India’s GST Council is reviewing proposals to remove tax officers’ arrest powers, aiming to ease enforcement concerns and create a more business-friendly tax environment amid ongoing reforms.
India’s Goods and Services Tax regime may be heading for one of its most significant reforms since its launch in July 2017, with the GST Council expected to consider stripping tax officers of arrest powers when it meets on 7 October.
According to The Indian Express, the proposal is aimed at easing long-running concerns among businesses that the criminal provisions in GST law have been used too aggressively. People familiar with the discussions told the newspaper that the Centre and the states have been working for eight to nine months to build agreement on the change, including talks involving senior Union government officials. The hoped-for result is a more business-friendly framework that reduces the sense of fear many traders say has surrounded enforcement.
The broader context is a tax system that has struggled with repeated fraud cases, often involving fake identities, mule accounts, false invoices and bogus claims for input tax credit, the tax credit businesses can claim on purchases used in their operations. The Indian Express reported that in 72,393 GST offences recorded between 2021-22 and 2024-25, central GST formations made 887 arrests, with state authorities accounting for additional arrests beyond that total.
Under the current law, tax non-compliance can trigger penalties, interest and recovery proceedings, while deliberate evasion can lead to prosecution and arrest. Section 69 of the Central GST Act allows a commissioner to authorise arrest when there are recorded reasons to believe that a person has committed specified offences, including fake invoicing and fraudulent use of input tax credit. Officials have argued that these powers include safeguards and are meant to deter serious evasion, but industry leaders have long said the provisions are disproportionately harsh.
That debate has been present since the early days of GST. The Indian Express cited minutes from an earlier GST Council meeting in December 2016 showing that some states warned the arrest provisions would not sit comfortably with the idea of ease of doing business. A Maharashtra official questioned the need for arrest and confiscation powers, while a West Bengal minister pointed out that the earlier value added tax regime did not give tax officers such authority. If the proposed change goes ahead, GST would move closer to the pre-2017 VAT structure, which did not include arrest powers.
The issue also fits into a broader shift in tax policy. The Central Board of Direct Taxes moved in September to remove arrest and detention provisions from income-tax recovery rules with effect from 1 April 2026, part of a wider trend towards decriminalisation on the direct tax side. If the GST Council endorses the change on 7 October, officials expect the Centre to seek the necessary legislative amendments in the Winter Session of Parliament. For businesses, especially in services such as banking and insurance, that could mark a notable reduction in compliance risk and a symbolic retreat from a more confrontational enforcement model.
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