GST Council recommends ending arrest powers and raising prosecution threshold to ₹5 crore
GST officers have had the power to arrest since 2017. Why is the Council now asking for it to go?
Published 9 October 2026. Written by Pratidin from the reports linked at the end; every fact checked by a separate review before publishing. How we work
The GST Council met for the 57th time in New Delhi on 8 October 2026, chaired by Union Finance Minister Nirmala Sitharaman. It recommended the complete withdrawal of arrest powers under GST by omitting Section 69 of the Central Goods and Services Tax (CGST) Act, 2017. It also recommended raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore, narrowing some offences in Section 132(1), and cutting the maximum general penalty under Section 125 from ₹25,000 to ₹10,000. No show cause notice would be issued where the combined tax involved (CGST, SGST, IGST and cess) is below ₹10,000, and the pre-deposit for appeals involving only a penalty would be capped at ₹40 crore (₹20 crore CGST and ₹20 crore SGST/UTGST).
The package also eases cash flow and paperwork. Refunds would move towards automation: excess balance in the electronic cash ledger would be refunded in full automatically, 90% of zero-rated and inverted duty refund claims would be sanctioned provisionally, and the time to acknowledge a refund claim would fall from 15 to 10 days. Accumulated input tax credit (ITC) on input services availed from 1 November 2026, and on capital goods availed from 1 April 2027 (spread over 60 months), would become refundable in inverted duty cases. Several blocked credits under Section 17(5), such as outdoor catering, health and life insurance and telecom towers, would be opened up. Goods in inter-State transit could be intercepted only on specific intelligence, with authorisation from an officer not below Joint Commissioner, and not by States through which the goods merely pass.
The GST Council is a constitutional body under Article 279A, inserted by the Constitution (One Hundred and First Amendment) Act, 2016. Its recommendations are not law by themselves: the official release says they take effect only through circulars, notifications and law amendments, so removing Section 69 needs Parliament to amend the CGST Act, and States have their own SGST Acts. The change comes after the Supreme Court in Radhika Agarwal v. Union of India (27 February 2025) upheld Section 69 as valid under Article 246A but tied arrests to safeguards such as recorded reasons to believe. The Council presents the package as a shift towards trust-based compliance. The test will be deterrence: the narrowed Section 132 still targets fraudulent ITC claims made without receiving goods or services, or without an invoice.
Prelims facts
- The 57th GST Council meeting (8 October 2026) recommended omitting Section 69 of the CGST Act, 2017, which gives GST officers the power to arrest.
- The prosecution threshold would rise from ₹1 crore to ₹5 crore, and the maximum general penalty under Section 125 would fall from ₹25,000 to ₹10,000.
- Inter-State goods could be intercepted only on specific intelligence, authorised by an officer not below Joint Commissioner, and not by transit States.
- GST Council recommendations take effect only through notifications, circulars and amendments to the CGST and SGST Acts.
- In Radhika Agarwal v. Union of India (27 February 2025), the Supreme Court upheld Section 69 under Article 246A, with safeguards.
Quick recall
- Which section of the CGST Act, 2017 gives the power to arrest?
- Section 69. The 57th GST Council recommended omitting it.
- Recommended new GST prosecution threshold?
- ₹5 crore, up from ₹1 crore.
- Recommended maximum general penalty under Section 125?
- ₹10,000, down from ₹25,000.
- Below what tax amount will no GST show cause notice be issued?
- ₹10,000 (CGST, SGST, IGST and cess combined).
- Who may now authorise interception of goods in transit?
- An officer not below Joint Commissioner, and only on specific intelligence.
- Which Article creates the GST Council?
- Article 279A, inserted by the 101st Amendment Act, 2016.
- Vote weight of the Centre in the GST Council?
- One-third; all States together hold two-thirds.
- Which 2025 case upheld GST arrest powers with safeguards?
- Radhika Agarwal v. Union of India (27 February 2025).
