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India’s GST Council Proposes Easing Arrest, Prosecution and Penalty Rules

The GST Council has proposed changes to arrest powers, prosecution thresholds, penalties and appeals. The recommendations require implementation before taxpayers can treat them as changes in force.
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India’s GST Council has recommended easing several punitive rules, including withdrawing GST arrest powers, raising the prosecution threshold from ₹1 crore to ₹5 crore, and reducing some penalties. These are recommendations from the Council’s 57th meeting on 8 October 2026—not confirmation that the law has changed. Taxpayers should check the final amendments and their effective dates before relying on them.

What the GST Council proposed on arrest and prosecution

The Council recommended removing section 69 of the Central Goods and Services Tax Act, 2017, which would withdraw arrest powers under GST if enacted as proposed. The government’s official summary describes this as a “complete withdrawal” of those powers.

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It also recommended raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore. The higher threshold concerns prosecution; it should not be read as a general exemption from tax assessments, recovery, or other enforcement measures.

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Narrower offences and punishments

The package proposes removing one listed offence, deleting specified wording from two other offence clauses, and limiting one offence to fraudulent input tax credit involving goods or services not received, or the absence of an invoice or bill. The official summary does not provide a full offence-by-offence schedule of revised punishments, so the precise scope and consequences depend on the final legal text.

Proposed changes to penalties and payment deadlines

The Council recommended lowering the maximum general penalty under section 125 from ₹25,000 to ₹10,000. It also proposed a 5% penalty in specified non-fraud cases when tax and interest are paid within the applicable period: 30 days under section 73 or 60 days under section 74A. For non-fraud cases, it recommended removing the minimum ₹10,000 penalty.

These are distinct proposals: the section 125 change concerns a maximum general penalty, while the 5% and minimum-penalty changes apply to specified non-fraud situations and are tied to timely payment. The meeting summary does not establish the final wording or commencement date for these changes.

Notice and appeal proposals

The Council recommended a ₹10,000 minimum threshold for issuing show-cause notices, meaning notices would not be issued for amounts below that threshold if the proposal is implemented in its reported form. The precise provision and how the threshold is applied will depend on the final text.

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For an appeal against an order involving only a penalty and no tax demand, the proposed pre-deposit cap is ₹40 crore: ₹20 crore for CGST and ₹20 crore for SGST or UTGST. This is a cap for the specified penalty-only appeal situation, not a general cap for every GST appeal.

A safeguard for intercepted goods

The Council also recommended that a conveyance carrying goods be intercepted only on specific intelligence and with authorization from an officer of at least Joint Commissioner rank. This is a proposed procedural safeguard for interception; it is separate from the prosecution threshold and does not itself remove every form of GST enforcement.

Recommendations are not yet proof of a change in law

The Press Information Bureau’s summary of the 57th GST Council meeting, published on 8 October 2026, reports recommendations. It does not confirm that the punitive proposals have been enacted, nor does it provide their effective dates or complete final statutory wording. The arrest, prosecution, penalty, notice, and appeal changes should therefore be treated as proposals unless implementing legislation and notifications establish otherwise.

Businesses handling a live notice, investigation, payment, or appeal should continue to follow the law currently in force and obtain advice based on the applicable statute and notifications. A Council recommendation alone is not a basis to assume that an existing deadline or legal obligation has changed.

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Other measures in the wider GST package

The same meeting summary also describes recommendations on registration changes and cancellations, refunds of accumulated input tax credit in specified cases, removing input-tax-credit restrictions for listed categories, and giving taxpayers an opportunity to object and receive a personal hearing before a decision to block an amount in the electronic credit ledger under proposed changes to rule 86A. These broaden the package beyond punitive provisions and should not be confused with the enforcement proposals above.

Source: Press Information Bureau, summary of recommendations from the 57th GST Council meeting, 8 October 2026.

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