At the upcoming meeting on October 7, the GST Council is likely to consider a major overhaul of the enforcement provisions. This overhaul will include a proposal to take away arrest powers from tax officials and require judicial authorization before any arrest.
The proposed changes come under the government’s next-generation GST reform and could mark a shift towards a more civil recovery-focused approach to tax enforcement.
Under this proposal, GST officers will no longer be able to authorize arrests under Section 69 of the Central GST Act. Any arrest would require an order from a court, according to sources.
The council is likely to reconsider raising the threshold for launching criminal prosecution from Rs 1 crore to Rs 5 crore. The proposal would seek to reserve criminal proceedings for more serious cases, including significant tax evasion or fraud.
Under the new proposal, the scope of prosecution provisions would also be narrowed so that routine disputes over classification, valuation, or input tax credit are not treated as criminal offences.
However, the proposed changes will not affect the government’s ability to recover unpaid taxes or impose interest and penalties. Taxpayers found guilty of short-paid tax or wrongly claimed ITCs will continue to face recovery proceedings and other statutory consequences.
Serious cases involving deliberate tax evasion or fraud could continue to be prosecuted through the courts.
Nearly 24 offences currently covered under the prosecution provisions of the GST law will be included in the proposal. Nine offences are proposed to be removed entirely, while 11 others will be retained in their existing form.
The minimum sentence provision is also proposed to be removed, meaning courts would not be required to impose imprisonment in such cases. A fine will be levied in every case, while the maximum sentence in the middle category could be reduced from three years to two years.
The council will also reconsider waiving the late fee for small taxpayers and rationalizing penalties.
The proposal comes at the heels of the government’s major GST rate rationalization in September 2025, which simplified the structure around a 5 per cent merit rate and an 18 per cent standard rate, along with a 40 per cent rate for selective luxury and demerit goods.
The coming phase aims to focus on simplifying administration, reducing compliance costs, and making enforcement more proportionate.
If approved, the proposed changes would require amendments to the GST law. The council’s recommendations would therefore need to go through a legislative procedure before being brought into effect.