Tax cops may lose power to arrest evaders under proposed GST law decriminalisation

Council may also simplify multi-state registration and allow input tax credit on employee insurance as it weighs wider changes to GST enforcement and compliance

The Goods and Services Tax (GST) enforcement framework might soon see significant changes, with tax officers likely to lose the power to arrest evaders, as part of the decriminalisation of the GST law.

While the 56th GST Council meeting held in September 2025 saw major steps on rationalisation of tax rates, the 57th meeting, to be held on October 8, is likely to take up policy reforms that include changes in enforcement provisions.

If the GST Council, comprising Union and state finance ministers, approves the proposal, GST enforcement could shift from departmental arrest to judicial oversight, while reserving criminal prosecution for serious and deliberate tax fraud.

Multiple registrations

The GST Council is likely to consider a proposal to allow businesses to file for GST registration in multiple states through a single application process and also list out a unified set of documents that tax officers may ask for.

The council is likely to deliberate on a redesigned and simpler GST registration form for large businesses.

Employee insurance

The GST Council may allow employers to claim input tax credit on premiums paid for insurance coverage provided to employees. GST is exempt on individuals buying life or health policies for themselves or their family. However, when a business buys life or health cover for its employees, tax is charged on that cover, and until now the business could not claim ITC on it.

The Council is also likely to consider recasting its tax officers' committees, making them leaner, sources said.

"Trade is keenly awaiting the 57th GST Council meeting. The proposed decriminalisation, with judicial oversight of arrests and routine ITC and classification disputes kept outside criminal reach, would be a forward-looking step that treats honest taxpayers as partners rather than suspects.

"Unblocking credit on employee group insurance and outdoor catering would aid cash flow. Equally significant is the proposal to let genuine recipients retain credit even where suppliers default, signalling that honest taxpayers will not be penalised for others' defaults.

Simpler registration returns and GSTR-3B amendments should ease MSME compliance. Overall, the meeting appears set to reduce litigation, which trade will welcome, though real relief will hinge on implementation circulars and field-level follow-through," said Jitendra Motwani, partner - tax practice, Trilegal.