The 57th Goods and Services Tax (GST) Council, set to convene on October 8, 2026, is poised to enact significant enforcement and procedural reforms. These changes are expected to include the complete removal of arrest powers under the GST statute, alongside substantial compliance relief measures aimed at micro, small, and medium-sized enterprises (MSMEs) and e-commerce sellers.
Fundamental Shift in Enforcement Policy
A core proposal involves the total elimination of arrest powers, marking a fundamental shift in GST enforcement strategy. Tax authorities will instead rely on civil financial measures such as tax recovery, interest, and proportionate penalties to resolve disputes. This move acknowledges the current digital matching systems, which effectively detect fraudulent credit, a primary concern when arrest powers were initially introduced as a deterrent.
Decriminalisation and Higher Prosecution Thresholds
Further reforms include a fivefold increase in the statutory threshold for prosecution, rising from ₹1 crore to ₹5 crore. This aims to shield common operational, valuation, or classification disputes from criminal proceedings. Additionally, nine statutory offenses are slated for complete decriminalisation, while 24 others will see reduced maximum sentences and the removal of mandatory minimum prison terms.
Streamlining Administrative Processes for Small Businesses
To alleviate administrative burdens and costs for small enterprises, the Council is expected to introduce a minimum threshold of ₹10,000 for issuing show-cause notices under sections 73, 74, and 74A. Crucially, this threshold will apply retroactively to existing pending cases across various adjudicating bodies, potentially resolving approximately 1.23 lakh pending show-cause notices and nearly 11,800 first appeals immediately.
Easing E-commerce Compliance
For small and micro-enterprises selling through digital platforms, the Council is likely to eliminate the requirement of maintaining a physical registered office in every state where they supply goods. Under the proposed arrangement, a small seller would only need physical address verification and authentication once in their home state. To sell nationwide, merchants could declare the e-commerce platform's local warehouse as their place of business in other states via automated platform consent, removing the need for officer intervention.
Optional Annual Returns for B2C Businesses
The Council will also consider an optional annual return system paired with quarterly payments for businesses with a turnover up to ₹5 crore that exclusively supply to unregistered end-consumers (B2C). This reform aims to transition approximately 16.66 lakh small traders from recurring monthly filing requirements to a single annual return, significantly simplifying compliance.