GST arrest powers may be removed? Council to discuss decriminalisation on Wednesday; law change likely in Winter Session

Indian government is considering a change to the enforcement framework under the Goods and Services Tax (GST) Act: removing the power of tax authorities to arrest taxpayers under GST law.

The proposal is expected to be taken up for discussion at the 57th GST Council meeting on Wednesday, 7 October. The move follows months of consultations between the Centre and states amid concerns from businesses about the use of arrest provisions and alleged overreach by tax authorities, The Indian Express reported.

If approved, the change would require amendments to GST legislation. According to the report, the Centre is likely to consider introducing the required amendments during the Winter Session of Parliament.

What will happen in cases of deliberate GST fraud?

The proposed change is not expected to mean that serious fraud or deliberate tax evasion will go without criminal action. Intentional fraud and deceit could still lead to prosecution, while arrests in such cases may be handled under the Bharatiya Nyaya Sanhita (BNS), according to the report.

GST enforcement authorities have encountered several forms of fraud since the regime was introduced. These include the use of fake identities or mule accounts to generate fraudulent transactions and claim input tax credit, issuing invoices without an underlying supply, and non-payment of GST despite collecting the tax from customers.

How often have arrests been made under GST?

Central GST formations recorded 72,393 cases of GST offences between 2021-22 and 2024-25 and made 887 arrests, according to data cited by The Indian Express. Arrests made by state tax authorities are separate from this figure.

At present, Section 69 of the Central GST (CGST) Act gives the Commissioner the power to authorise an arrest in specified cases.

The provision applies to certain offences under Section 132, including supplying goods or services without an invoice with the intention to evade tax, issuing invoices without an actual supply, and fraudulently availing input tax credit. It also covers cases where tax is collected but not paid to the government for more than three months after it becomes due.

However, an arrest cannot be authorised merely on the basis of suspicion. Section 69 requires the Commissioner to have “reasons to believe” that the person has committed an offence covered by the law. This belief must be supported by credible material and evidence.

Why is the government considering the change?

Businesses and industry representatives have argued that the arrest provisions can create fear and uncertainty, particularly when used against senior executives or in sectors such as banking and insurance.

The proposed removal is therefore being viewed as a taxpayer-friendly step that could reduce concerns around harassment and improve the ease of doing business, The Indian Express reported.

The proposed GST changes also come amid a broader move towards decriminalisation in taxation. In September, the Central Board of Direct Taxes removed arrest and detention provisions from income-tax recovery rules with retrospective effect from 1 April 2026.

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