GST council set to consider removing direct arrest power for tax officials

Indian tax officials may soon lose the direct power to arrest individuals under the Goods and Services Tax laws, as the GST Council prepares to discuss major reforms during its meeting on October 7. Under the proposed changes, any arrest would require a formal court order rather than just the approval of a commissioner level official.

Key Proposals

The financial threshold for launching criminal prosecution and cases involving fake input tax credit claims or tax evasion is set to be raised from 1 crore rupees to 5 crore rupees. Officials will also see changes across 24 crime-related rules, with 9 offenses proposed to be completely removed, 11 kept as they are, and mandatory minimum jail terms removed to give courts more flexibility. For medium-level offenses, the maximum prison sentence could be reduced from 3 years to 2 years.

Recovery And Technology

Despite the removal of direct arrest powers, the government will retain its civil powers to recover due taxes, interest, and penalties from individuals who pay less tax or wrongly claim input tax credit. Dainik Bhaskar notes that when GST was first launched on July 1, 2017, automated systems were not strong enough to catch fake invoices, making arrest powers necessary at the time. The current data-driven and automated invoice matching system now catches fake credit early, reducing the need for direct arrests that traders often viewed as a tool for harassment.

Context

The GST Council is the key governing body that decides changes to indirect tax laws in India, with representatives from both the central government and state governments. These proposed shifts reflect a broader move toward relying on digital data matching rather than coercive measures to ensure tax compliance while easing the burden on businesses.