The GST prosecution threshold is not one number. Section 132 of the Central Goods and Services Tax (CGST) Act sets criminal punishment bands according to the amount of tax evaded, input tax credit (ITC) wrongly availed or utilised, or refund wrongly taken. Separately, CBIC Instruction No. 04/2022-23 (1 September 2022) says prosecution should normally be launched when the relevant amount exceeds ₹5 crore.
That administrative guideline does not make prosecution automatic. The investigating authority still needs a legally provable offence, evidence of the required guilty intent, the correct procedural approvals and an assessment of the individual’s role. The rules below describe the central framework; check subsequent amendments and applicable State GST law before relying on them in a live matter.
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What is the GST prosecution threshold?
There are two thresholds that are often confused:
- Statutory punishment bands: Section 132(1) of the CGST Act links the maximum prison term to the amount involved in specified GST offences.
- CBIC’s prosecution-launch guideline: Instruction No. 04/2022-23 says prosecution should normally be launched when the amount exceeds ₹5 crore, subject to stated exceptions and a case-specific review.
The second figure is an administrative decision-making guideline, not a new offence threshold and not a guarantee that a case will be filed. Conversely, an amount below ₹5 crore does not make prosecution legally impossible if the facts fall within an exception or another applicable provision.
How the statutory punishment bands work
Section 132 uses the word “exceeds.” The amount must therefore be above the stated figure, not merely equal to it. The relevant bands are:
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| Amount involved | Maximum punishment under section 132(1) | What the amount refers to |
|---|---|---|
| More than ₹5 crore | Imprisonment up to five years and fine | Tax evaded, ITC wrongly availed or utilised, or refund wrongly taken in the covered offences |
| More than ₹2 crore and not more than ₹5 crore | Imprisonment up to three years and fine | The same statutory categories, subject to the particular offence |
| More than ₹1 crore and not more than ₹2 crore | Imprisonment up to one year and fine | The residual covered offences in section 132(1) |
| Specified offences outside those monetary bands | Up to six months’ imprisonment, or fine, or both | For example, certain obstruction, goods-related and evidence-tampering offences listed in section 132(1) |
These are maximum terms, not automatic sentences. A conviction, the evidence proved at trial and the court’s sentencing decision determine the outcome. Section 132(2) provides a higher punishment where a person is convicted again under the section.
What counts as “tax” for the calculation?
The explanation to section 132 treats “tax” broadly. It includes tax evaded, ITC wrongly availed or utilised, and refund wrongly taken under the CGST, State GST, Integrated GST and Union Territory GST laws, as well as compensation cess under the GST Compensation to States Act.
Do not substitute turnover, the total invoice value or an ordinary unpaid tax demand for the statutory amount without analysing the alleged offence. The figure must be tied to the conduct charged and to the categories recognised by section 132.
CBIC’s normal prosecution-launch guideline
CBIC Instruction No. 04/2022-23 states that prosecution should normally be launched when the relevant amount is “more than Five Hundred Lakh rupees” (₹5 crore). The instruction is directed at prosecution decisions in central GST cases; it does not amend section 132 or decide whether a person is guilty.
Exception 1: habitual evaders
The usual ₹5 crore limit does not apply in the instruction’s stated habitual-evader situation. This concerns a company or taxpayer involved in at least two cases of confirmed demand at the first adjudication level or above during the previous two years, where the aggregate tax evaded, ITC misused or fraudulent refund exceeds ₹5 crore.
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The wording requires attention to the number and status of the confirmed cases, the two-year period and the aggregate amount. A single disputed notice is not the same as two confirmed demands meeting those conditions.
Exception 2: an arrest during investigation
The guideline’s usual limit also does not apply where an arrest has been made under section 69 during the investigation. Arrest is therefore a separate trigger for considering prosecution; it is not proof of conviction and does not remove the need to establish the offence in court.
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Even when the amount is above ₹5 crore or an exception applies, CBIC directs officers to consider the nature and gravity of the conduct, the amount involved, and the nature and quality of the evidence. The guideline is not a mechanical filing rule.
Why crossing ₹5 crore does not automatically mean prosecution
CBIC expressly states: “Prosecution should not be filed merely because a demand has been confirmed in the adjudication proceedings.” A confirmed demand addresses the tax-recovery process; a criminal case requires proof of the elements of the particular offence.
Evidence of guilty mind
The instruction calls for evidence capable of establishing beyond reasonable doubt the person’s guilty mind, knowledge, fraudulent intention or other required mens rea. A calculation error, a record-keeping lapse or a genuine disagreement about how an uncertain provision should be interpreted may support a tax adjustment without proving criminal intent.
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Technical cases and legal-interpretation disputes
CBIC says prosecution should not be launched in technical cases or where additional tax arises from a difference of opinion on legal interpretation. That qualification does not excuse deliberate concealment or fabricated records; it means the evidence must show more than an arguable classification or computation dispute.
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When can a complaint be filed?
The instruction says the prosecution decision would normally be taken after adjudication. It also recognises that a complaint can be filed before adjudication in specified circumstances, such as a grave offence, strong evidence, an apprehended delay that could prejudice the case, or an arrest.
Adjudication and criminal proceedings are related but legally distinct. The instruction refers to the Supreme Court’s decision in Radheshyam Kejriwal for the principles governing their independence and relationship. The timing of a complaint therefore depends on the facts and procedural record, not solely on whether an order confirming demand has already been issued.
