GST Council Moves to End Arrest Powers and Raise the Prosecution Limit to ₹5 Crore
At its 57th meeting in New Delhi on 8 October 2026, the GST Council approved removing the power of GST officers to arrest people.
The Council also raised the minimum amount of tax fraud needed to start a criminal case (prosecution) from ₹1 crore to ₹5 crore.
The minimum punishment is to be removed. The court will decide in each case whether to give a fine, jail, or both (this is called judicial discretion).
The general penalty, used when the law fixes no other penalty for a rule break, is to be cut from ₹25,000 to ₹10,000.
The finance ministry said the GST rate structure is now settled, so rates will be changed only once a year. The Council is now focusing on how the tax works day to day.
A Committee of Officers will study, within three months, how to protect an honest buyer who has a proper invoice, has received the goods and has paid the supplier in full, so that the buyer does not lose input tax credit because of the seller's fault. Its report will go to the next Council meeting.
GST Act Provisions on Offences and Arrests
The GST law punishes rule-breakers in two ways. Money punishment (tax demand, interest and penalty) is decided by tax officers. Criminal punishment (jail) can be given only by a criminal court after a trial, called prosecution. Today, senior officers can also arrest a person for big, deliberate frauds such as fake invoice rackets, even before the trial.
The 57th Council has recommended omitting Section 69, so GST officers would no longer be able to arrest anyone, and raising the prosecution limit to ₹5 crore. It also wants to remove the minimum jail term and leave the choice of fine or jail to the courts. This moves GST towards "trust-based" tax administration: honest mistakes are settled with money, and only large, deliberate frauds go to criminal court.
The GST Council (Article 279A)
The GST Council is a joint body of the Union Finance Minister and the finance ministers of all states. It recommends GST rates, which goods and services are taxed or exempt, and changes to the GST laws. It was created by Article 279A of the Constitution, added by the 101st Amendment Act, 2016. It is often called the best example of "cooperative federalism" in India, because the Centre and states decide tax rules together.
Ending arrest powers and changing jail terms needs amendments to the CGST Act and every state's GST Act. So the change had to start in the GST Council, where the Centre and the states agree together. The decision to change rates only once a year also shows the Council's focus shifting from rates to how the tax is run.
Input Tax Credit (ITC) Mechanism Under GST
Input tax credit is the heart of GST. A business pays GST when it buys raw materials or services. When it sells its own product, it subtracts the GST already paid on purchases from the GST it owes on sales. So tax is paid only on the value added at each step, and "tax on tax" is avoided.
Many honest buyers pay the full price, including GST, but are denied credit because the seller never deposited the tax. The new Committee of Officers will study how to protect such a buyer who has a proper invoice, has received the goods and has paid in full. This is the old "Section 16(2)(c) problem" that courts have often raised.
- 57th GST Council meeting: 8 October 2026, New Delhi
- Arrest power of GST officers: to be removed (Section 69, CGST Act, 2017)
- Prosecution threshold: ₹1 crore → ₹5 crore (recommended)
- Minimum punishment: to be removed; fine, jail or both left to the court
- General penalty (Section 125): ₹25,000 → ₹10,000 (recommended)
- GST rate changes: only once a year
- Committee of Officers on protecting genuine buyers' ITC: report within 3 months
- GST Council created by Article 279A, inserted by the 101st Constitutional Amendment Act, 2016; GST rolled out on 1 July 2017
- Previous decriminalisation step: Finance Act, 2023 (effective 1 October 2023), threshold ₹1 crore → ₹2 crore