Archive · 9 Oct 2026
Finance Ministry Explains GST Penalty and Refund Changes
The Finance Ministry has explained planned changes to GST rules and refunds.
One proposal would let a court choose whether to impose prison time, a fine, or both for certain GST offences.
It would also remove a rule requiring at least six months in prison under one provision.
The GST Council has decided to raise the threshold for prosecution and withdraw GST arrest powers from tax officers.
The government also plans to make some refund steps happen automatically.
In the first phase, officials would have 10 days instead of 15 to acknowledge an application or send a deficiency memo.
If there is no action within 10 days, the application would be treated as acknowledged.
For eligible low-risk claims, the system could provisionally pay up to 90% of the claimed refund.
A later phase would add automatic checks and more automatic refund decisions.
A Finance Ministry FAQ says proposed GST penalties would allow courts to impose imprisonment, a fine, or both.
The proposed change would remove the minimum six-month prison term under section 132(3).
At its October 8 meeting, the GST Council decided to raise the prosecution threshold and withdraw tax officers’ GST arrest powers.
In refund-system phase one, the deadline for acknowledgement or a deficiency memo would fall from 15 days to 10 days.
The system is set to automate some provisional and final refunds, with further automation planned in phase two.
- Who
- The Finance Ministry and GST Council; the changes concern taxpayers and GST officers.
- What
- The ministry outlined proposed changes to GST penalties and a phased plan to automate parts of the refund process.
- When
- The GST Council decisions were made at its 57th meeting on October 8; the FAQ gives no year.
- Where
- India.
- Why
- The proposed penalty changes would give courts discretion, while the refund-system changes are planned in phases according to system readiness.
- Prison-term minimum
- The proposed change removes the minimum six-month imprisonment requirement under section 132(3).
- Proposed penalty options
- The wording would change from “imprisonment and fine” to “imprisonment or fine or both.”
- GST Council decisions
- At its 57th meeting on October 8, the Council decided to raise the prosecution threshold and withdraw GST arrest powers from tax officers.
- Refund acknowledgement deadline
- In phase one, the time limit for acknowledgement or a deficiency memo would be reduced from 15 days to 10 days.
- Deemed acknowledgement
- If an officer takes no action within 10 days, the application would be deemed acknowledged and the system would issue an acknowledgement.
- Provisional refund
- For eligible low-risk claims involving zero-rated supplies or an inverted duty structure, the system would automatically sanction up to 90% provisionally.
- Refund plan
- The changes are planned in two phases, according to system readiness; phase two includes automated application validation and further automatic refund decisions.