CII hails GST reforms as transition to trust-based governance

New Delhi, Nov 1 (IANS) Apex business chamber CII said on Sunday that the GST Council’s landmark decisions on decriminalisation and rationalisation of enforcement powers of tax officials were among the most significant institutional reforms in India’s transition towards trust-based economic governance.

CII said the importance of the GST reforms marks a fundamental shift towards more proportionate enforcement, greater predictability, and confidence in legitimate business activity, while retaining strong safeguards against deliberate fraud and evasion.

“Reaching agreement on such fundamental changes is a substantial achievement of cooperative federalism. It demonstrates the willingness of the Centre and states to reconsider established regulatory practices in favour of greater trust in legitimate enterprise,” CII Director General Chandrajit Banerjee said in a statement.

The GST Council’s decisions encompass the removal of arrest powers through the omission of Section 69 of the CGST Act, a fivefold increase in the monetary threshold for prosecution from Rs 1 crore to Rs 5 crore, narrowing of specified offences under Section 132, and rationalisation of imprisonment provisions, including greater judicial discretion in sentencing.

These decisions represent a fundamental recalibration of GST enforcement while retaining criminal prosecution for serious cases of deliberate fraud and evasion. They recognise that genuine commercial disputes, procedural lapses and deliberate wrongdoing must be treated differently. For businesses, particularly MSMEs and first-generation entrepreneurs, the significance lies in reducing the uncertainty, reputational risks, legal costs and management disruption associated with disproportionate criminal consequences, the chamber noted.

“The importance of this reform is not simply that certain enforcement powers are being withdrawn. It is that the GST Council has recognised that effective tax administration need not depend on the threat of criminal sanctions. This is one of the most consequential steps towards trust-based governance in recent years, particularly given the reach of GST across virtually every sector of the economy,” CII said.

CII further noted that the developments since the Council meeting have reinforced this direction. CBIC’s circulars issued on October 26 address practical concerns relating to registration, notices, and adjudication, including the need to substantiate allegations of fraud with evidence, provide greater clarity in tax notices and ensure reasoned adjudication. These instructions address longstanding concerns of industry, where uncertainty over interpretation, documentation requirements and allegations of wrongdoing can impose substantial costs even before disputes are resolved.

Together with the Council’s decisions on faster refunds, input tax credit, and compliance simplification, these measures can improve working capital efficiency, reduce avoidable disputes and make tax administration more predictable. Their full impact will depend on consistent implementation across jurisdictions, the statement added.

–IANS

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