GST Council May Consider Removing Arrest Powers For Certain Offences On October 7

New Delhi, Oct 5 (KNN) The Goods and Services Tax (GST) regime could see changes to its arrest provisions, with the GST Council expected to consider a proposal to decriminalise certain offences under the indirect tax framework at its upcoming meeting on October 7.

Centre, States Consulted Over GST Arrest Powers

The Centre and states have held consultations over the past eight to nine months on removing arrest provisions under GST. The proposal aims to address business concerns and improve the investment climate.

If approved by the GST Council, the move would require amendments to GST laws, which the Centre is expected to introduce during Parliament’s Winter Session, reported Indian Express.

Under the proposed framework, cases involving intentional fraud or deceit could be prosecuted under the Bharatiya Nyaya Sanhita (BNS) instead of the GST law.

Businesses Raise Concerns Over Arrest Powers

The discussions come amid business concerns over the use of arrest powers in GST cases, with industry representatives warning of excessive enforcement, particularly in the services sector.

Data showed that central GST formations made 887 arrests in 72,393 GST offence cases between 2021-22 and 2024-25. Arrests by state GST authorities would be additional to this figure.

CGST Act Provides for Penalties and Criminal Prosecution

Under the CGST Act, tax violations can result in penalties, interest and tax recovery. Deliberate evasion may also lead to criminal prosecution and arrest under specified provisions.

Section 69 empowers the Commissioner to authorise arrest where there are recorded reasons to believe that a person has committed specified offences, including issuing fake invoices or fraudulently claiming ITC. Such action must be supported by credible evidence; mere suspicion is insufficient.

GST Arrest Powers Debated Since 2016

The debate over GST arrest powers predates the regime’s launch in July 2017. At the fifth GST Council meeting in December 2016, Maharashtra and West Bengal representatives raised concerns about granting arrest powers to tax authorities, citing ease-of-doing-business considerations.

The GST Council administration said the provisions were intended only for serious offences and would be subject to monetary thresholds and safeguards. 

These included issuing invoices without supply, supplying goods or services without invoices, collecting tax but failing to deposit it with the government, and fraudulently claiming ITC without receiving the underlying goods or services.

CBIC Says Arrest Powers Deter Tax Evasion

The CBIC has maintained that GST arrest provisions target serious tax evasion and serve as a deterrent, subject to legal authorisation and safeguards.

The proposed GST changes come alongside direct-tax decriminalisation measures. On September 17, the CBDT notified the Income-Tax (Fourth Amendment) Rules, 2026, removing arrest and detention provisions from tax recovery rules retrospectively from April 1, 2026.

The GST Council’s decision will determine whether the government moves ahead with legislative changes to remove or modify arrest powers under the GST framework.

(KNN Bureau)