GST Council | New Delhi / Hyderabad, Oct. 8: The GST Council has approved a package of reforms aimed at easing compliance, reducing tax disputes and making enforcement more proportionate.
The measures include curbing the arrest powers of GST authorities and raising the prosecution threshold for serious tax offences to Rs 10 crore, according to sources.
The Council has also approved input tax credit on eligible employee insurance expenses. It has further cleared a Rs 10,000 threshold for show cause notices and a 5% GST rate for specified delivery services provided through e commerce platforms.
The decisions mark the next phase of GST reforms after the major rate rationalisation exercise undertaken in September 2025. The new focus is on administration, compliance, litigation and enforcement.
GST Council | Target Arrests, ITC and Low Value Disputes
The proposal to curb GST arrest powers is among the most significant enforcement changes. Under Section 69 of the CGST Act, authorised officers can currently order arrests when statutory conditions for specified offences are met.
The proposed framework seeks to reduce the use of criminal enforcement in routine tax disputes. Serious cases involving deliberate fraud, fake invoices and significant tax evasion would continue to face prosecution.
However, changes to statutory arrest provisions will require the necessary legislative amendments and related implementation measures.
The Council has also raised the minimum tax evasion or wrongful input tax credit amount for prosecution from Rs 5 crore to Rs 10 crore, according to reports citing sources.
The change would mean that criminal prosecution would generally be reserved for cases involving larger alleged tax evasion or wrongful ITC amounts. The move is intended to separate serious tax fraud from routine compliance disputes.
Another decision concerns input tax credit on employers’ expenditure on employee insurance. The measure could reduce the effective cost of group health and life insurance provided to employees, subject to the final conditions and statutory framework.
Businesses have long sought greater clarity on ITC eligibility for employee insurance. The proposed relief could particularly benefit companies with large workforces and group insurance arrangements.
The Rs 10,000 show cause notice threshold is intended to reduce low value disputes. Tax authorities would be able to focus more resources on cases involving larger revenue implications.
The Council has also approved a 5% GST rate for specified delivery services provided through e commerce operators by unregistered delivery partners.
The measure seeks to bring greater consistency to the tax treatment of delivery services across different e commerce business models. The final scope and conditions will determine how platforms and delivery partners are affected.
The reforms are part of the broader GST 2.0 process. The government is seeking to move towards simpler registration, faster refunds, wider ITC availability and technology based administration.
Businesses will now await the detailed amendments, notifications and implementation dates required to give effect to the decisions.
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