GST Arrest and Prosecution (2026): Section 69 Removed, ₹5 Crore Threshold and Court Discretion
CA Meet Dhrangadhariya 
October 10, 2026
CA Meet Dhrangadhariya October 10, 2026
Table of Contents
7 min readTable of Contents
Last updated: 10 October 2026 · Written and reviewed by CA Meet Dhrangadhariya, CSM & Co LLP
Quick summary
Of everything the 57th GST Council recommended, this is the change that alters the relationship between a business and the tax department most directly. The power to arrest a person for a GST offence is to be taken out of the law entirely.
The official FAQ of 09/10/2026 puts it plainly: after the proposed amendment, no person shall be arrested for an offence under the GST law. The press release of 08/10/2026 describes the mechanism, which is the omission of section 69 of the CGST Act, 2017.
This has not happened yet, and the distinction is not academic here. Section 69 remains on the statute book until Parliament and the State legislatures pass the amendment and it is brought into force. Anyone currently facing an investigation is governed by the law as it stands today, not by what the Council has recommended. Take advice on your actual position rather than on this page.
| Item | Position today | Recommended |
|---|---|---|
| Power of arrest | Section 69 of the CGST Act | Omitted entirely |
| Prosecution threshold | ₹1 crore | ₹5 crore |
| Punishment structure | Imprisonment and fine | Imprisonment or fine or both |
| Minimum imprisonment, section 132(3) | Six months | Removed |
| Maximum imprisonment, amount above ₹10 crore | Not stated in the FAQ | Five years, or fine, or both |
| Maximum imprisonment, amount above ₹5 crore up to ₹10 crore | Not stated in the FAQ | Two years, or fine, or both |
| Clause (i) of section 132(1) | In force | Omitted |
| Clause (e) of section 132(1) | Covers evading tax and fraudulently obtaining refund | Confined to fraudulently obtaining refund |
| Clause (h) of section 132(1) | Includes “or in any other manner deals with” | Those words omitted |
| Clause (c) of section 132(1) | Wider | Redrafted to cover only fraudulent availment of credit without receipt of goods or services or without an invoice |
It is worth being exact about what survives, because the headline invites over-reading.
So the department’s route to a criminal sanction runs through a court from the outset, rather than beginning with a detention. For a business under investigation, the practical change is that the threat which has shaped the conduct of GST investigations for years is no longer available.
One boundary to keep in mind. All of this concerns arrest and prosecution under the GST law. It says nothing about powers that may exist under other statutes, and nothing here should be read as a general immunity. If an investigation touches other legislation, that is a separate question and a separate conversation.
Two changes work together here.
“And” becomes “or”. The punishment moves from “imprisonment and fine” to “imprisonment or fine or both”. The court may impose a fine alone.
The floor is removed. The requirement of a minimum six months imprisonment under section 132(3) is being removed, again to confer discretion on the court.
The ceiling is also rationalised:
| Amount involved | Maximum punishment |
|---|---|
| Exceeds ₹10 crore | Imprisonment up to five years, or fine, or both |
| Exceeds ₹5 crore but does not exceed ₹10 crore | Imprisonment up to two years, or fine, or both |
The FAQ describes this as a rationalisation of the maximum term, and indicates that the ₹5 crore to ₹10 crore band comes down from three years to two. It does not restate the existing maxima in full, so the table above records only what the FAQ itself puts on the record.
Read together, a conviction no longer carries an automatic custodial sentence. That is what the word decriminalisation in the FAQ’s own title is doing.
Three descriptions in section 132(1) are cut back, and the stated reasoning is as useful as the change.
Clause (i) is omitted entirely. It related to the supply of services in contravention of the Act. The FAQ’s reason is candid: the offence was difficult to quantify and liable to subjective interpretation. That is an unusual admission in an official document, and it is the right one. An offence nobody can measure consistently is an offence that gets applied inconsistently.
Clause (e) loses “evades tax”. What remains is confined to fraudulently obtaining a refund. Evasion of tax is still dealt with elsewhere in the section and through the demand machinery; what goes is a broad overlapping description.
Clause (h) loses “or in any other manner deals with”. Only the specific acts listed in the clause remain. Catch-all wording of that kind is exactly what converts a targeted offence into a general one.
Clause (c) is redrafted to cover only the fraudulent availment of input tax credit without receipt of goods or services, or without an invoice. In other words, the fake invoice case, which is what the provision was aimed at, rather than any disputed credit claim.
That last one matters more than it looks. A great many credit disputes are genuine differences of view about eligibility. Narrowing clause (c) to credit taken without any underlying supply or invoice draws a line between a disagreement and a fraud.
We can advise on your position in an ongoing GST investigation under the law as it currently stands, assess whether a demand framed under the fraud limb is properly characterised in light of the proposed redrafting of clause (c), handle representations and replies to show cause notices, and advise on voluntary payment and the conclusion of proceedings where that is the sensible route. Please reach out to our team and we will be happy to assist.
Once the amendment is enacted, no. The Council recommended removing the arrest provisions by omitting section 69 of the CGST Act, and the official FAQ states that no person shall be arrested for an offence under the GST law. Until the amendment is passed and notified, section 69 remains in force.
No. Prosecution can still be launched before the competent court on a complaint by the tax authorities where the amount involved exceeds ₹5 crore. What goes is the power to arrest, not the offence.
₹5 crore, up from ₹1 crore. Prosecution under section 132(1) is to be launched only where the evaded tax amount exceeds that figure.
Not necessarily. The punishment changes from “imprisonment and fine” to “imprisonment or fine or both”, and the minimum six months imprisonment under section 132(3) is removed, so the court may impose only a fine.
Up to five years where the amount involved exceeds ₹10 crore, and up to two years where it exceeds ₹5 crore but does not exceed ₹10 crore, in each case with the option of a fine instead or as well.
Clause (i) of section 132(1) is omitted entirely. In clause (e) the words “evades tax” go, confining it to fraudulently obtaining a refund. In clause (h) the words “or in any other manner deals with” go, leaving only the specific acts listed. Clause (c) is redrafted to cover only fraudulent availment of input tax credit without receipt of goods or services or without an invoice.
This article is for general informational purposes only and should not be considered professional advice. Please consult a qualified expert for advice tailored to your specific situation. The author and website owner are not liable for any errors or actions based on this content.
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