GST arrest powers on way out amid concerns over taxmen’s overreach. Read the key points, why it matters and what businesses should watch next.
GST arrest powers set for review
The GST Council is expected to consider removing arrest provisions from the indirect tax regime at its 57th meeting on October 7, according to two people familiar with the matter. The proposal follows eight to nine months of discussions between the Centre and states, including at senior levels of the Union government, aimed at building consensus. If approved, the Centre is expected to move an amendment in the Winter Session of Parliament to enable the legislative changes.
Why businesses are watching
Arrest powers under Section 69 of the CGST Act allow the Commissioner to authorise an officer to arrest a person where there are reasons to believe an offence has been committed, including fake invoices or fraudulent input tax credit claims. Such reasons must rest on credible material and be recorded in writing; mere suspicion is not enough. Industry experts have described arrests as a harassment tool, particularly in services sectors such as banking and insurance, and as leverage to push businesses into paying penalties to avoid prolonged litigation. An official said removing the powers would be a taxpayer-friendly step and ease perceptions of fear and harassment.
The fraud context
Since GST rolled out in July 2017, authorities have dealt with recurring fraud patterns: fake identities or mule accounts for fraudulent transactions, fake bills without actual supply, undervaluation of final goods, and supply of taxable goods and services without paying GST. In 72,393 GST offence cases between 2021-22 and 2024-25, central GST formations made 887 arrests, with state arrests additional. For intentional fraud, prosecution and arrests would proceed under the Bharatiya Nyaya Sanhita, a source said.
Concerns predate rollout
The issue was flagged even before GST began. At the fifth GST Council meeting in December 2016, Maharashtra's Additional Chief Secretary said arrest and confiscation powers did not fit the ease-of-doing-business concept, …
Services related to this update
Want this handled for you?
Get a free expert consultation and an exact quote within 24 hours.
Get free quote
