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GST Council removes arrest powers, raises prosecution threshold

GST Council removes arrest powers, raises prosecution threshold

Rule Changes

CBIC stopped GST arrests from October 30, 2026 and barred notices under ₹10,000; the law change and the ₹5 crore prosecution threshold wait for Parliament, targeted at April 2027

November 1st, 2026: Online sellers can register through e-commerce warehouses

Overview

Updated Nov 2

The Central Board of Indirect Taxes and Customs told its field officers on October 30 to stop making GST arrests immediately, and to hold back show-cause notices where the tax at stake is under ₹10,000. The directions are an interim measure. Parliament still has to amend the GST law, which the government targets for April 1, 2027.

The first batch of changes that needed no law amendment took effect on November 1. Online sellers registered in one state can now use a consenting e-commerce company's warehouse in another state as their principal place of business, under a ₹2.5 lakh monthly ceiling on certain supplies. Registration paperwork is simpler, refunds of excess cash balances are approved automatically, and post-sale discounts are easier to pass on.

Why it matters

Arrests have stopped in practice, but the legal protection only arrives when Parliament amends the GST law.

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Key Indicators

Oct 30, 2026
GST arrests halted
CBIC instructed field formations to stop making arrests as an interim measure until Parliament amends the law.
₹5 crore
Prosecution threshold
Raised from ₹1 crore; prosecution is retained for the largest fraud cases once the law is amended.
₹10,000
Show-cause notice floor
No show-cause notice where the tax at stake is below this amount, applied by CBIC from October 30, 2026.
₹2.5 lakh
Monthly ceiling for warehouse registrations
Cap on defined output tax liability for online sellers registering through an e-commerce operator's warehouse under rule 14B.

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People Involved

Nirmala Sitharaman
Nirmala Sitharaman
Union Finance Minister, chairs GST Council
Announced the reforms after the 57th GST Council meeting
VC
Vivek Chaturvedi
Chairman, Central Board of Indirect Taxes and Customs (CBIC)
Explained the GST reforms at taxpayer meetings in Tamil Nadu on October 15 and in Hyderabad on October 16, 2026
SM
Sanjay Mangal
Member (GST), Central Board of Indirect Taxes and Customs
Said on October 22, 2026 that reforms not needing law amendments would start November 1, 2026; that tranche took effect on schedule

Organizations Involved

GST Council
GST Council
Constitutional body
Approved the reforms at its 57th meeting

Joint decision-making body for India's goods and services tax, comprising the Union Finance Minister and state finance ministers.
CB
Central Board of Indirect Taxes and Customs (CBIC)
Government body
Halted GST arrests from October 30, 2026 and began rolling out rule-only reforms on November 1; law amendments targeted for April 1, 2027

India's central body for indirect taxes and customs, implementing the 2026 GST reforms.

Timeline

July 2017 November 2026

15 events Latest: November 1st, 2026 · 1 week ago Showing 8 of 15
Tap a bar to jump to that date

  1. Online sellers can register through e-commerce warehouses

    Latest Policy

    Rule 14B, inserted by the CGST (Amendment) Rules, 2026, lets eligible online goods sellers registered in one state obtain GST registration in another state using a consenting e-commerce operator's warehouse as their principal place of business. A ₹2.5 lakh monthly ceiling applies to defined output tax liability on relevant supplies to registered persons.

  2. Simpler registration, automatic refunds and easier discounts start

    Policy

    The GST department specified the documents needed for registration, the portal was given a revised interface, full refunds of excess electronic cash ledger balances are sanctioned automatically, and post-sale discounts no longer need a pre-existing agreement tied to a specific invoice.

  3. CBIC halts GST arrests and bars notices below ₹10,000

    Policy

    Instruction No. 02/2026-GST told field formations to make no further GST arrests, to intercept e-way bill conveyances only on intelligence authorised by a joint commissioner, and not to issue show-cause notices where the amount involved is below ₹10,000. The directions hold until the CGST Act is amended.

  4. CBIC sets November 1 start for reforms that need no law change

    Policy

    CBIC member (GST) Sanjay Mangal said process changes that need no amendment to the GST law will roll out from November 1, 2026. Changes to arrest provisions, prosecution thresholds, e-way bill rules and the ₹10,000 notice floor are targeted for April 1, 2027.

  5. Transit states can stop e-way bill vehicles only on specific intelligence

    Policy

    A finance ministry official said a vehicle carrying an e-way bill may be intercepted in a transit state only on specific intelligence and with prior approval from a senior GST officer. The official also said B2C e-invoicing will start on a voluntary basis from April 1, 2027.

  6. Centre plans three-month review of GST reforms with states

    Policy

    A senior official said the Centre will review implementation of the reforms with states in three months to identify gaps before the April 2027 rollout.

  7. CBIC chief clarifies GST reforms at Hyderabad taxpayers' meet

    Policy

    CBIC chairman Vivek Chaturvedi and other officials explained the reforms to about 250 MSME, exporter and start-up representatives in Hyderabad, covering automated refunds and the arrest and prosecution changes.

  8. CBIC chief briefs Tamil Nadu traders on GST overhaul

    Policy

    CBIC chairman Vivek Chaturvedi told traders in Tamil Nadu the prosecution threshold would rise to ₹5 crore and that show-cause notices would be barred where the tax at stake is under ₹10,000.

  9. Tamil Nadu shifts goods-in-transit checks to intelligence-led squads

    Policy

    The state's commercial taxes department replaced roving squads with flying squads, which may intercept vehicles only on specific intelligence recorded electronically and approved by a joint commissioner.

