GST Council to consider removing arrest power under Section 69, raising evasion threshold to ₹10 crore
Synopsis
The GST Council is set to consider one of its most taxpayer-friendly reforms yet — stripping officials of the power to arrest taxpayers under investigation and doubling the prosecution threshold to ₹10 crore. If enacted, the move would shift serious fraud cases to the Bharatiya Nyaya Sanhita and end a provision critics say has been misused against executives in banking and insurance.
Key Takeaways
The upcoming GST Council meeting will discuss removing the arrest power under Section 69 of the CGST Act .
Serious offences like fake invoicing and fraudulent ITC would instead be prosecuted under the Bharatiya Nyaya Sanhita (BNS) .
The minimum prosecution threshold may be raised from ₹5 crore to ₹10 crore .
Imprisonment terms under Section 132 — currently up to five years for evasion above ₹5 crore — are also under review for reduction.
Any statutory change will require a formal amendment Bill passed by Parliament .
The upcoming GST Council meeting is set to deliberate on removing the standalone provision under Section 69 of the Central Goods and Services Tax (CGST) Act that empowers tax officials to arrest taxpayers during a GST investigation — a move described as taxpayer-friendly by a senior official. The proposal comes after documented instances of misuse of the arrest provision and follows recommendations by the Council's own Law Committee on broader decriminalisation of GST laws.
What Is Being Proposed
The Law Committee — comprising officials from the Centre and states — has recommended stripping the Commissioner of the authority under Section 69 to order the arrest of a taxpayer where tax non-payment was not deliberately intended. Under the current framework, such arrests can be authorised when there are reasons to believe a person has committed specified serious offences under Section 132 of the CGST Act.
In its place, the Committee's current thinking is that serious cases — involving fake invoicing, fraudulent input tax credit (ITC), and fake refund claims — should be pursued through criminal prosecution under the Bharatiya Nyaya Sanhita (BNS), the general criminal law, rather than through GST-specific arrest powers.
Higher Threshold, Lighter Sentences
The Law Committee has also proposed raising the minimum monetary threshold for launching prosecution from the current ₹5 crore to ₹10 crore. This change would shield smaller defaulters from criminal proceedings and focus enforcement on larger-scale evasion.
Additionally, the Committee has recommended reducing imprisonment timelines for lighter offences. Under the existing Section 132, GST offences exceeding ₹5 crore can attract a jail term of up to five years with a fine. Offences valued between ₹2 crore and ₹5 crore may carry a sentence of up to three years, while those in the ₹1–2 crore range may attract one year's imprisonment. Critics and legal experts have reportedly argued these terms are disproportionately harsh for what are often civil tax disputes.
Industry Concerns That Drove the Review
Businesses and industry representatives have repeatedly complained that the arrest provision creates fear and uncertainty — particularly when invoked against senior executives or in sectors such as banking and insurance, where regulatory complexity can lead to inadvertent non-compliance rather than deliberate fraud. The proposal to decriminalise addresses these longstanding concerns.
Notably, this is not the first time the GST Council has examined decriminalisation. Similar proposals were floated in earlier Council sessions but did not advance to legislative action. Whether this iteration reaches Parliament will depend on the Council's final consensus.
What Happens Next
Any changes to GST law will require a formal amendment Bill that must secure approval from Parliament. The GST Council meeting will first need to reach a consensus on all proposals before they can be sent for legislative action. The timeline for the meeting and the introduction of such a Bill has not been confirmed officially.
Point of View
But the real question is whether the GST framework has the enforcement bandwidth to rely on BNS prosecution for serious fraud — a route that has historically moved slowly through India's courts. Raising the prosecution threshold to ₹10 crore is pragmatic but risks signalling a softer line to mid-scale evaders. The most telling detail is that decriminalisation has been discussed in earlier Council sessions without reaching Parliament — the pattern of reform-by-deliberation rather than reform-by-legislation is one that industry has grown wary of.
NationPress
4 Oct 2026
Frequently Asked Questions
What is the GST Council proposing to change about arrest powers?
The GST Council is considering removing the power under Section 69 of the CGST Act that allows the Commissioner to arrest a taxpayer during a GST investigation. Instead, serious offences such as fake invoicing and fraudulent ITC claims would be handled through criminal prosecution under the Bharatiya Nyaya Sanhita.
Why is the GST arrest provision being reviewed?
The provision has reportedly been misused in several instances, and on many occasions the failure to pay tax was not deliberately intended. Industry bodies have raised concerns that the power creates fear and uncertainty, especially when used against senior executives in sectors like banking and insurance.
How will the prosecution threshold change under the new proposal?
The Law Committee has recommended raising the minimum tax evasion amount required to launch prosecution from ₹5 crore to ₹10 crore. This would effectively exempt smaller default cases from criminal proceedings.
Will prison terms for GST offences change?
The Law Committee has recommended reducing imprisonment timelines for lighter offences, which it considers disproportionately harsh. Currently, offences above ₹5 crore attract up to five years in jail, while offences in the ₹2–5 crore and ₹1–2 crore ranges attract up to three years and one year respectively.
When will these changes come into effect?
No timeline has been confirmed. Any change requires the GST Council to reach a consensus first, followed by the introduction and passage of an amendment Bill in Parliament. The date of the upcoming GST Council meeting has not been officially announced.