Prelims practice question
With reference to the recommendations of the 57th meeting of the GST Council, consider the following statements:
1. It recommended omitting Section 69 of the CGST Act, 2017, which deals with the power to arrest.
2. It recommended lowering the monetary threshold for prosecution from ₹5 crore to ₹1 crore.
3. Its recommendations take effect only through notifications, circulars or amendments to the law.
Which of the statements given above are correct?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Show answer
Answer: (c) 1 and 3 only. Statement 1 is correct: the Council recommended complete withdrawal of arrest powers by omitting Section 69. Statement 2 is wrong: the threshold is to be raised from ₹1 crore to ₹5 crore, not lowered. Statement 3 is correct: the official release says recommendations are given effect through circulars, notifications and law amendments, which alone have the force of law.
Use this in UPSC Mains: previous-year questions
Recurring theme: GST design, Centre-State fiscal relations and tax administration reform
- How to use this
Use it to show that the 'common national market' goal still needs procedural reform, especially for inter-State movement and refunds, years after the amendment.
- The 57th GST Council (8 October 2026) recommended that goods be intercepted only on specific intelligence, with Joint Commissioner approval, and not by transit States.
- It proposed 90% provisional sanction of zero-rated and inverted duty refunds to release trapped input tax credit.
- Several Section 17(5) blocked credits, such as outdoor catering and telecom towers, are to be opened, reducing cascading.
- How to use this
Cite the 57th Council meeting as an example of pooled Union-State decision-making that still leaves each legislature the final word.
- Under Article 279A the Centre holds one-third of the vote weight and States two-thirds; decisions need three-fourths of weighted votes.
- The 8 October 2026 meeting recommended omitting GST arrest powers under Section 69 of the CGST Act.
- Recommendations need amendments to the CGST Act and every SGST Act; Mohit Minerals (2022) held they are not binding.
Background on how GST works; the story is about enforcement rather than revenue.
Mains practice question
The 57th GST Council meeting recommended removing arrest powers and raising the prosecution threshold under GST. Examine how far decriminalisation of tax offences can improve compliance without weakening deterrence against tax fraud. (250 words)
Model answer
On 8 October 2026, the 57th GST Council recommended omitting Section 69 of the CGST Act, 2017 (arrest powers) and raising the prosecution threshold from ₹1 crore to ₹5 crore, a clear move towards trust-based taxation.
How decriminalisation helps compliance
- Less fear, less litigation: the general penalty falls from ₹25,000 to ₹10,000 and no show cause notice is issued for tax below ₹10,000.
- Cheaper appeals: pre-deposit for penalty-only appeals is capped at ₹40 crore.
- Faster refunds: automatic refund of excess cash balance and 90% provisional sanction of export and inverted duty refunds free working capital.
- Fewer harassment points: goods in transit can be intercepted only on specific intelligence with Joint Commissioner approval, and not by transit States.
Why deterrence need not weaken
- Prosecution remains for large frauds above ₹5 crore, and Section 132 still covers fraudulent ITC claimed without goods, services or an invoice.
- Penalties and interest remain the main civil tools; a 5% reduced penalty rewards early payment in non-fraud cases.
- Data tools such as the Invoice Management System help detect mismatches without coercion.
Concerns
- Fake invoicing networks may treat a higher threshold as a safe zone.
- Changes need amendments to the CGST Act and every SGST Act, so uneven adoption is possible.
- The Supreme Court in Radhika Agarwal (2025) already required recorded reasons and safeguards, so gains depend on field practice.
Way forward
- Risk-based audits, analytics on invoice chains and quick adjudication.
Decriminalisation works best when civil enforcement becomes swift and certain.
The basics
Why this matters
GST is India's main indirect tax, shared by the Union and the States. On 8 October 2026 the GST Council proposed a major enforcement shift: no arrest powers at all under GST.
How GST is built
GST came into force on 1 July 2017 after the 101st Amendment, 2016. Article 246A lets both Parliament and State legislatures make GST laws. A sale within a State attracts Central GST (CGST) and State GST (SGST); an inter-State sale attracts Integrated GST (IGST). The key design feature is input tax credit: a business pays tax on its purchases and deducts it from the tax due on its sales, so tax is paid only on value added.
