GST Council Removes Arrest Powers of Tax Officers in Major Reform

The Goods and Services Tax (GST) Council has approved a major change to the tax regime by removing the power of GST officers to arrest taxpayers in cases involving tax evasion. The decision is part of a broader effort to make the GST system more taxpayer-friendly and reduce the scope for punitive action.

Under the existing framework, GST officers could arrest individuals in certain cases involving suspected tax evasion and other offences. The latest decision seeks to do away with this provision, marking a significant shift in the enforcement mechanism under the indirect tax system.

The GST Council has also approved an increase in the threshold for launching prosecution. The limit has been raised from ₹1 crore to ₹5 crore, meaning criminal prosecution would generally be considered only in cases involving tax evasion above the revised threshold.

Another measure cleared by the Council is a ₹10,000 monetary threshold for GST show-cause notices. Pending notices involving amounts below this limit will also be withdrawn under the new framework. The changes are aimed at simplifying GST compliance and ensuring that enforcement action remains focused on more serious cases. The government has been working to reduce disputes and compliance difficulties faced by businesses and taxpayers since the introduction of GST.

The decisions come as part of wider efforts to streamline the GST framework and improve ease of doing business. The Council’s latest measures are expected to reduce the risk of disproportionate enforcement action while retaining stronger provisions for cases involving significant tax evasion.