GST Arrest Powers May Be on Their Way Out — What It Means for Businesses

What's proposed: Removal of arrest powers under GST
Current provision: Section 69, CGST Act
Next step: 57th GST Council meeting, then Parliament
Status: Proposal — not yet law

Please note — this is a developing proposal

As reported, the Centre is considering removing arrest powers under GST, with the matter to be taken up by the GST Council and followed by legislative changes. Nothing has been enacted yet. Section 69 arrest powers remain in force until Parliament amends the law. Treat this as the current direction of policy, not the current legal position.

The short version

The government is reported to be moving to remove the power of arrest under GST law, after years of business feedback that it had become a tool of harassment.
Genuine, intentional fraud would still be prosecuted — but reportedly through the general criminal code (Bharatiya Nyaya Sanhita) rather than arrest provisions inside the GST law itself.
The GST Council is expected to discuss it at its 57th meeting, with an amendment likely to follow in the Winter Session of Parliament.
It mirrors the direct-tax side: in September, the CBDT removed arrest and detention from the tax-recovery rules, effective 1 April 2026.

For years, one provision has loomed over GST compliance disputes more than any other: the power to arrest. Now, according to news reports, it may be on its way out — a shift that, if it happens, would meaningfully change how GST enforcement feels for honest businesses.

The reported plan is to drop the arrest provisions from GST law. Deliberate fraud wouldn't go unpunished — the authorities would reportedly pursue prosecution through the country's general criminal code, the Bharatiya Nyaya Sanhita, rather than through arrest powers built into the GST statute. A source quoted in the reporting described consultations running over the past eight to nine months, with business feedback on arrests factored in.

What the law says today

Under the CGST Act as it stands, ordinary non-compliance already attracts civil consequences — penalty under Section 122, interest under Section 50, and recovery of tax. Arrest is reserved for the serious end. Section 69 lets the Commissioner, where he has "reasons to believe" that a person has committed specified offences — such as issuing fake invoices or fraudulently availing input tax credit — authorise an officer to arrest that person.

Those "reasons to believe" are not meant to be casual. They must be backed by credible material and evidence; mere suspicion is not enough, and the reasons have to be recorded in writing. The power has also been described as highly restricted — exercisable only where the evasion involved is ₹2 crore or more and the offence is of a severe kind, such as supplies made without any invoice, invoices issued without any supply, tax collected but not paid over, or ITC taken without receiving goods or services.

Why the rethink

The numbers give a sense of scale. In 72,393 cases of GST offences between 2021-22 and 2024-25, central GST formations made 887 arrests — with state-authority arrests on top of that.

72,393

GST offence cases, 2021-22 to 2024-25

887

arrests by central GST formations (states extra)

Industry voices quoted in the reporting argue that arrest had, in practice, become a pressure tactic — particularly in the services sector, including banking and insurance — sometimes used as leverage to make businesses pay penalties and avoid drawn-out legal battles. An official described the proposed removal as a taxpayer-friendly step meant to take fear and the perception of harassment out of the system.

An old concern, not a new one

Unease about GST arrest powers predates the tax itself. In the fifth GST Council meeting in December 2016 — before the July 2017 rollout — a senior Maharashtra official observed that the power to arrest and confiscate sat awkwardly with the idea of ease of doing business, and a West Bengal minister noted that the VAT regime had no arrest power at all, with FIRs lodged only through the police. If arrest powers go, GST would in that respect look closer to the pre-2017 VAT regime.

The other side of the argument

The case for keeping arrest powers has its own logic, and it's worth stating fairly. A CBIC document has noted that arrest provisions exist to deal with unscrupulous evaders — that while they may look harsh, they serve as a deterrent and instil discipline, and that the GST law already contains safeguards: arrests need the Commissioner's authorisation, apply only to specified offences, and only above the prescribed tax threshold. On this view, removing the power risks weakening the tools available against large, organised fake-invoice and ITC-fraud rackets.

The counter-view is that genuine fraud can still be prosecuted under the criminal code, so the deterrent need not sit inside the tax statute — and that the day-to-day cost of broad arrest powers has fallen disproportionately on compliant businesses caught in grey areas. Which consideration should weigh more is precisely what the GST Council will have to balance.

Part of a wider decriminalisation push

The GST move doesn't stand alone. On the direct-tax side, the CBDT in September removed arrest and detention provisions from the tax-recovery rules, with retrospective effect from 1 April 2026, barring tax officials from arresting a defaulter in recovery proceedings. The change came through the Income-Tax (Fourth Amendment) Rules, 2026, notified on 17 September, which also removed "arrest and detention" from the recovery rules in the case of a deceased defaulter. Read together, the two signal a broader shift toward decriminalising routine tax default while reserving the criminal law for genuine fraud.

What it would mean for businesses

Less fear in disputes. If arrest powers go, the threat of detention would no longer hang over routine GST investigations and negotiations.
Fraud still carries consequences. Deliberate evasion would reportedly be prosecuted under the general criminal code — this is decriminalisation of the tax statute, not an amnesty.
Civil consequences stay. Penalty, interest and recovery of tax under the CGST Act are unaffected by this proposal.
Nothing changes yet. Until the Council decides and Parliament amends the law, Section 69 remains fully in force.

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Disclaimer: This article summarises a developing policy proposal based on news reports (Indian Express, 4 October 2026) and is current as at the date of publication. No change to GST arrest provisions has been enacted; Section 69 of the CGST Act remains in force until amended. Figures, dates and the status of any proposal may change after the GST Council meeting and subsequent legislative process. This is not legal or tax advice — please consult a qualified professional. Talk to efiletax if you need help.