GST Council removes officers' arrest power and lifts the prosecution bar to Rs 5 crore

The 57th Goods and Services Tax Council, meeting in New Delhi on Thursday after a gap of 13 months, voted to take the power of arrest away from GST officers and to raise the threshold for criminal prosecution from Rs 1 crore to Rs 5 crore. Finance minister Nirmala Sitharaman, who chaired the meeting, said a tax officer who thinks a file contains a crime cannot arrest on that view. The officer has to build a prosecution, and the law already provides for that step.

The finance ministry said the rate structure is settled, so the Council has turned to how the tax works day to day. Rate changes will now happen once a year. The enforcement decisions, the Indian Express reported, come into force on 1 April 2027.

What changes in the file

The prosecution bar moves fivefold, from Rs 1 crore to Rs 5 crore, which the ministry described as a way to keep deterrence against fraud while limiting criminal cases to larger evasions. The minimum punishment is removed. Fine, imprisonment, or both, is left to the court in each case. The general penalty, used where no specific penalty is written into the law, falls from Rs 25,000 to Rs 10,000.

A floor of Rs 10,000 is set for the issue of a show-cause notice, and that floor applies retrospectively, the Indian Express reported. Vehicles carrying goods may be stopped only by officers of the state of the supplier or the state of the recipient, and only on specific intelligence and with due authorisation. A stop by a third state, which has been a regular complaint on long routes, is outside that rule.

On input tax credit, the Council set up a committee of officers to look at how a buyer who holds a proper invoice, has received the goods, and has paid the supplier in full should be protected if the supplier later fails. The committee is to finish within three months, and an agenda is to go to the next Council meeting. That is the live dispute in many appeals: the buyer has paid, the seller has not deposited, and the department denies the credit.

What Sitharaman drew as the line

Sitharaman's distinction was between building a case and arresting in anticipation of one. She told reporters that the law itself provides for prosecuting a person once a prima facie criminal case is made. The officer, she said, cannot arrest because he thinks the file in front of him has criminality in it. The Council's vote writes that distinction into the enforcement design, with effect from April 2027.

The meeting was the first in 13 months, and the ministry framed the package as decriminalisation and ease of doing business. The numbers that will matter to a firm are the ones in the notice and the prosecution file. A dispute under Rs 5 crore no longer starts on the prosecution track. A penalty that used to be Rs 25,000 where no other penalty was specified is now Rs 10,000. A truck can be stopped only in the supplier's state or the buyer's, and only with specific intelligence.

The open point is the input-tax-credit committee. Three months from Thursday puts its report in early January. Until that agenda is written, a buyer who paid a supplier in full and then lost the credit still has the present rule. The arrest change, by contrast, has a date: 1 April 2027.