(Threshold + Arrest Powers)
GST Decriminalisation: what changed on 8 October 2026
GST decriminalisation is an important reform aimed at reducing criminal penalties for certain tax-related offences and easing compliance for Indian businesses.
Many small business owners in India have been worried about the knock on the door whilst dealing with the GST . However, at the 57th GST Council meeting chaired by Finance Minister Nirmala Sitharaman on 8th October 2026, key steps have been taken to decriminalise GST. This has also changed how GST Arrest Power will work .
5 Major Changes Under the New GST Decriminalisation Rules
Decriminalisation does not mean that you can legally evade paying tax .It means that small or procedural errors are no longer seen as crimes. If there is an honest mistake then it will be dealt with in a civil manner. This will include a penalty. However, if there is a deliberate fraudulent act it could result in jail .
Explore our guide to GST compliance rules in India to understand tax filing, input tax credit reconciliation, penalties and regulatory requirements.
1.Removal of Arrest Powers
The council has recommended that GST Officers will no longer have arrest powers under section 69 of the CGST Act. Previously, if an officer had reason to believe that someone had committed certain offences, they could arrest them. This has long been a problem for the industry bodies .
2.Threshold for Prosecution increased ( ₹5 Crores)
Previously prosecution could happen when the tax was above ₹1 crore. However, the council has recommended that this is increased to ₹5 crore. Cases below this threshold will be dealt with in a non-criminal manner .
3. Prosecution Still Possible
A common misconception about this is that it will completely remove the option to prosecute. Offences above the increased threshold will still face prosecution. Conviction will also see imprisonment becoming optional.
4. Reduced Penalties and Minimum Notices
General penalties are going to be reduced from ₹25,000 to ₹10,000. The Finance Minister mentioned that no notices will be sent out for amounts of ₹10,000 and below. Any outstanding notices below this amount will be cancelled. Small traders will not have to deal with lots of paperwork for very small amounts.
5. Not yet law
These are recommendations made by the Council. Therefore, the GST Acts need to be amended. Reports suggest that this will happen from around April 2027. Until then the current provisions will remain in force. Therefore businesses should not assume the previous rules have been removed.
Key Takeaways
Experts have welcomed the changes ; however, it will be important to see how it is implemented. To ensure that officers adhere to the spirit of the change clear guidance will need to be issued to the department.
For honest taxpayers you should continue to make sure your returns are correct, you have reconciled your input tax credit and you are responding to notices in a timely manner. Penalties will still be in place.
Conclusion
Overall GST Decriminalisation has moved away from a fear- based system to trust- based one. With the prosecution threshold increased, GST arrest powers restricted and penalties reduced this should reduce the burden on taxpayers – especially small businesses.
However it will depend on how the law is written. Until the amendments are notified, keep compliant and keep your records up to date.
Many will see Arrest Powers Removed think this means there won’t be any criminal elements to GST anymore. Whilst this is not the case, if the amount of tax exceeds the new threshold of ₹5 crore you can still face prosecution. Officers will no longer have the power to arrest. Conviction will also likely become optional for the court.
References
[1] Swarajya “GST Council removes arrest powers of tax officers, raises prosecution threshold to Rs 5 crore,” Swarajya.OnlineAvailable:
[2]The Daily Pioneer “GST Council eases norms, scraps arrest powers,” The Daily Pioneer.Online Available:
https://dailypioneer.com/news/gst-council-eases-norms-scraps-arrest-powers
[3] Business Standard “PM Modi welcomes fresh GST reforms to ease compliance, speed up refunds,” Business Standard.OnlineAvailable: https://www.business-standard.com/economy/news/pm-modi-welcomes-fresh-gst-reforms-to-ease-compliance-speed-up-refunds-126100801534_1.html
[4]DNA India “57th GST Council Meeting: Experts hail decriminalisation, wider ITC refunds; flag implementation challenges,” DNA India.OnlineAvailable: https://www.dnaindia.com/business/report-57th-gst-council-meeting-experts-hail-decriminalisation-wider-itc-refunds-flag-implementation-challenges-3221971
[5]PSU Watch “GST Council clears removal of arrest powers, makes jail optional for offences,”.OnlineAvailable: https://psuwatch.com/amp/story/newsupdates/gst-council-clears-removal-of-arrest-powers-makes-jail-optional-for-offences
