57th GST Council Meeting 2026: ₹5 Crore GST Prosecution Threshold, Arrest Powers and Key Changes Explained
The 57th GST Council proposed a ₹5 crore prosecution threshold and changes to arrest powers. These recommendations require legal implementation before taking effect.
Published 2 November 2026Last Updated 2 November 202610 min readBy Kar Sathi Team
Updated: 2 November 2026 | Category: GST Updates & Compliance
A GST notice is stressful enough for any business owner. But when a dispute raises the possibility of criminal prosecution or arrest, the consequences can become much more serious.
The 57th GST Council Meeting, held on 8 October 2026, recommended major changes to GST enforcement. The Council proposed complete withdrawal of GST arrest powers under Section 69, an increase in the prosecution threshold from ₹1 crore to ₹5 crore, narrowing of certain offences under Section 132 and rationalisation of punishment.
These are significant recommendations, but one point is essential: a GST Council recommendation does not automatically amend the CGST Act. The relevant legislative amendments and commencement provisions must come into force before taxpayers treat the proposed changes as operative law.
The 57th GST Council recommended omitting Section 69. Learn how the proposal differs from the existing arrest law and why legal implementation must be verified.
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Council recommended complete withdrawal by omitting Section 69
Section 132 Offences
Certain clauses proposed to be narrowed or omitted
Punishment
Rationalisation recommended
Legal Status
Recommendations require statutory implementation
Business Impact
Proposed reduction in criminal exposure, subject to legislative implementation; civil proceedings may continue
Important: The proposed ₹5 crore threshold relates to criminal prosecution. It does not create a ₹5 crore minimum threshold for tax demands, interest, penalties or routine GST proceedings.
What Is GST Prosecution?
GST prosecution means criminal proceedings for specified offences under the CGST Act.
It is different from ordinary adjudication. A GST demand proceeding may determine unpaid tax, interest or penalty, while prosecution can result in criminal proceedings before a court.
Section 132 covers specified criminal offences, including qualifying fake-invoice, fraudulent ITC and tax-evasion conduct. The ingredients of each offence and the applicable statutory conditions must be assessed separately.
Not every return mismatch, ITC difference or GST notice is therefore a criminal case. The nature of the conduct, evidence and statutory ingredients are important.
₹5 Crore GST Prosecution Threshold: What Is Changing?
The GST Council has recommended increasing the monetary threshold for prosecution from ₹1 crore to ₹5 crore.
Under the current Section 132 framework, specified offences can enter the punishment structure once the relevant amount exceeds ₹1 crore. The current statute contains different punishment bands depending on the amount involved.
If the recommended amendment becomes law, the general prosecution threshold for relevant offences would move to ₹5 crore.
For example, suppose a business faces an allegation involving ₹3 crore of GST. If the final amended provision applies a ₹5 crore prosecution threshold to that offence, the amount may fall below the revised prosecution threshold.
However, the department may still pursue
Tax recovery
Applicable interest
Civil penalties
Adjudication proceedings
Other proceedings permitted under GST law
The prosecution threshold should therefore never be confused with the threshold for determining tax liability.
Statutory Threshold vs CBIC's 2022 Prosecution Guidelines
This distinction is especially important.
Although the existing statute contains a punishment band beginning above ₹1 crore, CBIC Instruction No. 04/2022-23 dated 1 September 2022 already stated that prosecution should normally be launched where tax evasion, ITC misuse or fraudulent refund exceeds ₹5 crore, subject to exceptions.
The instruction also made clear that prosecution should not be launched merely because a demand has been confirmed and should generally not be used for technical disputes or differences in interpretation where criminal intent is absent.
The 57th GST Council recommendation is therefore significant because it seeks to change the statutory framework itself, rather than merely the administrative policy followed by officers.
Complete Withdrawal of GST Arrest Powers Proposed
The Council's official press release uses clear language: it recommended complete withdrawal of arrest powers under GST by omission of Section 69 of the CGST Act, 2017.
Section 69 currently allows the Commissioner, subject to statutory conditions, to authorise arrest for specified offences linked to Section 132.
If Section 69 is ultimately omitted as recommended, this GST-specific arrest power would be removed.
But this recommendation should not yet be described as an enacted repeal. Until the necessary amendment becomes legally effective, the statutory position in force must be checked for any ongoing matter.
It is also important to distinguish arrest from prosecution. Removing GST-specific arrest powers does not automatically mean that qualifying criminal offences or prosecution proceedings disappear.
Section 132 Offences Are Also Proposed to Be Narrowed
The Council did more than recommend a higher monetary threshold.
It also proposed specific changes to the scope of offences under Section 132(1). These include
Clause (c): to focus on fraudulent availment of ITC without receipt of goods or services, or without an invoice or bill.
Clause (e): removal of the words relating to “evades tax”.