Is GST prosecution bailable?
The default rule in section 132(4) is that offences are non-cognizable and bailable. Section 132(5) creates a narrower exception: offences under clauses (a) to (d) of section 132(1), when punishable under clause (i), are cognizable and non-bailable. Clause (i) is the highest punishment band for amounts exceeding ₹5 crore.
This is not a blanket rule that every offence involving more than ₹5 crore is non-bailable. The alleged conduct must fall within clauses (a) to (d), and the statutory punishment provision must be the one covered by section 132(5). Classification affects arrest and bail procedure; it does not determine guilt.
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Why prior sanction matters
Section 132(6) requires the Commissioner’s previous sanction before prosecution is launched. CBIC’s 2022 instruction sets out the sanctioning authority for CGST cases and for cases investigated by the Directorate General of GST Intelligence (DGGI).
Sanction is a statutory gateway, not a substitute for evidence. A person facing a proposed complaint should check which authority sanctioned it, whether the sanction predates filing and whether the complaint identifies the correct offence and amount.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Can directors and employees be prosecuted under GST?
Section 137 deals with offences by companies and other entities. The company and people responsible for the conduct of its business may be proceeded against under the section. It also addresses a director, manager, secretary or other officer where the offence occurred with that person’s consent or connivance, or resulted from neglect.
The section provides a defence where the individual proves that the offence occurred without their knowledge or that they exercised due diligence to prevent it. Liability is therefore role-based, not an automatic consequence of holding a corporate title.
CBIC’s approach to public-company directors
CBIC cautions against indiscriminate prosecution of every director of a public limited company. Officers should focus on people who oversaw day-to-day operations and on those who actively participated in, consented to or connived in the conduct. A non-executive or independent director with no operational involvement should not be treated as criminally liable merely because their name appears in corporate filings, although the facts of each case control.
How to analyse your own exposure
- Identify the alleged conduct. Determine whether the notice concerns suppression, invoices, supplies without delivery, wrongful ITC, an improper refund, obstruction or another section 132 category.
- Calculate the statutory amount. Separate tax evaded, ITC wrongly availed or utilised and refund wrongly taken. Confirm whether the calculation includes CGST, SGST, IGST, UTGST and compensation cess as relevant.
- Place the amount in the correct band. Use “more than” literally: ₹5 crore exactly is not the same as an amount exceeding ₹5 crore for the highest band.
- Check the CBIC guideline. Ask whether the amount exceeds ₹5 crore, whether there are two qualifying confirmed demands in the previous two years, or whether an arrest under section 69 occurred.
- Test the evidence and intent. Gather contracts, invoices, e-way bills, ledgers, return workings, system logs and correspondence that explain the transaction and show who made decisions.
- Map individual roles. Document approval chains, delegation, finance and tax responsibilities, reporting lines and the dates on which each person joined or left.
- Review procedure. Check summons, statements, arrest records, adjudication orders, the proposed offence sections and the Commissioner’s sanction.
- Obtain specialist advice promptly. If there is an investigation, arrest risk or prosecution proposal, consult a qualified GST criminal-litigation lawyer; this article cannot replace advice on the facts.
Common mistakes and how to avoid them
- Calling ₹5 crore “the legal prosecution limit.” It is CBIC’s usual launch guideline, while section 132 contains separate punishment bands.
- Using turnover as the threshold. The relevant amount concerns evasion, misuse of ITC or an incorrect refund, not sales turnover by itself.
- Assuming an adjudication order proves a crime. Criminal liability still requires proof beyond reasonable doubt and the required mental element.
- Assuming every amount above ₹5 crore is non-bailable. The cognizable, non-bailable exception is limited to the offences and punishment clause specified in section 132(5).
- Adding every director to a complaint. The statutory tests and CBIC’s guidance focus on responsibility, consent, connivance, neglect and actual participation.
- Ignoring amendments or state provisions. The central Act page used for this explanation did not state a consolidation date. Verify the current text and the applicable State GST enactment before taking a position.
Practical scenarios
A ₹6 crore disputed ITC demand with no evidence of fraud
The amount is above the highest statutory band and above CBIC’s usual guideline, but neither figure alone proves that a director or employee committed an offence. If the dispute turns on a defensible interpretation of eligibility and the records are complete, the instruction’s warning about technical or interpretation cases is relevant.
A ₹3 crore fraudulent refund with fabricated documents
The amount falls in the more-than-₹2-crore-to-₹5-crore punishment band. Fabricated records and evidence of intentional conduct may support prosecution even though the amount is below the normal ₹5 crore launch guideline; the final decision remains case-specific and requires sanction.
Two confirmed demands totalling ₹5.4 crore
If the company or taxpayer has at least two qualifying confirmed demands at the required adjudication level within the previous two years, the habitual-evader exception may remove the usual ₹5 crore launch limit. Officers must still evaluate evidence, gravity and the individuals actually involved.
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The safest way to read the framework is as a sequence: identify the offence, calculate the legally relevant amount, apply the punishment band, check CBIC’s launch guideline and exceptions, then test intent, evidence, individual responsibility, sanction and bail classification. The amount is important, but it is only one part of the prosecution decision.
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