CII hails GST Council's decision to decriminalise certain offences as a historic reform

The Confederation of Indian Industry (CII) has termed the decisions taken by the GST Council to decriminalise certain offences and rationalise enforcement powers as a significant institutional reform. According to a report by Business Standard, the CII has described this move as a major shift towards trust-based economic governance and presented it as a model for next-generation economic reforms for India.

CII Director General Chandrajit Banerjee stated, "The decisions of the GST Council deserve special recognition as a landmark institutional reform. We deeply respect the leadership of Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman in driving this change, and we also appreciate the constructive role played by the State Governments in reaching a consensus on sensitive issues such as enforcement, revenue security, and taxpayers' rights."

Banerjee further added that reaching a consensus on such fundamental changes is a major achievement of cooperative federalism. It demonstrates the willingness of the Centre and the States to rethink established regulatory methods to place greater trust in legitimate enterprises.

As per the decisions taken in the 57th GST Council meeting held on 8 October, recommendations have been made to remove arrest provisions under the GST law. Additionally, the threshold for prosecution has been increased from ₹1 crore to ₹5 crore. Certain specific offences under Section 132 of the CGST Act have been limited, and imprisonment provisions have been rationalised. These recommendations include provisions for greater use of judicial discretion in sentencing, which includes the option of imposing only fines, and the removal of the provision for a minimum six months of imprisonment.

The primary objective of these proposed changes is to distinguish genuine business disputes and procedural errors from intentional tax evasion and fraud. Implementation of these changes will require necessary legal amendments.

According to the CII, these changes will particularly benefit MSMEs and first-generation entrepreneurs. It will reduce uncertainty, reputational risk, legal costs, and management disruptions associated with disproportionate criminal consequences.

Banerjee further stated, "The significance of this reform is not just that certain enforcement powers are being withdrawn. But the importance lies in the fact that the GST Council has accepted that effective tax administration does not need to rely on the fear of criminal punishment. This is the most impactful step towards trust-based governance in recent years, especially as GST has reached almost every sector of the economy."

This decision demonstrates confidence in legitimate enterprises and the capability of modern tax administration to protect revenue through better information, technology, and targeted enforcement. According to a report by Hindustan Times, several changes in GST processes have come into effect from 1 November, 2026, including easier registration for small e-commerce sellers, faster refunds, and new rules for discounts.

Under the new rules, small businesses selling goods across multiple states through e-commerce operators (ECOs) will be able to register more easily. Sellers whose monthly Input Tax Credit is up to ₹2.5 lakh will be able to declare the e-commerce operator's warehouse in a particular state as their Principal Place of Business (PPoB). This is expected to benefit approximately 9.5 lakh small sellers.

The refund process has also been streamlined. For excess amounts in the Electronic Cash Ledger, refunds will be provided through an automated system without the approval of a tax officer. In refunds for zero-rated supplies and inverted duty structures, 90% of the amount will be released quickly through a provisionally automated process.

Traders will also get more flexibility in providing discounts after supplying goods. Now, a pre-existing contract will not be required for post-supply price reductions. However, protective rules regarding the issuance of credit notes and the reversal of Input Tax Credit will continue.

The CII noted that the circulars issued by the Central Board of Indirect Taxes and Customs (CBIC) on 26 October have addressed practical concerns related to registration, notice, and adjudication. This includes proving allegations of fraud with evidence and providing more clarity in tax notices.

Banerjee emphatically stated that for the success of these reforms, industries must also fulfill their responsibility through voluntary compliance, internal controls, and responsible tax behaviour. He said, "We must respond through responsible behaviour and robust voluntary compliance."

The CII also suggested that this approach of the Council could serve as a model for upcoming economic reforms, which will require better coordination between the Centre, States, and local authorities in sectors such as land use, construction permissions, labour administration, and logistics.