Clause (h): deletion of broader language covering persons who “in any other manner deal with” specified goods.
Clause (i): proposed omission of the clause dealing with certain contraventions involving supply of services.
These recommendations indicate an attempt to make criminal provisions more targeted.
For businesses, this distinction matters particularly in ITC disputes. A genuine transaction with documentation and a reporting mismatch is not the same factual situation as a fictitious purchase supported by fake invoices.
What Is Changing in GST Imprisonment Rules?
Under the existing Section 132 framework, punishment varies according to the offence and monetary amount.
The present law can provide imprisonment of up to five years for the highest qualifying band, while lower bands carry shorter maximum imprisonment terms. It also currently contains a minimum six-month imprisonment rule for specified cases unless the court records special and adequate reasons otherwise.
The 57th GST Council has recommended rationalising the amount of punishment for various offences under Section 132.
For publication, it is safer not to treat any proposed revised imprisonment slab as final until the detailed legislative text and commencement provisions are available.
The broader direction, however, is clear: the Council wants criminal punishment to be more proportionate while retaining deterrence against serious fraud and evasion.
Practical Example
Consider a business accused of wrongly availing ₹3 crore of ITC.
The first question should not simply be, “Is the amount above or below ₹5 crore?”
The facts must also be examined.
If genuine purchases were made, goods or services were actually received, payments were recorded and invoices exist, but a reporting or reconciliation issue arose, the matter is factually different from a case where invoices were created without any underlying supply.
Even where prosecution is not attracted, the department may still determine tax, interest and applicable penalties.
Quick Tip: Maintain invoices, payment records, goods-receipt evidence, e-way bills where applicable and regular GSTR-2B reconciliations. Good documentation can make a major difference when explaining genuine transactions.
Related Relief: Small GST Notices and General Penalty
The 57th meeting also recommended other enforcement-related changes.
For specified show-cause notices under Sections 73, 74 and 74A, the Council recommended a minimum tax threshold of ₹10,000, calculated across CGST, SGST/UTGST, IGST and cess.
The Council also recommended reducing the maximum general penalty under Section 125 from ₹25,000 to ₹10,000.
These proposals are separate from the ₹5 crore prosecution threshold and should not be mixed together.
What About Existing GST Prosecution Cases?
Businesses with pending proceedings should not assume that their cases automatically close because the Council has recommended a higher threshold.
The effect on an existing matter will depend on factors such as
Final wording of the amendment
Date on which the amendment comes into force
Nature of the alleged offence
Stage of the proceedings
Any transitional provisions
Applicable judicial principles
A pending prosecution or investigation should therefore be reviewed on its own facts.
What Should Businesses Do Now?
The proposed reforms may reduce unnecessary criminal exposure, but they do not reduce the importance of GST compliance.
Businesses should continue to
File GSTR-1 and GSTR-3B correctly and on time.
Reconcile ITC with GSTR-2B and accounting records.
Avoid unsupported or accommodation invoices.
Verify significant suppliers and transactions.
Maintain purchase, sales, payment and movement-of-goods records.
Respond to GST notices and summons within applicable timelines.
Review serious allegations with an experienced GST or legal professional.
CBIC's 2022 prosecution guidelines themselves emphasise that prosecution should be based on the seriousness of the case, quality of evidence and criminal intent—not merely the existence of an adjudication demand.
Why This Matters for Businesses
The 57th GST Council recommendations represent a meaningful shift toward distinguishing ordinary compliance disputes from serious tax fraud.
A statutory ₹5 crore prosecution threshold, removal of GST-specific arrest powers and narrower offence provisions could reduce criminal exposure in appropriate cases.
At the same time, deliberate fake invoicing, fraudulent ITC and other serious misconduct remain areas where businesses should expect strict enforcement.
Conclusion
The 57th GST Council Meeting 2026 has recommended some of the most important changes yet to GST prosecution and arrest provisions.
The Council has proposed raising the prosecution threshold from ₹1 crore to ₹5 crore, completely withdrawing arrest powers under Section 69, narrowing specified Section 132 offences and rationalising punishment.
For taxpayers, however, the practical rule remains simple: do not treat a recommendation as an enacted amendment. Continue complying with the law currently in force and check the final legislation and commencement notifications before relying on the proposed relief in an existing case.
Need Help With a GST Notice or Compliance Issue?
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If you have received a GST notice or are dealing with an ITC or compliance issue, contact Kar Sathi for professional assistance with the next steps.
The Council recommended increasing the statutory prosecution threshold from ₹1 crore to ₹5 crore for relevant GST offences, subject to final legislative implementation.
Understand the 57th GST Council’s proposed ₹10,000 notice threshold, Section 125 penalty reduction, non-fraud relief and new safeguards for e-way bill enforcement.
