GST Council Moves to Drop Arrest Powers and Decriminalise Tax Offences: What Changes and Why
At its 57th meeting, held on 8 October 2026 at Bharat Mandapam, New Delhi, the GST Council recommended a major change in how the Goods and Services Tax law punishes rule-breakers.
It recommended removing Section 69 of the CGST Act, 2017, which gives GST officers the power to arrest people suspected of serious tax fraud.
It recommended raising the money limit for starting a criminal case (prosecution) from ₹1 crore to ₹5 crore of tax evaded. Smaller cases would be handled by tax demands, interest and penalties, not courts and jail.
It also recommended lowering the general penalty limit from ₹25,000 to ₹10,000, a minimum tax amount of ₹10,000 before a show cause notice (a formal "explain yourself" letter) is issued, and a reduced 5% penalty in eligible cases where there is no fraud.
The Confederation of Indian Industry (CII), a leading industry body, said these decisions reflect trust-based economic governance and called them a landmark institutional reform.
These are recommendations. They take legal effect only after Parliament and the state legislatures amend the CGST and SGST Acts.
GST Act Provisions on Offences and Arrests
The GST law punishes rule-breakers in two ways. The first is money punishment: tax demand, interest and penalty, decided by tax officers. The second is criminal punishment: jail, which only a criminal court can give after a trial (this is called prosecution). Jail is meant only for serious, deliberate fraud, such as issuing fake invoices to claim tax credit.
The 57th Council's recommendations are the biggest step yet in moving GST away from jail and towards money penalties. Industry sees it as the state trusting honest taxpayers, while big fraud above ₹5 crore can still be taken to court.
The GST Council (Article 279A)
The GST Council is a body made up of the Union Finance Minister and the finance ministers of all states. It decides the main rules of GST: tax rates, exemptions, and changes to the GST laws. It was created by the Constitution itself through Article 279A, inserted by the 101st Constitutional Amendment Act, 2016. Because both the Centre and the states share GST, the Council is the meeting place where they agree together.
The arrest and prosecution changes came as Council recommendations. Because of the Mohit Minerals ruling, they need amendments to the Central and State GST Acts before they actually change the law.
Jan Vishwas (Amendment of Provisions) Act, 2023
The Jan Vishwas Act is a law that changed many central laws together. It removed jail terms for small, technical or procedural mistakes and replaced them with money penalties. "Jan Vishwas" means "people's trust". The idea is that the government should trust citizens and businesses, and save jail for real wrongdoing.
The GST Council's move follows the same trust-based thinking as the Jan Vishwas laws: keep jail only for serious, deliberate fraud and handle honest mistakes with penalties. This is why industry bodies describe it as "trust-based economic governance".
- 57th GST Council meeting: 8 October 2026, Bharat Mandapam, New Delhi
- Recommended: omit Section 69 (power to arrest) of the CGST Act, 2017
- Prosecution threshold: to be raised from ₹1 crore to ₹5 crore of tax evaded
- General penalty limit: to be lowered from ₹25,000 to ₹10,000; minimum ₹10,000 tax demand for a show cause notice; 5% penalty in eligible non-fraud cases
- Section 132 jail terms: up to 5 years (above ₹5 crore), 3 years (₹2 to 5 crore), 1 year (₹1 to 2 crore)
- GST Council: Article 279A, 101st Amendment Act, 2016; decisions by three-fourths weighted vote (Centre one-third, states two-thirds)
- Union of India v. Mohit Minerals (2022): Council recommendations are persuasive, not binding
- Jan Vishwas Act, 2023: 183 provisions, 42 Acts, 19 ministries/departments