GST reforms: Arrest powers, prosecution threshold, penalty changed; what happens to those already facing proceedings?

The GST Council on Thursday, October 8, cleared a major set of changes to GST (goods and services tax) administration, including higher prosecution threshold, lower general penalty and curbs on arrest powers for tax officers.

These reforms, scheduled to come into force on 1 April 2027, aim to reduce the compliance burden on businesses. They follow the broader GST reforms introduced last year, when rates were mostly cut and tax slabs rationalised.

Here's the list of compliance-related changes that would largely impact businesses from next financial year onwards:

However, these changes raise an important question about whether businesses already facing prosecution or other enforcement action under the existing provisions will benefit from the revised rules.

“As a general principle, amendments to penal and procedural provisions apply prospectively, unless the amending statute expressly provides otherwise,” Kunal Savani, Partner at Cyril Amarchand Mangaldas told Livemint .

This means cases that are already initiated under the existing provisions would, absent express retrospective applicability, continue to be governed by the law as it stood at the time of the alleged offence.

“Where the amended provisions are beneficial to the accused, such as higher prosecution thresholds or removal of mandatory minimum sentences, courts may, relying on the principle of beneficial construction and constitutional safeguards, extend the benefit of such amendments to pending proceedings,” he noted.

Meanwhile, another expert said that there is a possibility of government applying these reforms on a retrospective basis.

“The Council has not given any such clarification so far. However, considering the intention behind these changes, the government may apply them retrospectively,” said Karan Sarawagi, Advocate at Bombay High Court.

Another key question relates to how the government will ensure that the changes do no weaken action against deliberate defaults.

Commenting on this, Sarawagi said that prosecution has not been done away with; only arrest powers for GST officers have been removed, meaning officers can no longer make pre-emptive arrests under the new provisions, addressing concerns over the alleged misuse of these powers.

“The taxman will continue to retain powers to suspend or cancel registration, block fraudulent ITC, attach property & bank accounts and recover tax, interest and penalty. Further, with the growing use of AI and data analytics, the department can now detect illicit and fraudulent activities far more quickly, so checks and balances remain firmly in place. The changes only aim to ease the business environment and prevent misuse of powers,” he explained.

Eshita Gain is a digital journalist at Mint, where she joined in May 2025. She writes on corporate developments, personal finance, markets, and business trends, with a focus on delivering timely and relevant stories to a broad audience. <br><br> While her core beat lies in business and finance, she is not confined to a single niche and frequently explores stories across domains, including international relations and policy developments.