Amendments to the GST law are planned to provide significant assistance to entrepreneurs. Among the proposals is the withdrawal of the right of GST employees to conduct arrests. If this proposal is adopted, court permission will be required to detain any person. Furthermore, there is a possibility of increasing the threshold for initiating a criminal case from 1 to 5 million rupees.
These changes could directly affect businesses. Currently, GST employees can make arrests after approval from a commissioner-level official in several serious cases, such as tax evasion, obtaining fictitious Input Tax Credit (ITC), or improper reimbursement. The proposal calls for the abolition of this arrest power for officials.
However, this does not mean that tax law violators will be exempt from enforcement measures. The government is working on the next stage of reforms to simplify the GST system. Following the tax rate changes in September 2025, the focus has shifted to simplifying rules, reducing costs for businesses, and defining enforcement measures according to the severity of the offense. Within this initiative, a proposal has been put forward to change the rules regarding arrests and criminal cases.
According to the proposal, even after the right to arrest is abolished, the government will retain the ability to collect taxes. If an entrepreneur paid less tax or improperly claimed ITC, unpaid taxes, interest, and penalties will be collected from them. Thus, minor tax disputes will focus more on financial sanctions and tax collection rather than direct criminal prosecution.
However, the path to criminal prosecution will remain open for cases of intentional tax evasion or fraud. The proposal includes increasing the threshold for initiating a criminal case from 1 to 5 million rupees, which will allow criminal prosecution to focus on larger cases.
A proposal to soften rules related to 24 offenses has also been presented to the GST Council. It is planned to completely eliminate 9 of these offenses, while 11 will be retained as is. It is also proposed to eliminate the requirement for a minimum sentence period so that the court is not obliged to impose imprisonment in every case. For mid-level offenses, a reduction in the maximum penalty term from three to two years is being considered.
Additionally, the possibility of abolishing late payment fees for small businesses and rationalizing fines is being discussed. The package of proposals also includes initiatives such as simplifying registration for entrepreneurs, accelerating reimbursement issuance, and streamlining the ITC procedure.
When GST was introduced, detecting fake invoices and tax fraud was difficult. At that time, the right to arrest was seen as one way to prevent such crimes. Now, the GST system allows cross-checking information provided by buyers and sellers. This increases the likelihood of early detection of fictitious ITC.
Within this proposal, the emphasis will be placed on detecting tax fraud and other violations using technology, rather than through arrests. Nevertheless, all these changes are currently at the proposal stage and require approval from the GST Council and corresponding legislative amendments to be implemented.
