax credit (ITC) on health and life insurance taken for employees. Credits will also be available on telecommunication towers and pipelines laid outside a factory, both of which are significant capital items for the sectors concerned.

ITC will also be allowed on free samples and on stock returned after its shelf life where the law requires the goods to be destroyed.

The council further sought to remove instances where a service bought and resold in the same line of business effectively faces tax twice.

Inverted Duty Refund Rules Eased

Another significant change relates to businesses that have accumulated unused ITC because their inputs are taxed at a higher rate than their output, commonly referred to as an inverted rate structure. At present, refunds under this mechanism are confined to tax paid on goods. The council has decided to extend the refund to tax paid on input services as well.

The changes will apply to credit availed on or after November 1, 2026.

The exclusion of tax paid on plant and machinery from refunds will also be removed for both exporters and businesses operating under an inverted rate structure.

Panel to Examine Genuine Buyer Protection

The council has decided to constitute a committee of officers to examine whether a genuine buyer can be protected when the buyer possesses a valid invoice, has received the goods and has paid the supplier in full. The committee has been tasked with completing its study within three months, following which an agenda on the matter will be placed before the next GST Council meeting.

GST Rates Remain Unchanged

The GST rates were not changed. Moreover, the council clarified that the GST matter will be taken up once a year at a proposed meeting.

Focus on Ease of Doing Business

Interacting with media reporters after the meeting, the Finance Minister said that the council focused on process-related reforms aimed at improving the ease of doing business and reducing the compliance burden, rather than making changes to GST rates.