Industry body CII, has described the GST Council’s decisions to decriminalise certain offences and rationalise enforcement powers as a significant institutional reform, saying the move marks a shift towards trust-based economic governance and offers a model for India’s next generation of economic reforms.
On the decisions taken at the GST Council’s October 8 meeting, CII said the consensus-driven approach showed how the centre and states could work together on difficult reforms to improve the relationship between the government and businesses.
CII, director general Chandrajit Banerjee said, “The GST Council’s decisions deserve special recognition as a landmark institutional reform.”
“Reaching agreement on such fundamental changes is a substantial achievement of cooperative federalism. It demonstrates the willingness of the centre and states to reconsider established regulatory practices in favour of greater trust in legitimate enterprise,” he said.
The GST Council recommended removing arrest provisions under the GST law, raising the threshold for prosecution from Rs 1 crore to Rs 5 crore, narrowing certain specified offences under Section 132 of the CGST Act and rationalising imprisonment provisions.
The recommendations also provide for greater judicial discretion in sentencing, including the option of imposing only a fine and removing the minimum six-month imprisonment provision.
The proposed changes seek to distinguish genuine commercial disputes and procedural lapses from deliberate tax fraud and evasion. They require the necessary legislative amendments for implementation.
CII said the changes would particularly benefit MSMEs and first-generation entrepreneurs by reducing uncertainty, reputational risks, legal costs and management disruptions associated with disproportionate criminal consequences.
“The importance of this reform is not simply that certain enforcement powers are being withdrawn. It is that the GST Council has recognised that effective tax administration need not depend on the threat of criminal sanctions. This is one of the most consequential steps towards trust-based governance in recent years, particularly given the reach of GST across virtually every sector of the economy,” Banerjee stated.
It signals confidence in legitimate enterprise and in the ability of modern tax administration to protect revenue through better information, technology and targeted enforcement. Industry must recognise the significance of this change in regulatory philosophy, he added.
CII also noted that the Central Board of Indirect Taxes and Customs (CBIC) circulars issued on October 26 addressed practical concerns relating to registration, notices and adjudication, including the need to substantiate allegations of fraud with evidence, provide greater clarity in tax notices and ensure reasoned adjudication.
It said these measures, along with the Council’s decisions on faster refunds, input tax credit and compliance simplification, could improve working capital efficiency, reduce avoidable disputes and make tax administration more predictable, although their full impact would depend on consistent implementation across jurisdictions. ANI
