GST Decriminalisation: Centre and States to Frame Rules for Pending Arrest Cases, IMS to Become Mandatory
The 57th GST Council recommended removing Section 69 of the Central Goods and Services Tax (CGST) Act, which gives tax officers the power to arrest in serious fraud cases. It also recommended raising the threshold for criminal prosecution from ₹1 crore to ₹5 crore of tax evaded.
Since arrest cases are already pending, the Centre will work with the states to frame a standard operating procedure (SOP) so that these existing cases are handled the same way everywhere, in line with the new decriminalisation approach.
The Invoice Management System (IMS) on the GST portal is planned to become mandatory from 1 April 2027. The Central Board of Indirect Taxes and Customs (CBIC) is upgrading it so that invoice matching becomes fully digital, with minimum scope for human error.
Businesses will get 90% of refunds and input tax credit-related claims quickly on the basis of a system risk assessment. The Centre will hold a quarterly review of this refund risk assessment with the states so that refunds stay fast and consistent across regions.
The changes need about a dozen amendments to laws and rules. Rule changes may come sooner, but changes to the Act need Parliament's approval, which is why 1 April 2027 was chosen as the main start date.
GST Act Provisions on Offences and Arrests
The GST law has two kinds of punishment. The first is money punishment: tax demand, interest and penalty, decided by tax officers. The second is criminal punishment (jail), which only a court can give after a trial, called prosecution. Jail is kept for the most serious frauds, such as fake invoices and large tax evasion, and for such frauds the law has so far let senior officers arrest a person even before trial.
Once Section 69 goes, officers will not be able to arrest anyone under GST. But many people are already facing arrest-based cases. The SOP that the Centre and states are drafting will decide how these pending cases are handled, so that a business in one state is not treated differently from a business in another.
Invoice Management System (IMS) under GST
The Invoice Management System, or IMS, is a facility on the GST portal where a business can see every bill (invoice) that its suppliers have uploaded against its name. For each bill, the buyer can accept it, reject it, or keep it pending. Only accepted bills count towards the buyer's input tax credit for that month. In simple words, IMS lets the buyer say "yes, I really bought this" or "no, this is not mine" before tax credit is calculated.
The government plans to make IMS compulsory from 1 April 2027 and fully digital. If every buyer must confirm its purchase bills, fake bills will be caught at the start, credit claims will be cleaner, and refunds can be cleared faster on the basis of system checks.
GST Refund Mechanism (Section 54, CGST Act)
A GST refund is money the government pays back to a business when the business has paid more tax than it owed, or has collected tax credit that it cannot use. The rules for refunds are in Section 54 of the Central Goods and Services Tax (CGST) Act, 2017. Fast refunds matter because, for a business, money stuck with the government is money it cannot use to buy raw material or pay workers.
The Council has decided that 90% of refunds should be cleared quickly on the basis of a system risk check. The quarterly Centre-state review of this risk check is meant to make sure honest exporters and manufacturers get their money on time in every state, while risky claims still get a closer look.
- Section 69 CGST Act (power of arrest): recommended for removal
- Prosecution threshold: recommended to rise from ₹1 crore to ₹5 crore
- SOP for pending arrest cases: to be framed jointly by the Centre and states
- Invoice Management System: planned to be mandatory from 1 April 2027
- Refunds/ITC: 90% to be allowed on risk-assessment basis; quarterly Centre-state review
- About a dozen amendments to laws and rules needed; some require Parliament's approval
- 57th GST Council meeting: 8 October 2026