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GST Council lifts arrest powers for tax officers and raises prosecution limit to five crore rupees
Reported by Abhishek Tiwari (Copy Editor) · Indian Express - Business ·
Confirmed by a second source: The Hindu - Business
UPDATE - follow-up to GST Council scraps arrest power of tax officers: The GST Council on Thursday officially approved scrapping the arrest powers of tax officers and raised the prosecution threshold from one crore to five crore rupees. According to The Hindu - Business, this decision came during the 57th GST Council meeting held at Bharat Mandapam in New Delhi. The Finance Ministry stated that since the tax rate structure is now settled, the Council is focusing on daily tax administration, with GST rate changes now limited to once a year.
Penalties and Judicial Role
While the minimum punishment has been removed, final decisions on fines, imprisonment, or both are now left entirely to judicial discretion in every case. The general penalty for situations where no specific penalty is provided comes down from 25,000 to 10,000 rupees. The Centre and states spent eight to nine months holding top-level meetings to reach a consensus on removing the arrest provisions, which businesses had viewed as a major hurdle due to recent arrests of high-ranking functionaries.
State Concerns and New Committees
At least five major states—Maharashtra, Gujarat, Uttar Pradesh, Karnataka, and Andhra Pradesh—raised concerns that curtailing taxmen's powers would render the indirect tax regime toothless, demanding graded pre-prosecution arrests with an additional layer for civil arrest in serious cases. Additionally, the 57th Council decided to set up a Committee of Officers to examine how to protect genuine buyers who hold proper invoices, receive goods, and pay suppliers in full regarding input tax credit claims, with the study to be completed within three months.
Context
Changes to indirect tax rules and enforcement powers directly impact how millions of businesses operate across India on a daily basis. The GST Council brings together the Union government and all state finance ministers to jointly decide on policy shifts, balancing revenue collection needs with ease of doing business.
What changed since yesterday
- GST Council Removes Tax Officers' Arrest Power, Raises Prosecution Threshold
Latest
GST Council lifts arrest powers for tax officers and raises prosecution limit to five crore rupees
ExplainerWhy this matters
What Happened
The GST Council has removed the power of tax officers to make arrests and raised the prosecution threshold to five crore rupees, alongside creating a new officer committee to study input tax credit protections for genuine buyers.
Why It Matters
For years, businesses and industry leaders argued that the threat of sudden arrests and strict pre-prosecution rules created fear and hampered business sentiment. Raising the threshold and removing automatic arrest powers offers major relief to traders, reducing the risk of overreach by tax authorities while balancing state revenue security.
What Happens Next
The newly formed Committee of Officers will study input tax credit rules and present its report within three months for the next Council meeting agenda. States and businesses will watch closely to see how tax authorities enforce compliance under the revised judicial oversight framework.
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