GST Council to Weigh Scrapping Arrest Powers for Tax Officials at October 7 Meeting

Tax officers under India's Goods and Services Tax regime could lose their power to arrest taxpayers, with the GST Council set to take up a proposal to decriminalise most GST offences at its 57th meeting on October 7, according to reports on Sunday.

The proposal, first reported by The Indian Express, would be the biggest change to GST enforcement since the tax was launched in July 2017. If the Council, which includes the Union finance minister and state finance ministers, signs off, the Centre is expected to bring amendments to the Central GST Act in the Winter Session of Parliament.

What would change

Under the current law, Section 69 of the CGST Act allows a GST commissioner to authorise the arrest of a person where there are recorded "reasons to believe" that serious offences, such as issuing fake invoices or wrongly claiming input tax credit, have taken place. Ordinary non-compliance is handled through penalties, interest and tax recovery.

The new plan would remove administrative arrests altogether. Deliberate fraud would instead be pursued through formal prosecution under the Bharatiya Nyaya Sanhita, the country's main criminal code, rather than through detention ordered by tax officials. That would bring GST closer to the pre-2017 state VAT regimes, which did not give tax officers direct arrest powers.

The Council is also expected to look at a broader easing of prosecution rules. These include doubling the monetary threshold for launching prosecution from Rs 5 crore to Rs 10 crore of evaded tax, cutting the maximum jail term from three years to two for cases between Rs 5 crore and Rs 10 crore, and letting courts choose between a prison sentence, a fine, or both.

Why now

The proposal follows eight to nine months of consultations between the Centre and the states. The main push has come from industry, where the arrest of senior corporate executives under GST provisions has caused growing unease. Businesses, particularly in services such as banking and insurance, have argued that the threat of arrest was often used as leverage to make companies pay disputed demands rather than contest them in long legal battles.

The scale of enforcement has been significant. Central GST formations registered 72,393 cases of violations between 2021-22 and 2024-25 and made 887 arrests in that period, a figure that does not include arrests by state tax departments. Most cases have involved fake or borrowed identities used to generate input tax credit, invoices issued without any actual supply of goods, undervaluation and evasion on services.

The move also mirrors a change on the direct tax side. In September, the Central Board of Direct Taxes removed "arrest and detention" powers from income tax recovery rules, with retrospective effect from April 1, 2026.

The case against

Enforcement officials have long argued that the power of arrest is a necessary deterrent against organised input tax credit fraud, which often involves networks of shell firms that are hard to pursue through slow court processes. Some states may share that concern, and GST Council decisions usually require broad consensus, so the proposal could be diluted or deferred.

For businesses, a clear decision on October 7 would reduce one of the biggest sources of regulatory anxiety under GST. The meeting comes in a busy week for policy, with the Reserve Bank of India's interest rate decision also due on the same day.

This is an original summary based on public reporting. See our editorial policy for how we source, write, and correct our stories.