  10. Centre and states to draft SOP for pending arrest cases

    Policy

    The CBIC will write standard procedures with states for existing arrest cases, make invoice matching fully digital from April 1, 2027, and review refund risk checks quarterly with states.

  11. Finance ministry sets GSTN deadline, plans GST Amendment Bill

    Policy

    The finance ministry set an internal deadline for GST Network to update systems for the reforms. The GST Amendment Act will be introduced in Parliament before April 2027, and the Department of Revenue will review risk rules within three months.

  12. 57th GST Council meeting approves sweeping reforms

    Policy

    Council removes arrest powers, raises prosecution threshold to ₹5 crore, cuts penalties, speeds refunds.

  13. Keralam opposes scrapping arrest powers at GST Council

    Policy

    Kerala finance minister V.D. Satheesan opposed removing tax officers' arrest powers at the 57th Council meeting, urging they be kept for serious tax fraud and high-value cases.

  14. Two-rate GST structure introduced

    Policy

    GST Council simplifies its multi-slab rate structure to a two-rate system.

  15. GST launches across India

    Policy

    India replaces multiple central and state indirect taxes with a unified goods and services tax.

Scenarios

1

Reforms take effect April 1, 2027

Likely Resolves by Apr 1, 2027

Discussed by: Finance Ministry, GST Council

Sitharaman said every agenda item will be implemented from April 1, 2027. Implementation requires formal notifications amending the CGST Act. The reforms include removing arrest powers, raising the prosecution threshold, cutting penalties, and speeding refunds.

2

Supplier-default ITC proposal finalized

Possible Resolves by Q1 2027

Discussed by: GST Council

The proposal to protect genuine buyers from losing input tax credit when suppliers default was referred to an officers' committee. If finalized, it would prevent cascading losses for honest businesses. Sitharaman said committee matters would be finalized before April 2027.

3

First annual rate review under new policy

Likely Resolves by Apr 1, 2027

Discussed by: GST Council

The Council decided rate changes will be considered only once a year, effective April 1. The first annual review would happen in 2027. This marks a shift toward predictability for businesses, with rates reviewed annually rather than at each meeting.

4

SOP for existing arrest cases finalized before April 1, 2027

Likely Resolves by Apr 1, 2027

Discussed by: Central Board of Indirect Taxes and Customs, state governments

The Centre and states are drafting standard procedures so pending arrest cases are handled uniformly after arrest powers are removed. The GST Council has said tax officers will no longer have arrest powers; rule changes could roll out sooner than April 1, 2027, while some law amendments need Parliament approval.

5

GST Amendment Act clears Parliament before April 2027

Likely Resolves by Apr 1, 2027

Discussed by: Finance Ministry, GST Council

The finance ministry will table the GST Amendment Act before April 2027. It carries about a dozen changes to the CGST Act, including dropping Section 69 on arrests. If Parliament delays, the April 1 effective date could slip.

6

B2C e-invoicing begins voluntarily on April 1, 2027

Likely Resolves by Apr 1, 2027

Discussed by: Finance Ministry, CBIC, GST Network

A finance ministry official said business-to-consumer e-invoicing will start on a voluntary basis from April 1, 2027, with GST Network supporting states. B2B e-invoicing is already mandatory for businesses with average annual turnover of ₹5 crore. The move would extend supply-chain data to the final buyer.

7

First tranche of GST reforms goes live on November 1, 2026

Deadline passed (Nov 1, 2026)

Discussed by: Central Board of Indirect Taxes and Customs

CBIC member Sanjay Mangal said process changes that need no amendment to the GST law will be implemented from November 1, 2026, with the rest held for the April 1, 2027 target. He gave no itemised list of which measures fall in the first tranche.

8

Online sellers use platform warehouses to register across states

Likely Resolves by Apr 1, 2027

Discussed by: CBIC, GST Council

Rule 14B lets small online goods sellers registered in one state take GST registration in other states through a consenting e-commerce operator's warehouse, without opening an office there. Mint reported the option could help around 9.5 lakh small sellers reach the national market.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

July 2017

GST launch (July 2017)

India replaced a patchwork of central and state indirect taxes with a single goods and services tax on July 1, 2017. The reform unified a market of 1.3 billion people under one tax system, ending decades of cascading taxes.

Then

Businesses faced a steep learning curve with new compliance requirements and frequent rate changes.

Now

GST became the backbone of India's indirect tax system, with the Council meeting regularly to refine rates and rules.

Why this matters now

The 2026 reforms are the latest chapter in GST's evolution, shifting from enforcement-heavy compliance to a trust-based model.

2025

Two-rate GST structure (2025)

The GST Council simplified its multi-slab rate structure to a two-rate system, a year before the 2026 reforms.

Then

Simplified compliance for businesses navigating multiple tax slabs.

Now

Set the stage for the process reforms of 2026, which focused on enforcement and compliance rather than rates.

Why this matters now

The 2026 reforms build on this simplification, addressing process and enforcement issues while leaving rates unchanged.

Sources

(28)
+22
Press Information Bureau, Government of India The Economic Times The Indian Express Business Standard Moneycontrol Public TV English Deccan Chronicle Press Information Bureau (via GST Council) India Today Mint The New Indian Express The Hindu IANS Rediff.com NewKerala TaxGuru The Times of India Vantage (With Tatva) The Economic Times The Economic Times Press Information Bureau, Government of India The New Indian Express Mint Rediff.com The Economic Times The Indian Express Mint Business Standard