‘Removal of arrest power of GST officers may face opposition’

The proposals have been prepared by the Law Committee and Fitment Committee, with states consulted throughout the process, a source said

GST-COUNCIL2071253.JPG Center-Center-Delhi

The proposal to remove the power of arrest from GST officers may face resistance from some states when the GST Council deliberates on the issue, even as the Centre seeks to shift towards a more trust-based tax administration.

“Though these proposals have been discussed intensively with the states over the past eight months, we expect a few states to resist the move as they may think we are taking away all powers to act against tax evaders,” a top government source said.

“We are of the opinion that arrest powers should not rest with tax officers. If any criminality is established, the arrest should be made by enforcement agencies through a court-monitored process,” the source said on condition of anonymity.

The source said arrest powers were not available to tax officers under the earlier VAT regime, similar to income tax. However, such powers existed under the Excise Act and were retained when indirect taxes, including VAT and excise duty, were subsumed into GST.

The proposals have been prepared by the Law Committee and Fitment Committee, with states consulted throughout the process, the source said. The changes are expected to be rolled out in phases through 2027, giving businesses and the tax administration time to adjust.

The next phase of GST reforms is expected to place greater emphasis on trust-based compliance. A large number of offences could be removed from the criminal provisions of GST, with enforcement relying more on tax recovery, interest and proportionate penalties.

The Council is also likely to consider raising the threshold for launching prosecution from Rs 1 crore to Rs 5 crore. The government is proposing invoice matching to identify fraudulent input tax credit closer to its point of origin and prevent it from moving further through the supply chain.

To reduce litigation, the Council may also consider barring GST notices where the tax demand is below Rs 10,000.

Revenue department officials have clarified that rate changes are not on the agenda of the October 8 Council meeting. The government wants the new GST rate structure to remain stable, with any future rate changes to be considered once a year and take effect from April 1.

A limited set of issues relating to rationalisation and removal of ambiguities, however, will be taken up at the meeting.