- 1Union Finance MinisterChairperson
- 2Union Minister of State in charge of Revenue or FinanceMember
- 3Finance or Taxation Minister of each State, or another nominated MinisterMembers; they choose a Vice-Chairperson among themselves
How the Council decides
The GST Council (Article 279A) recommends tax rates, exemptions, thresholds and model laws. A decision needs at least three-fourths of the weighted votes of members present and voting. The Centre's vote carries one-third of the weight and all States together carry two-thirds, so neither side can push a decision alone. In the Mohit Minerals judgment (2022), the Supreme Court held that the Council's recommendations have persuasive value and are not binding on legislatures.
- Section 69 lets a Commissioner authorise arrest
- Prosecution threshold ₹1 crore
- Maximum general penalty ₹25,000
- Goods may be intercepted in transit States
- Section 69 to be omitted
- Prosecution threshold ₹5 crore
- Maximum general penalty ₹10,000
- Interception only on specific intelligence, not by transit States
Arrest, prosecution and penalty
A penalty is a civil money charge. Prosecution is a criminal case under Section 132. Arrest under Section 69 takes a person into custody before trial; the Supreme Court upheld it in 2025 with safeguards (see Arrest and prosecution under the CGST Act). The package keeps prosecution for large frauds but drops arrest. It becomes law only when Parliament amends the CGST Act and States amend their SGST Acts.
- 2016Constitution (One Hundred and First Amendment) Act inserts Articles 246A and 279A
- 1 July 2017GST comes into force
- May 2022Mohit Minerals: Council recommendations are persuasive, not binding
- 27 February 2025Radhika Agarwal: Supreme Court upholds Section 69 with safeguards
- 8 October 202657th Council meeting recommends omitting Section 69
Go deeper
In one line: The GST Council has recommended that GST officers lose the power to arrest, that only frauds above ₹5 crore be prosecuted, and that refunds and credits flow faster.
Why it matters for UPSC
The story joins three syllabus threads: indirect tax reform (GS3), cooperative federalism through a joint Union-State body (GS2), and the wider debate on decriminalising economic offences.
The core idea
The GST Council (Article 279A) recommends; Parliament and State legislatures legislate. The Council now wants to remove the arrest power in Section 69 and raise the prosecution bar in Section 132, explained in Arrest and prosecution under the CGST Act. Alongside, it is easing refunds of input tax credit, which matters most to exporters and firms whose inputs are taxed more than their outputs. Whether States must follow is settled by the Mohit Minerals judgment (2022): recommendations persuade but do not bind.
Numbers and dates to remember
- 57th meeting: 8 October 2026, New Delhi
- Prosecution threshold: ₹1 crore to ₹5 crore
- General penalty (Section 125): ₹25,000 to ₹10,000
- No show cause notice for tax below ₹10,000
- Pre-deposit cap for penalty-only appeals: ₹40 crore
- Provisional refund: 90% of zero-rated and inverted duty claims
Where to go next
- GST Council (Article 279A): who decides GST and how the votes are weighted
- Arrest and prosecution under the CGST Act: what Sections 69 and 132 do and what the Supreme Court said
- Input tax credit and inverted duty structure: the credit chain at the heart of GST refunds
- Mohit Minerals judgment (2022): why Council recommendations are not binding
Go deeper: decriminalisation versus deterrence
The case for the change. Arrest is the harshest pre-trial power a tax officer can hold. Taxpayers have long argued that its availability pushes them to pay disputed amounts under pressure. The Supreme Court in Radhika Agarwal (2025) upheld the power but listed safeguards: reasons to believe must be recorded, criminal procedure protections apply, and coercive recovery during investigation is disapproved (see Arrest and prosecution under the CGST Act). Removing the power altogether goes further than those safeguards. The package also cuts small disputes (no notice below ₹10,000) and caps pre-deposits, which reduces litigation.
