GST Law Committee Proposes Higher Prosecution Threshold and Shorter Jail Terms; Council to Decide on Arrest Powers
The GST Council's Law Committee has proposed changes to the criminal (jail-related) provisions of the GST law. The proposals will go before the GST Council at its 7 October 2026 meeting.
Higher threshold for prosecution: the monetary limit for prosecution (taking a case to a criminal court), last revised in 2017, is proposed to rise to ₹10 crore from ₹5 crore, because the economy and businesses have grown.
Shorter jail terms: for tax evasion between ₹5 crore and ₹10 crore, the maximum jail term is proposed to fall to two years from three years.
More choice for judges: courts would be able to give jail, or a fine, or both, depending on how serious the offence is. Today, most serious GST offences carry jail and a fine, with little choice.
No agreement on arrest powers: the committee was divided. One view: better checks in return filing will reduce fake input tax credit claims, so the power to arrest can go, while prosecution stays. The other view: removing arrest could hurt compliance, so it should stay with safeguards. The GST Council will take the final call.
The Law Committee is made up of tax officials from the Centre and from the States and Union Territories with legislatures. It studies GST laws and suggests amendments to the Council.
GST Act Provisions on Offences and Arrests
The GST law has two kinds of punishment for people who break it. The first kind is money punishment: tax demand, interest and penalty, decided by tax officers. The second kind is criminal punishment: jail, decided only by a criminal court after a trial, which is called prosecution. Jail is kept for the most serious frauds, such as fake invoices and large tax evasion. For such frauds, the law also lets senior tax officers arrest a person even before the trial.
The Law Committee's proposals would rework exactly these provisions: raising money thresholds unchanged since 2017, cutting the jail term in the ₹5 crore to ₹10 crore range, and letting courts choose jail, fine or both instead of both by default. The split over Section 69 arrest powers reflects the old debate between stopping harassment and keeping a strong tool against fake invoice rackets.
The GST Council (Article 279A)
The GST Council is a constitutional body made up of the Union Finance Minister and the finance ministers of all states. It recommends the main GST rules: tax rates, exemptions, thresholds and changes to the GST laws. It was created by Article 279A, added by the 101st Constitutional Amendment Act, 2016. Because both the Centre and states tax the same goods and services, the Council is the joint forum where they agree.
The Law Committee only recommends; the decision to change prosecution and arrest provisions lies with the GST Council at its 7 October 2026 meeting. Any change will then need amendments to the CGST Act by Parliament and to the State GST Acts by state legislatures.
- GST Council meeting to consider the proposals: 7 October 2026
- Proposed prosecution threshold: ₹10 crore (from ₹5 crore, last revised in 2017)
- Proposed maximum jail for evasion of ₹5 crore to ₹10 crore: 2 years (from 3 years)
- Proposed: courts may award jail, or fine, or both, based on seriousness
- No consensus on removing the power of arrest (Section 69, CGST Act); left to the GST Council
- Current law: above ₹5 crore, up to 5 years jail; cognizable and non-bailable for clauses (a) to (d)
- Finance Act, 2023 raised the general prosecution threshold from ₹1 crore to ₹2 crore (fake invoices still ₹1 crore)
- Radhika Agarwal v. Union of India (27 February 2025): Supreme Court upheld GST and customs arrest powers, with safeguards