On 8 October 2026, the GST Council recommended completely withdrawing arrest powers by omitting Section 69 of the CGST Act and raising the monetary threshold for launching criminal prosecution from ₹1 crore to ₹5 crore. These are policy recommendations, not immediate law. Parliament and every State legislature must still pass formal amendments to their respective tax statutes before...
On 8 October 2026, the GST Council recommended completely withdrawing arrest powers by omitting Section 69 of the CGST Act and raising the monetary threshold for launching criminal prosecution from ₹1 crore to ₹5 crore. These are policy recommendations, not immediate law. Parliament and every State legislature must still pass formal amendments to their respective tax statutes before these protections become legally effective.
The underlying instinct of this reform is right, but the sequencing remains structurally incomplete. The reform abolishes custody for a category of compliance infractions that Parliament had previously isolated as the gravest. However, it does nothing to recalibrate the intensive civil-side machinery of provisional asset attachment, electronic credit ledger blocking, and invasive searches, where administrative coercion will now inevitably relocate. Without building robust statutory safeguards and accountability metrics directly into those civil powers, the promise of "no arrest" risks becoming a political slogan rather than a tangible systemic protection for taxpayers.
The Line Parliament Had Already Drawn
On 8 October 2026, the GST Council recommended omitting Section 69 of the CGST Act and raising the prosecution threshold from ₹1 crore to ₹5 crore. These are recommendations, not law; Parliament and every State legislature must still amend their statutes.
The reform abolishes custody for a category Parliament had already isolated as gravest. However, the council did not ignore the civil-side machinery; it proposed an amendment to Rule 86A to introduce a personal hearing and objection mechanism before ledger blocking occurs. Yet, without comprehensive and enacted statutory safeguards on attachment and search powers, coercive pressure may still relocate, and "no arrest" risks becoming a slogan more than a protection.
Arrest as a Recovery Instrument
The mischief was never the statutory text. It was the sequence. Adjudication under Sections 73 and 74 determines liability, recovery under Section 79 follows a determined demand, and prosecution under Section 132 needs the Commissioner's sanction. Arrest, or its threat, collapsed all three into one meeting.
In Radhika Agarwal, the Court said so plainly. It held that recovery follows due process, and that coercion by threat of arrest violates fundamental rights. It also recorded that taxpayers who deposit are not arrested, and it directed that coerced deposits be refunded.
The Revenue's chart in that judgment is instructive. As per my own estimate, it shows roughly 1,640 arrests in GST offence cases between July 2017 and March 2024, of which about 1,400 were in ITC fraud cases. In those ITC cases, recovery was about 9 per cent of detection. The Court cautioned that detection is not an adjudicated figure, so I draw only a modest inference: arrests tracked deposits more than they tracked convictions.
The Safeguards Existed; Enforcement Did Not
The Court did not make an assessment order a precondition to arrest. It held that the Commissioner may authorise arrest on recorded reasons to believe, without a formal order, if there is a degree of certainty. CBIC's own instructions, which the Court endorsed, already barred arrest in interpretational disputes and directed officers not to employ coercive recovery during the investigation phase. So the safeguards existed as soft law and were honoured unevenly. The GST Council has chosen abolition over enforcement by recommending the omission of Section 69. That is defensible, but it is a confession that administrative discipline failed. The same discipline will now be asked to police the powers that remain
Fake Invoices: Deterrence by Data Is a Wager
The ITC figures make clear what this reform really is. Arrest powers were used mostly against ITC fraud, so abolishing them is principally a decision about ITC fraud. The statutory omission of arrest powers under Section 69 means tax authorities will rely on court-monitored prosecution rather than custodial administrative actions.
The Council also proposes confining clause (c) to fraudulent credit without receipt of goods or services, or without an invoice, and deleting "evades tax" from clause (e). Narrowing clause (c) is a fair shield for the genuine recipient who took delivery against a defaulting supplier's invoice. But prosecution will now carry the burden of proving non-receipt. Proving that means tracing the beneficial controller behind a dummy GSTIN. CBIC's guidelines flagged exactly that person, the mastermind operating through dummy registrations, as a candidate for enforcement. Without custodial interrogation, that tracing gets harder.
Coercion Migrates
Section 69 is proposed to be removed following systemic decriminalization initiatives, but Section 83 provisional attachment, Section 67 search and seizure, and Rule 86A credit ledger blocking remain active enforcement mechanisms. Administrative guidelines and judicial precedents mandate that an objection and personal hearing process follow the imposition of an ledger block, preserving a distinct sequence where legal recourse follows the initial restriction.
Search powers represent a stark exercise of departmental authority: Section 67(10) imports the Code of Criminal Procedure's search rules but deliberately substitutes the Commissioner for the Magistrate in its operational framework, allowing the tax department to internally authorize its own intrusions. Consequently, an eligible taxpayer operating under a blocked ledger and an attached bank account faces severe operational paralysis, maintaining a heavy structural incentive to clear disputed tax liabilities "voluntarily." The nature of the compulsion has not been abolished; its form has simply transitioned from physical to economic pressure.
What "Cooperation" Must Mean
With arrest gone, "non-cooperation" will become the stated justification for these civil measures. CBIC's existing arrest guidelines list the markers: complying with summons, furnishing documents, avoiding evasive replies and voluntary payment of tax. These markers will migrate to justify blocks and attachments unless they are redefined. I propose some objective parameters in rules or a binding Board instruction:
Non-cooperation can only be alleged against a document request specified in writing, with a fixed minimum response period, following the statutory rules set for Section 70 summons protocols. Voluntary deposit must be struck from any cooperation test. CBIC's own instruction accepts that recovery cannot precede due process, and the Court called payment under threat of arrest unacceptable. Contesting liability is not obstruction. To be clear, a person summoned under Section 70 is not per se an accused protected by Article 20(3), a principle validated under settled constitutional jurisprudence, so I do not claim a privilege of silence. My point is narrower: disputing quantification or classification must never, by itself, count against the taxpayer. Reasoned findings, communicated first. A finding of non-cooperation must be recorded with reasons and served before any adverse step, adhering to the strict checks required for provisional attachment of assets.
Prior Judicial Authorisation
The structural fix is to move authorization outside the investigating chain. Section 83 attachments, Section 67 searches and Rule 86A blocks above a prescribed value should require prior approval from a designated judicial officer on a recorded showing of material. Restoring the Magistrate in the Section 67(10) substitution would be a start.
Emergency action could proceed with mandatory confirmation within a fixed period, failing which the measure lapses. A single national authority is impractical across State administrations. Designated Special Court judicial officers, applying uniform central rules, would deliver the same discipline.This would not weaken enforcement against real fraud. Pre-cleared actions are far less likely to be quashed on writ.
The Verdict Awaits the Drafting
The GST Council has staked a great deal on technology replacing custody. If it works, the reform will look prescient. If it does not, the gap in fake-invoice enforcement will be filled by the very coercion the reform sought to end.
The current legislative drafting window should be used to define cooperation, impose judicial gatekeeping on residual powers, and test amended Clause (c) of Section 132(1) against the paper-chain recipient. Until these statutory changes are formally codified, the handcuffs are effectively off, but heavy financial leverage remains.
Author is an Project Associate Bay of Bengal Programme Inter-Governmental Organisation (BOBP-IGO). Views are personal.