The case for caution. GST fraud often runs through fake invoices that pass on credit without real supply. The narrowed Section 132 still covers fraudulent input tax credit availed without goods, services or an invoice, and prosecution remains above ₹5 crore. The question is whether investigators can secure evidence and stop absconding without custody powers.
The federal angle. The recommendation came from the GST Council (Article 279A), where the Centre holds one-third of the vote weight and States two-thirds. But under the Mohit Minerals judgment (2022), each legislature keeps the final word, so the reform is complete only when Parliament and every State amend their GST laws.
GST Council (Article 279A)
The joint Union-State body that made these recommendations.
In one line: The GST Council is a constitutional body of the Union and State Finance Ministers that recommends how GST should work.
What it is
Article 279A was inserted by the Constitution (One Hundred and First Amendment) Act, 2016. The Union Finance Minister chairs the Council; the Union Minister of State for Revenue or Finance and the Finance Minister (or a nominated Minister) of each State are members. It recommends taxes to be subsumed, rates, exemptions, thresholds and model GST laws.
How it votes
Half the members form the quorum. A decision needs at least three-fourths of the weighted votes of members present and voting. The Centre has one-third of the weight and all States together two-thirds, so the Centre cannot carry a decision without most States, and States cannot carry one without the Centre.
Why it is in the news
Its 57th meeting on 8 October 2026 recommended removing arrest powers under GST.
Where to go next
Arrest and prosecution under the CGST Act
What Sections 69 and 132 do, and what the Supreme Court said about them.
In one line: Section 132 lists GST offences that can be prosecuted, and Section 69 lets a Commissioner authorise arrest for the serious ones.
The two provisions
Section 132 of the CGST Act, 2017 covers offences such as supplying without an invoice, issuing invoices without supply, and wrongly availing input tax credit, with punishment linked to the amount involved. Section 69 allows a Commissioner who has reasons to believe that such an offence has been committed to authorise an officer to arrest the person.
The 2025 judgment
In Radhika Agarwal v. Union of India (27 February 2025), the Supreme Court upheld Section 69 as part of the GST power under Article 246A. It held that criminal procedure safeguards apply, such as production before a Magistrate within 24 hours, that reasons must be recorded, and that anticipatory bail is available.
Why it is in the news
On 8 October 2026 the GST Council recommended omitting Section 69 and raising the prosecution threshold from ₹1 crore to ₹5 crore.
Where to go next
Input tax credit and inverted duty structure
The credit chain at the heart of GST refunds.
In one line: Input tax credit lets a business subtract the GST it paid on purchases from the GST it owes on sales.
How the chain works
A manufacturer pays GST on raw materials and services. When it sells, it charges GST on the full price but pays the government only the difference after deducting the credit. Tax is thus paid on value added at each stage, which removes the cascading of tax on tax.
The inverted duty problem
When inputs are taxed at a higher rate than the final product, credit keeps piling up because output tax is too small to absorb it. This is an inverted duty structure. Exporters face a similar pile-up because exports are zero-rated. Refunds release this trapped money.
Why it is in the news
The 57th GST Council recommended refunds of accumulated credit on input services (availed from 1 November 2026) and capital goods (availed from 1 April 2027, over 60 months), plus 90% provisional sanction of such refund claims.
Where to go next
Mohit Minerals judgment (2022)
Why Council recommendations are not binding on legislatures.
In one line: In Union of India v. Mohit Minerals (May 2022), the Supreme Court held that GST Council recommendations have persuasive value and do not bind Parliament or State legislatures.
What the Court said
Article 246A gives Parliament and State legislatures simultaneous power to make GST laws. The Council is a forum for dialogue between them, not a body above them. Its recommendations are the product of collaborative discussion, and legislatures may take them or depart from them.
Why it matters now
The 57th Council's plan to remove arrest powers needs amendments to the CGST Act and to each State's SGST Act. Under Mohit Minerals, each legislature makes that choice for itself, which is why the official release stresses that only circulars, notifications and law amendments have the force of law.
Where to go next
Take the 9 October 2026 quiz: 30 Prelims-style questions with answers