GST Council will be asked on 7 October to take arrest powers out of the tax law

The GST Council will be asked on 7 October to take arrest powers out of the goods and services tax law, The Indian Express reported on Saturday, citing two people familiar with the proposal. If the council agrees, the Centre expects to bring an amendment in the Winter Session. Intentional fraud would still be prosecuted. The arrests would then run through the Bharatiya Nyaya Sanhita, not through a power written into the GST Act. Nothing has been tabled. The 57th meeting is the first formal stop.

GST began in July 2017. The arrest clauses were written in so that officers could hold people accused of serious evasion before a charge reached a criminal court. A Central Board of Indirect Taxes and Customs note, quoted by the Express, says those clauses exist for unscrupulous evaders. The same machinery has produced arrests of company officers that trade bodies have called overreach. Consultations on pulling the power back have been going on for eight or nine months, the people familiar with the file said, including at senior levels of the Union government. Feedback from businesses was part of that file.

The legal detail that would change is the threshold for locking someone up. Under the present law, an officer needs reasons to believe, recorded in writing and backed by credible material. Suspicion is not enough. That standard has not stopped arrests that firms say were used as pressure in a tax dispute. Moving the arrest into the criminal code does not make evasion legal. It changes who orders the arrest, which court sees it first, and which procedural rules apply. A GST officer would no longer be the officer signing the custody. A police investigation under the Nyaya Sanhita would be.

The council is the right room because GST is a shared tax. The Centre cannot rewrite the arrest clause alone if the amendment touches the common law. States have a vote on Wednesday. A consensus that has been discussed for most of a year can still fail in the room, or pass and then wait on Parliament. The Winter Session is the earliest legislative window named so far. Until a bill is printed, firms have the same exposure they had last week.

What businesses have asked for is a line between a disputed input-tax credit and a custody cell. The proposal, as described, draws that line by deleting the GST-specific arrest and leaving fraud to the ordinary criminal law. It does not, on the account given to the Express, set a new rupee threshold, name the offences that stay inside the tax act, or say what happens to arrests already made. Those blanks are the part the council paper will have to fill. A decision on Wednesday that only agrees the principle will still leave the draft to the finance ministry.

The useful fact on Sunday is the date and the status. The 57th GST Council meets on 7 October. The item, if the Express account holds, is decriminalisation of the arrest power. The amendment, if the council agrees, is aimed at the Winter Session. Until then the power on the statute book is the one officers have been using since 2017.