GST Council Introduces Major Changes: What You Need to Know About New Penalties

The GST Council has introduced significant changes to the penalties for GST offences, including a revised maximum imprisonment term and the removal of mandatory arrest provisions. With new thresholds for prosecution and a focus on decriminalization, these changes aim to provide courts with more discretion in sentencing. Set to take effect in 2027, these reforms mark a pivotal shift in how GST violations will be handled in India. Read on to learn more about the implications of these changes.

By Narendra Chaudhary Oct 9, 2026, 21:37 IST

Significant Revisions to GST Offences

New Delhi: The GST Council, which includes Finance Ministers from both the Centre and states, has made significant changes to the penalties associated with GST violations. The maximum imprisonment term for such offences has been adjusted to a maximum of five years, along with the option of a fine or both.

For cases where tax evasion exceeds ₹10 crore, the revised maximum imprisonment term is now set at five years, or a fine, or both.

In instances of GST evasion between ₹5 crore and ₹10 crore, the Council has approved a maximum imprisonment of two years, or a fine, or both, during its 57th meeting.

According to an FAQ released by the Central Board of Indirect Taxes and Customs (CBIC), imprisonment will not be mandatory upon conviction.

The CBIC clarified, "The punishment structure is shifting from 'imprisonment and fine' to 'imprisonment or fine or both', allowing courts more discretion in sentencing."

Additionally, the requirement for a minimum six-month imprisonment under section 132 (3) has been eliminated, granting courts more flexibility.

These new proposals, which were approved by the Council, are set to take effect on April 1, 2027.

In a significant move towards decriminalization, the GST Council has decided to eliminate arrest provisions under GST, meaning no individual will be arrested by a GST officer for violations of the law.

Nonetheless, prosecution can still be initiated in a competent court based on complaints from tax authorities when the amount involved exceeds ₹5 crore.

The Council has also increased the threshold for initiating prosecution in GST evasion cases from ₹1 crore to ₹5 crore.