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GST Council recommends scrapping arrest powers, ₹5 crore prosecution threshold

By CAShorts DeskPublished Updated Source: Ministry of Finance, PIB; Constitution; CGST Act; Supreme Court

GST Council recommends scrapping arrest powers, ₹5 crore prosecution threshold
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The GST Council, at its 57th meeting in New Delhi on October 8, 2026, recommended withdrawing the arrest powers of GST officers and raising the prosecution threshold from ₹1 crore to ₹5 crore. It also recommended cutting the maximum general penalty from ₹25,000 to ₹10,000 and acknowledging refund claims within 10 days instead of 15.

Syllabus: GS3 · Indian Economy & Growth; GS2 · Federalism & Local Government; GS3 · Government Budgeting

Why it matters

A business owner under GST investigation would no longer face arrest by tax officers, and would be prosecuted only where the amount involved crosses ₹5 crore. A seller on an e-commerce platform could register in another State through the platform's warehouse instead of renting an office there. An exporter waiting for a refund could get 90% of the claim provisionally, sanctioned by the system without an officer, which frees working capital. An employer could claim credit on GST paid for staff health and life insurance. The larger question is how to make business easier without going soft on fraud: the Council says it wants a tax system built on trust that still deters fraud and evasion.

Prelims pointers

  • GST Council: constitutional body under Article 279A, inserted by the 101st Constitutional Amendment Act, 2016; the President constitutes it by order.
  • Composition: Union Finance Minister (Chairperson), Union Minister of State for Revenue or Finance, and a minister nominated by each State; State members choose the Vice-Chairperson.
  • Voting: decisions need three-fourths of weighted votes present and voting; the Centre's vote counts for one-third, all States together two-thirds. Quorum is half the members.
  • Article 246A: Parliament and State legislatures both make GST laws; Parliament alone legislates on GST for inter-State supplies.
  • Union of India v. Mohit Minerals (2022): Council recommendations are persuasive for legislatures but bind governments framing rules under the CGST and IGST Acts.
  • Article 366(12A): GST is a tax on supply of goods or services, except alcoholic liquor for human consumption.
  • Petroleum crude, high-speed diesel, petrol, natural gas and aviation turbine fuel come under GST only from a date the Council recommends.
  • CGST Act, Section 16: input tax credit needs a valid invoice, receipt of the goods or services, tax actually paid by the supplier, and a filed return.

Practise a UPSC-style question

With reference to the Goods and Services Tax (GST) Council, consider the following statements:

1. The Union Finance Minister is the Chairperson of the GST Council under the Constitution.

2. The GST Council is a constitutional body set up under Article 280 of the Constitution.

Which of the statements given above is/are correct?

  1. (a) 1 only
  2. (b) 2 only
  3. (c) Both 1 and 2
  4. (d) Neither 1 nor 2
Show the answer

Answer: (a) 1 only

1 is correct: Article 279A makes the Union Finance Minister the Chairperson; the Union Minister of State for Revenue or Finance and a minister nominated by each State are members. 2 is incorrect: the Council is set up under Article 279A, inserted by the 101st Constitutional Amendment Act, 2016; Article 280 provides for the Finance Commission.

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