The Goods and Services Tax (GST) Council has approved changes to the punishment framework for GST-related offences, giving courts greater discretion to decide whether to impose imprisonment, a fine, or both. Under the revised provisions, tax evasion exceeding ₹10 crore may attract imprisonment of up to five years, a fine, or both.
 

The decision was taken at the GST Council’s 57th meeting, attended by Union and state finance ministers. For tax evasion involving more than ₹5 crore but less than ₹10 crore, the Council approved a punishment of up to two years in prison, a fine, or both.
 

The Central Board of Indirect Taxes and Customs (CBIC), in its frequently asked questions (FAQs), clarified that imprisonment will no longer be mandatory in every case, even when an accused person is convicted. The proposed wording changes the punishment from “imprisonment and fine” to “imprisonment or fine or both”, allowing courts to exercise discretion while deciding sentences.
 

Minimum Six-Month Jail Term to Be Removed
 

The mandatory minimum imprisonment of six months under Section 132(3) of the GST law will also be removed. The change is intended to give courts greater flexibility in determining appropriate punishment based on the circumstances of each case.
 

The GST Council’s recommendations are scheduled to come into effect from April 1, 2027.
 

Arrest Provisions Under GST Law to Be Removed
 

As part of a broader move to decriminalise certain offences, the GST Council has also decided to remove arrest provisions under the GST law. Under the proposed change, GST officers will no longer be able to arrest individuals for offences under the legislation.
 

However, prosecution may still be initiated before a competent court on the complaint of a tax officer if the amount involved exceeds ₹5 crore.
 

Prosecution Threshold Raised to ₹5 Crore
 

The Council has also approved an increase in the minimum amount of tax evasion required to initiate prosecution, raising the threshold from the existing ₹1 crore to ₹5 crore.
 

The revised provisions are aimed at changing how GST-related offences are prosecuted and punished, while giving courts greater discretion over sentencing. The recommendations are expected to take effect on April 1, 2027.