Willie Collum admits his VAR team made an error to send off Mykola Kukharevych and award a penalty to Dundee United in the 1-1 draw earlier this month.
David Gray's side were 1-0 up with a minute remaining when United defender Emmanuel Adegboyega fell to the ground claiming his shirt had been tugged.
Referee Colin Steven waved play on but back at Clydsdale House, VAR referee Greg Aitken disagreed and sent Steven to the monitor.
After a long pause, a penalty was awarded with Kukharevych sent off for a second bookable offence.
The flashpoint has been put in front of the SFA's Key Match Incident panel, with three of the five-man team feeling that the original decision should have stood.
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On the SFA's monthly VAR Review show, head of refereeing Collum agreed with the verdict of the panel and admitted the footage would be a line in the sand for his team going forward.
He said: "Before we start, I think it's important to acknowledge that the (VAR) check takes far too long. We want to reduce our timings when we are looking at incidents and this is a case where we would try and make improvements in this area by making it quicker.
"Can we say that the Hibs player pulls the Dundee United player? Of course he does and I don't think anybody watching this clip would argue with that. But we also need to listen to our stakeholders, the KMI panel and what people are saying. And the overwhelming response has been that this is not for VAR.
"If it's given on-field, of course, it's supported but our take on this moving forward is that it is off the ball. Some people will debate its impact because the ball is knocked back across and could that player have got there and it's then a very difficult decision for the VAR and the referee to make.
"There could be instances where we would need to look at that where the secondary decision would be very, very key but listening to a lot of people about this incident, it would probably be in our best interests moving forward to leave this incident alone and for VAR to not get involved.
"It's very difficult because nobody can deny that the holding takes place. But the impact is the key question for us here. There is nothing in the laws of the game about impact but we also need to look at 'where do we draw the line?'
"If somebody pulls someone 20 meters off the ball do we look at that? Or if somebody scores a goal and somewhere there has been minimal contact, is that right to punish it? These are all things we need to consider."
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