GST Council to Consider Ending Direct Arrest Powers of Tax Officers: Shift to Recovery, Compounding and Court Oversight
The 57th meeting of the GST Council (the joint body of the Union and state finance ministers) is scheduled for 7 October 2026 in New Delhi. A proposal to decriminalise parts of the GST law (that is, to stop treating some violations as crimes) is on its agenda.
The key proposal is to amend Section 69 of the CGST Act, 2017, so that GST officers no longer have the power to arrest a person directly. Any arrest would instead need authorisation from a court.
Routine tax disputes would be handled through recovery of tax, interest and penalty, and through compounding (settling an offence by paying money instead of facing trial). Criminal prosecution would be kept for serious, deliberate fraud.
Reports indicate that nine offences may be fully decriminalised and one partly, penalties for 24 offences may be eased, the minimum jail term may be removed with a fine as an alternative, and the money threshold for prosecution may be raised. Officers would keep their powers of search, seizure and summons.
Data quoted with the proposal: Central GST formations detected Input Tax Credit (ITC) fraud of ₹74,782 crore in 2025-26 and arrested 358 persons; in 2024-25, ₹58,773 crore was detected and 178 were arrested; in 2023-24, ₹36,373 crore was detected and 182 were arrested.
The Council is also expected to discuss widening ITC under Section 17(5), refunds under the inverted duty structure, e-way bill checks and automated refunds. Any change in the law needs amendments by Parliament and the state legislatures after the Council recommends it.
GST Act Provisions on Offences and Arrests
The GST law punishes wrongdoing in two ways. The first is money: tax demand, interest and penalty, decided by tax officers. The second is criminal: prosecution in a court, which can lead to jail. Section 132 of the CGST Act lists the serious offences, and Section 69 lets officers arrest people suspected of some of them.
The proposal would take away the direct arrest power under Section 69 and make arrest depend on a court's permission. Section 132 prosecution would remain, but only for serious, deliberate fraud.
The GST Council (Article 279A)
The GST Council is a body of the Union Finance Minister and the finance ministers of all states. It recommends the main rules of GST: tax rates, exemptions, thresholds and changes to the law. Because GST is a tax that both the Centre and the states collect, the Council is the forum where both sides decide together.
The arrest-power proposal comes before the 57th meeting. If the Council recommends it, Parliament (for the CGST Act) and the state legislatures (for their SGST Acts) will have to amend their laws.
Compounding of Offences
Compounding means settling a criminal offence without a full trial. Either the victim agrees to settle with the accused, or (in tax and business laws) the government agrees to accept a fixed sum of money instead of prosecuting. Once an offence is compounded, the criminal case ends. In ordinary criminal law, the accused is treated as acquitted; in tax laws, prosecution is either not started or, if already started, it is dropped.
The GST Council proposal would make compounding, along with recovery of tax, interest and penalty, the normal way to deal with most GST offences. Arrest and prosecution would be kept for serious, deliberate fraud, and any arrest would need a court's authorisation.
- 57th GST Council meeting: 7 October 2026, New Delhi
- Proposal: amend Section 69, CGST Act, 2017 so arrest needs court authorisation
- Reported changes: 9 offences fully and 1 partly decriminalised; penalties eased for 24 offences; 11 retained
- CGST ITC fraud detected: ₹74,782 crore (2025-26, 358 arrests); ₹58,773 crore (2024-25, 178 arrests); ₹36,373 crore (2023-24, 182 arrests)
- Section 132(5): offences above ₹5 crore are cognizable and non-bailable
- Arrested person must be produced before a magistrate within 24 hours
- Radhika Agarwal v. Union of India (27 February 2025): upheld GST and Customs arrest powers with safeguards
- GST Council: Article 279A, 101st Amendment Act, 2016; Centre one-third vote weight, states two-thirds; decisions by three-fourths
- Compounding under GST: Section 138; 25% to 100% of tax involved