The Goods and Services Tax (GST) Council has approved several measures aimed at simplifying business compliance, reducing tax disputes and making enforcement provisions less stringent, according to a report by Moneycontrol citing sources.
The proposed reforms include restricting the arrest powers of tax authorities, increasing the monetary threshold for prosecution and expanding input tax credit (ITC) eligibility for employee insurance expenses.
The decisions mark another phase of GST reforms following the rate rationalisation exercise undertaken in September 2025.
GST prosecution threshold raised to ₹10 crore
According to sources, the Council has approved increasing the minimum tax evasion or wrongful ITC amount required to initiate prosecution from Rs5 crore to Rs10 crore.
The proposed changes also seek to limit the use of arrest powers during GST investigations.
Under Section 69 of the Central Goods and Services Tax (CGST) Act, the Commissioner can authorise arrests in specified cases involving alleged tax offences.
These provisions have been used in investigations concerning fraudulent ITC claims, fake invoices and substantial tax evasion.
The proposed reforms aim to distinguish serious offences from routine compliance disputes, allowing the latter to be addressed through tax recovery, interest and penalties where applicable.
Businesses have previously raised concerns about the uncertainty created by possible arrests during disputes over tax classification, credit eligibility and interpretation of GST provisions.
However, changes to statutory arrest powers would require legislative amendments.
Employee insurance ITC and delivery services GST relief
The Council has also reportedly approved ITC on employers' expenditure towards employee insurance.
The measure could allow eligible businesses to offset GST paid on group health and life insurance policies against their output tax liabilities, subject to final conditions.
Companies with large workforces, particularly in manufacturing, information technology and financial services, could benefit from reduced employee insurance costs.
Another proposal introduces a Rs10,000 monetary threshold for issuing GST show-cause notices.
Sources also indicated that GST on delivery services provided through e-commerce operators by delivery partners not registered under GST would be reduced to 5%.
Together, the measures seek to ease compliance obligations while making tax administration more proportionate.
Their practical impact will depend on the final legal provisions, eligibility criteria and implementation rules.
