🔑 In one line

Tax officers can no longer arrest taxpayers for routine defaults — arrest powers under Section 69 are scrapped, prosecution limits jump from ₹1 Cr to ₹5 Cr, and minor SCNs under ₹10,000 are eliminated.

₹5 Cr
New Prosecution Threshold
₹10,000
Minimum SCN Limit
Sec 69
Arrest Powers Removed

Decriminalizing GST Compliance

In what is being called the biggest taxpayer-friendly decision of 2026, Union Finance Minister Nirmala Sitharaman announced that routine compliance failures, clerical ITC mistakes, and classification disputes will no longer lead to criminal arrest threats. Tax administration is shifting to trust-based governance.

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Section 69 Amendment
Pre-Prosecution Arrests Stripped From Tax Officers
Tax authorities lose the power to arrest individuals before formal criminal proceedings. Criminal prosecution will now strictly apply only to intentional, fraudulent cartels evaluated under the criminal code (Bharatiya Nyaya Sanhita).
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Prosecution Relief
Monetary Floor Raised 5x to ₹5 Crore
The monetary threshold for initiating prosecution has been increased from ₹1 crore to ₹5 crore. Additionally, the maximum general penalty under Section 125 drops from ₹25,000 to ₹10,000.
🛡️
SCN Floor Limit
No Show-Cause Notices Below ₹10,000 Aggregate Tax
To stop departmental harassment over tiny tax mismatches, the Council established a ₹10,000 minimum tax threshold for issuing SCNs, applying retrospectively to pending minor notices.
Notice Relief: If you received minor demand notices where the aggregate tax (CGST + SGST + IGST) is under ₹10,000, those proceedings are slated for closure under the new retrospective floor guidelines.

What Businesses & CAs Must Do Now

✅ Compliance Action Steps
1
Review pending notices — list all ongoing SCNs where tax liability is under ₹10,000 to apply for retrospective withdrawal.
2
Pay non-fraud demands within 30 days to reduce penalties to just 5% under Section 73/74A.
3
Maintain clean purchase records — while criminal threats are reduced, civil recovery with 18% interest remains strictly enforced.

Keep Your Input Records Clean & Audit-Ready

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