GST Council: Proposes arrest removal, higher prosecution limit

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The GST Council recommended removing arrest provisions under GST and raising the prosecution threshold from Rs 1 crore to Rs 5 crore at its 57th meeting in New Delhi on 8 October 2026. Union Finance and Corporate Affairs Minister Nirmala Sitharaman chaired the meeting, according to the Ministry of Finance’s announcement.^[1]

The Council also recommended reducing the general penalty from Rs 25,000 to Rs 10,000. These are separate proposals: removing arrest provisions concerns taking a person into custody, while raising the prosecution threshold concerns bringing criminal proceedings. The announcement describes recommendations, not an operative notification establishing when those changes take effect.^[1]

Arrest powers and prosecution are different questions

The distinction is visible in the Central Board of Indirect Taxes and Customs’ earlier enforcement instructions. Its Instruction No. 02/2022-23, dated 17 August 2022, explained that Section 69 of the Central Goods and Services Tax Act, 2017 provided arrest powers linked to specified offences and punishment provisions under Section 132. The same instruction separately addressed filing a prosecution complaint before a competent court after arrest.^[2]

That historical framework helps explain the scope of the Council’s announcement. A proposal to remove arrest provisions is not the same as abolishing prosecution. The Council separately proposed a higher monetary threshold for prosecution, rather than announcing its removal.^[1]

The Rs 1 crore baseline should be understood as the figure used in the ministry’s announcement. The headline recommendation alone does not provide an offence-by-offence account of the threshold or settle how exceptions and pending proceedings would be treated.

The main comparisons supported by the official documents are:

Issue	Earlier position described in the documents	Council recommendation
Arrest	The 2022 CBIC instruction explained arrest powers under Section 69 for specified Section 132 offences	Remove arrest provisions under GST
Prosecution threshold	The October announcement identifies Rs 1 crore as the starting threshold	Raise it to Rs 5 crore
Maximum general penalty	Rs 25,000, according to the official reform brief	Reduce it to Rs 10,000
Minimum penalty in non-fraud cases	The reform brief identifies a Rs 10,000 minimum	Remove that minimum

The arrest comparison draws on CBIC’s dated instruction; the prosecution recommendation comes from the ministry’s meeting announcement. The penalty details are set out in the Press Information Bureau’s Next-Gen GST Process Reforms brief dated 9 October 2026.^[2]^[1]^[3]

What the earlier arrest safeguards required

CBIC’s 2022 instruction did not treat arrest as an automatic consequence of an alleged GST offence. It required the reasons supporting arrest to be clear and based on credible material. Even where the legal conditions were fulfilled, the instruction said that this did not, by itself, mean an arrest must follow.^[2]

The authority was to consider whether custody was necessary for a proper investigation, whether evidence could be tampered with, whether witnesses might be intimidated or influenced, and whether the person’s presence could otherwise be secured. Approval also required evident intent to evade tax or commit the specified wrongful acts.^[2]

For technical disputes, the instruction drew a separate boundary. It said arrest should not be used where a tax demand arose from a difference of opinion over interpretation of the law. Cooperation with an investigation, including responding to summons and providing documents, was among the factors officers could consider.^[2]

Those safeguards concerned how an arrest power should be exercised. The Council’s October recommendation goes beyond that approach by proposing removal of the provisions themselves. The older instruction supplies historical context; it does not establish the implementation status of the October proposal.^[1]^[2]

Smaller demands and penalties also targeted

Alongside the criminal-enforcement recommendations, the Council proposed changes to tax disputes. The PIB brief says no show cause notice would be issued where the tax amount involved is below Rs 10,000. A show cause notice asks the recipient to explain why the proposed action should not be taken.^[3]

The proposal would also apply that minimum threshold to pending notices and appeals involving amounts below Rs 10,000, treating the threshold as though it applied when the notice was issued. This expressly described treatment of smaller disputes should not be confused with an announced rule for pending criminal prosecutions.^[3]

A reduced penalty of 5 per cent was proposed where tax and interest are paid within 30 days of an adjudication order under Section 73, or within 60 days under Section 74A. An adjudication order is the authority’s decision on the tax dispute. The brief separately proposes removing the Rs 10,000 minimum penalty in non-fraud cases.^[3]

The Council also recommended comprehensive guidelines for officers covering demand notices, adjudication orders and appeal orders. PIB describes these measures as intended to streamline dispute resolution and reduce litigation; that is the stated purpose, not evidence of an achieved reduction in disputes.^[3]

These measures form part of the wider package covered in Digital Pradesh’s report on GST Council proposals to simplify rules. The meeting also recommended intelligence-based, authorised interception of goods, a separate enforcement subject discussed in the site’s coverage of the legal framework for goods detention.^[1]

The implementation details still matter

The documented proposal is to remove GST arrest provisions while retaining prosecution above a revised threshold. It is not an announcement that tax demands, interest or penalties disappear: the accompanying dispute-resolution proposals continue to address those liabilities and the conditions for reduced penalties.^[1]^[3]

For businesses and people facing investigations, the unresolved questions are the operative wording, the commencement date and the treatment of pending cases. The headline recommendations establish the Council’s proposed direction, but do not answer those questions.

References

Ministry of Finance, Press Information Bureau. Recommendations of the 57th Meeting of the GST Council. 8 October 2026. https://www.pib.gov.in/PressReleasePage.aspx?PRID=2320934&lang=1&reg=48
Central Board of Indirect Taxes and Customs. Instruction No. 02/2022-23 [GST – Investigation]: Guidelines for Arrest and Bail in Relation to Offences Punishable under the CGST Act, 2017. 17 August 2022.
Press Information Bureau. Next-Gen GST Process Reforms: Towards Simpler, Faster and More Predictable Processes. 9 October 2026.