GST Council proposes ending arrest powers: what would change?
Tax dues, arrest and criminal prosecution follow different rules. The proposed ₹5 crore threshold needs to be read against the law already in force.
The GST Council recommended removing GST officers' arrest powers on 8 October 2026, by omitting Section 69 of the Central GST Act. It also recommended a higher monetary threshold and narrower offences for criminal prosecution. Together, these proposals would change how GST is enforced, while leaving a separate question in place: what tax, interest or penalty a business owes.
The official Council release presents recommendations that need legal implementation. It does not itself repeal the arrest provision.
Tax dues, arrest and prosecution answer different questions
A tax demand concerns money: whether tax was unpaid, credit was wrongly claimed, or a refund was wrongly obtained, and what interest or penalty follows under the applicable rules. A disputed demand can proceed through the tax authorities and appeal system.
Arrest means taking a person into custody and can occur during an investigation, before a criminal trial has established guilt. Prosecution is the pursuit of a criminal case for a specified offence. If the court finds that offence proved, it records a conviction, followed by the applicable punishment.
An unpaid sum is different from intentionally supplying goods without invoices to evade tax, or issuing invoices for transactions that never occurred. The offence, the evidence and the statutory conditions determine criminal liability. The size of a company's sales alone does not answer that question.
What the current arrest provision covers
Section 69 gives the Commissioner power to authorise a central tax officer to arrest a person. The Commissioner must have reasons to believe that the person committed specified offences under Section 132, within the punishment categories the provision identifies.
The listed offences include intentional tax evasion through supplies without invoices, issuing invoices without actual supply that lead to wrongful credit or refunds, specified wrongful credit claims, and collecting tax without paying it to the government for the stipulated period. The arrest provision is tied to particular clauses and punishment tiers, including a separate repeat-conviction provision. It is not a general power to arrest anyone who has an error in a return.
Section 69 also addresses what happens after arrest, including production before a magistrate within 24 hours for the specified cognizable and non-bailable category, and bail arrangements for other covered cases. The scope and safeguards are part of the existing law; the Council now proposes omitting the section that creates this tax-officer arrest authority.
The proposed omission concerns Section 69 of the CGST Act. The eventual legal text will determine how the change operates within the wider enforcement framework; a Council recommendation is not a blanket statement about every police power, court order or other law.
Why the ₹1 crore headline needs context
The Council's release describes its recommendation as raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore. But the existing statute already has different bands for different offences. Treating ₹1 crore as today's uniform threshold would miss amendments that took effect on 1 October 2023.
The current Section 132, as consolidated by CBIC, sets out these amount-based punishment bands:
| Amount involved | Current statutory band |
|---|---|
| More than ₹1 crore, up to ₹2 crore | Applies to clause (b): invoices without actual supply leading to wrongful credit or refunds; up to one year in prison and a fine |
| More than ₹2 crore, up to ₹5 crore | Up to three years in prison and a fine for covered offences |
| More than ₹5 crore | Up to five years in prison and a fine for covered offences |
These are maximum imprisonment terms in the stated bands. Section 132 also contains separate provisions for falsifying records with intent to evade tax and for repeated convictions, so the table is not a complete list of criminal liability.
The relevant amount is the tax evaded, credit wrongly availed or used, or refund wrongly taken, as applicable under the section. It is not annual business turnover. ₹5 crore in sales is different from ₹5 crore of wrongful tax credit.
The lower fake-invoice band in Section 132 does not itself define the arrest threshold. Section 69 names the particular offences and punishment tiers covered by the arrest power. Prosecution also requires the Commissioner's previous sanction under Section 132(6).
The final amendments must establish how the proposed ₹5 crore threshold applies to the offences, punishment bands and exceptions.
The Council also proposes narrowing offences
The Council recommends omitting the clause concerning certain dealings in services that contravene the Act or rules, and narrowing wording in other clauses. It also proposes limiting the wrongful-credit offence in clause (c) to fraudulent availment without receipt of goods or services, or without an invoice or bill.
These are changes to the conduct that the criminal statute would cover. They matter separately from the amount involved: raising a monetary threshold and narrowing an offence can affect different cases. The Council also recommends rationalising punishments, but the release does not supply the enacted text needed to describe every resulting sentence or exception.
Its stated aim is a more progressive, trust-based tax regime while retaining effective deterrence against fraud and evasion. The announcement does not provide evidence measuring how the changes would affect compliance, business confidence or fraud.
Civil enforcement remains a separate track
The same meeting proposed reforms to demand notices and penalties. These include clearer guidance on notices and orders, a small-value notice threshold, and changes to penalties in specified non-fraud cases. Their subject is the civil tax process: deciding what is due and how a dispute or payment is handled.
The Council also recommended reducing the maximum general penalty under Section 125 from ₹25,000 to ₹10,000. That is a particular general-penalty provision, not a new ₹10,000 ceiling on every GST penalty. Other demands and offence-specific penalties need their own statutory analysis.
Tax recovery is separately provided for in Section 79. Removing a custodial power would therefore change an enforcement tool; it would not automatically settle unpaid dues or cancel the machinery for recovering them.
What the final law needs to settle
Reducing the risk of arrest could make a tax investigation less disruptive for businesses and individuals. Effective action against organised fraudulent invoicing, however, still depends on investigation, evidence, recovery and prosecution. Neither an arrest count nor a prosecution threshold alone tells us how well that system works.
The next documents to watch are the amendments and their commencement provisions, alongside any corresponding changes needed in the wider GST framework. They must establish the revised offences, monetary boundaries and punishments. Until then, businesses should read the announcement as a proposed change in enforcement, rather than an operative exemption.