Table of Contents
Quick Answer
On 8 October 2026 the GST Council recommended omitting Section 69 of the CGST Act (arrest), raising the prosecution threshold from ₹1 crore to ₹5 crore, cutting the maximum general penalty under Section 125 from ₹25,000 to ₹10,000, and barring show cause notices where the tax involved is below ₹10,000. These need amendments to the CGST Act. Until they are notified, existing provisions continue to apply.
Which GST enforcement changes were recommended?
The Council described its approach as a “progressive and trust-based tax regime” that retains deterrence against fraud and evasion. The recommendations are set out below, with the position today.
| Area | Current position | Recommended | Needs |
|---|---|---|---|
| Arrest | Section 69 of the CGST Act | Omit Section 69 | Act amendment |
| Prosecution threshold | ₹1 crore | ₹5 crore | Act amendment |
| Section 132 offences | Existing clauses | Omit clause (i) of 132(1); trim clauses (e) and (h); confine clause (c) to fraudulent ITC without receipt of goods or services or without invoice; rationalise punishments | Act amendment |
| General penalty (Section 125) | Up to ₹25,000 | Up to ₹10,000 | Act amendment |
| Show cause notice floor | None | No notice where tax below ₹10,000 | Act amendment |
| Minimum penalty in non-fraud cases | ₹10,000 | Remove the minimum | Act amendment |
| Penalty after adjudication (non-fraud) | Existing | 5% if tax and interest paid within 30 days (Section 73) or 60 days (Section 74A) | Act amendment |
| Pre-deposit for penalty-only appeals | Percentage of penalty | Upper limit of ₹40 crore (₹20 crore CGST + ₹20 crore SGST/UTGST) | Act amendment |
| Multi-year notices held invalid by courts | Contested | Validation clause | Act amendment |
How would these changes work in practice? Examples
- Notice floor: A registered person’s reconciliation shows ₹8,500 of tax short-paid. Under the recommended floor, no show cause notice would be issued because the tax is below ₹10,000. Today, a notice can still be issued.
- General penalty: A technical breach carries a penalty under Section 125. The recommended cap is ₹10,000 instead of ₹25,000.
- Arrest: If Section 69 is omitted as recommended, officers would no longer have the power to arrest for GST offences. Until the CGST Act is amended by Parliament and brought into force, Section 69 continues to apply.
What changes for movement of goods and e-way bills?
The Council recommended amendments to Sections 68, 129 and 130:
- Section 129(1)(a) penalty: proposed to reduce to 50% of tax payable (or 2% of value of exempt goods, maximum ₹25,000).
- Goods transport verification: a trust-based procedure based on risk analysis and electronic verification, with interception as an exception.
- Transporter penalty (Section 129(6)): proposed to reduce to ₹25,000 (from ₹1,00,000).
- E-way bill blocking: Rule 138E is amended so that inward e-way bill generation is not blocked when an outward return is pending, easing supply of inputs.
Guidance on notices and orders that is already in force
CBIC issued Circular No. 258/04/2026-GST (26 October 2026), providing administrative guidance to field formations:
- Officers are directed to issue a pre-show cause consultation wherever practicable.
- Summary of order in FORM GST DRC-07 must state grounds clearly and be uploaded on the portal.
- Notices and orders should not duplicate issues already resolved in earlier tax periods unless new facts exist.
Other recommendations on disputes
- Validation of multi-year notices: The Council recommended a statutory validation clause for notices covering more than one financial year where high courts have set them aside. Taxpayers with pending writ petitions should take note.
- Appellate Tribunal (GSTAT): Measures to operationalise State Benches and handle pre-deposits smoothly.
What should taxpayers do now?
- Review open notices to see whether any issue falls within the clarification circulars.
- Do not assume that arrest or prosecution relief applies today; wait for the amending Act.
- Review e-way bill and transport documentation processes in light of the proposed Section 129 changes.
- Consider voluntary payment under Section 73/74A within the 30/60-day windows to minimise penalty.
Related reading: 57th GST Council meeting: key decisions, GST ITC and return changes, and our GST litigation and appeals practice page.
57th GST Council Meeting: In-Depth Special Series
This statutory analysis is part of our comprehensive 6-part technical coverage of the 57th GST Council recommendations, CGST Rules amendments, and CBIC notifications:
- Part 1:
Pillar: Key Decisions & What Is Already in Force
- Part 2:
Registration: Rule 14B, Biometrics & Cancellation Reforms
- Part 3:
Refunds: 10-Day Acknowledgement, Provisional Sanction & Input Services
- Part 4:
Returns & ITC: Correction Mechanism, Schema 1.2 & ISD
- Part 5:
Rates & Exemptions: 5% EV Transport, App Delivery & Scrap TDS
Frequently Asked Questions
Has arrest under GST been abolished?▼
Not yet. The Council recommended complete withdrawal of arrest powers by omitting Section 69 of the CGST Act, 2017. The change takes effect only after Parliament amends the Act and the amendment is brought into force.
What is the new prosecution threshold under GST?▼
The Council recommended raising the monetary threshold for prosecution from ₹1 crore to ₹5 crore, along with changes to Section 132 that narrow certain offences and rationalise punishments.
Will GST notices below ₹10,000 be issued?▼
The Council recommended that no show cause notice be issued under Sections 73, 74 and 74A where the tax involved is below ₹10,000, and that pending notices and appeals below that amount be decided as if the threshold had applied. This needs an Act amendment.
What is the reduced penalty for paying after an adjudication order?▼
In non-fraud cases, the Council recommended a reduced penalty of 5% if tax with interest is paid within 30 days (Section 73) or 60 days (Section 74A) of the adjudication order. The amending Act will specify the exact computation.
Can goods in transit be stopped in any State?▼
The Council recommended that interception be allowed only on specific intelligence authorised by an officer not below Joint Commissioner, and not in transit States. Where there is no e-way bill or no document showing origin or destination, goods can be inspected, detained or seized irrespective of jurisdiction. This needs an Act amendment.
Primary Official Sources
CA Amol Gupta, FCA
Chartered Accountants AdvisoryPublished by H A V N & COMPANY (Amol Gupta & Associates). Providing technical analysis on corporate tax planning, entity incorporation, statutory attestation, and regulatory compliance under the ICAI framework.
General Information Only
This article is general information on the law as at its date of publication and is not professional advice. The Income-tax Act, 2025 applies from 1 April 2026; references to the Income-tax Act, 1961 apply to earlier years. Please take advice on your own facts before acting on it.