57th GST Council Recommends Scrapping Arrest Powers Under Section 69, Raises Prosecution Threshold to ₹5 Crore: What Today’s Outcome Actually Means

At 11:00 AM this morning, the 57th GST Council sat down at Bharat Mandapam for a meeting that had already been rescheduled twice in under a month. By early evening, the Press Information Bureau had posted its release, and the headline out of that release is not the one anyone was debating going in: the Council has recommended omitting Section 69 of the CGST Act altogether — not merely handing arrest-authorisation to a judicial officer instead of a Commissioner, as pre-meeting reports had suggested, but removing the arrest power from GST law entirely.

That is a materially bigger move than what was reported ahead of the meeting, and getting the distinction right matters for every client conversation this week.

Important at the outset: these are Council recommendations, reported from today’s PIB release and corroborated across multiple outlets. Per the Council’s own stated position, they take legal effect only through the specific circulars, notifications, or CGST Act amendments that follow — none of which has been issued as of this article. Current law, including Section 69 exactly as it stands today, continues to operate until that happens.

What The Council Actually Recommended

Arrest powers (Section 69). The Council has recommended omitting Section 69 of the CGST Act in full. As things stand today, Section 69 lets a Commissioner personally authorise arrest on his own “reason to believe” that a person has committed certain Section 132 offences. The pre-meeting reporting (Business Standard, 4 October, citing government sources) had framed the proposal as shifting that authorisation from the Commissioner to a judicial authority — a check on the power, not its removal. What the Council has actually recommended goes further: the power itself would disappear from the statute.

Prosecution threshold and offence narrowing (Section 132). The monetary threshold for launching prosecution is recommended to rise from ₹1 crore to ₹5 crore — consistent with the figure reported ahead of the meeting. Alongside it, the Council has recommended removing clause (i) of Section 132(1) entirely, dropping “evades tax” from clause (e) and “or in any other manner deals with” from clause (h), and narrowing clause (c) so that it catches only fraudulent input tax credit availed without actual receipt of goods or services, or without a valid invoice or bill. Punishments across the section are recommended to be rationalised.

Show-cause notices and penalties. A ₹10,000 aggregate floor (CGST + SGST + IGST + Cess) is recommended for issuing show-cause notices under Sections 73, 74 and 74A — with pending notices below that figure to be decided as though the floor already applied. The general penalty under Section 125 is recommended to come down from ₹25,000 to ₹10,000, and a reduced 5% penalty is proposed for non-fraud cases where tax and interest are paid within 30 days (Section 73) or 60 days (Section 74A) of the adjudication order. The existing ₹10,000 minimum penalty in non-fraud cases is recommended for removal, and pre-deposit for penalty-only appeals would be capped at ₹40 crore (₹20 crore CGST, ₹20 crore SGST/UTGST).

Refunds. In two phases, the Council has recommended moving toward largely automatic refund sanction: Phase 1 covers automatic sanction of the full excess electronic cash ledger balance, a cut in the acknowledgment/deficiency-memo window from 15 to 10 days with deemed acknowledgment, and provisional sanction of 90% of zero-rated and inverted-duty-structure claims based on system risk assessment. Phase 2 contemplates fully automated sanction of zero-rated claims after adjusting any pending dues. The 1.5-times-turnover cap in Rule 89(4)(C) is recommended for removal, and the ₹1,000 minimum-refund threshold under Section 54(14) is to be clarified as applying to the combined CGST + SGST + IGST refund, not each head separately.

Input tax credit. Section 17(5) is recommended to be amended to lift the current ITC blocks on outdoor catering, health and life insurance, telecom towers, pipelines laid outside factory premises, free samples, and goods destroyed or written off where required by law. Refund of accumulated ITC on input services for inverted-duty claims is proposed for services availed from 1 November 2026, and on capital goods for zero-rated/inverted-duty claims (spread over 60 months) for goods availed from 1 April 2027.

Registration, e-way bills and smaller reforms. The Council has also recommended a simplified registration process (including a new route for small e-commerce sellers operating from an e-commerce operator’s warehouse), automatic acceptance of registration amendments and cancellations in defined low-risk cases, tighter conditions on e-way-bill interception (specific intelligence only, Joint Commissioner-rank authorisation, no interception in transit states), and a late-fee waiver for taxpayers with turnover up to ₹5 crore who file a delayed return by the end of the month it was due.

Why It Matters

If these recommendations are carried through into law, this is the most significant change to GST’s enforcement architecture since the regime began in 2017 — not a rate tweak, but a change in how a dispute can escalate. Removing Section 69 altogether, rather than merely adding a judicial check on it, removes arrest as a live risk in a GST dispute as such a provision currently allows. Combined with the ₹5 crore prosecution threshold and the narrower Section 132 offence definitions, the direction is unmistakably toward civil, monetary consequences rather than criminal ones for all but the largest, most clearly fraudulent cases. For ordinary classification or valuation disputes — the overwhelming majority of GST disagreements — this would remove the single most coercive pressure point the department currently holds.

But recommendation is not law. The Council’s own summary of today’s meeting states plainly that these measures take effect only through the circulars, notifications or CGST Act amendments that follow — and since Sections 69 and 132 sit in the CGST Act itself, the arrest-powers and prosecution-threshold changes most likely require a Finance Bill amendment, not subordinate legislation. That takes time, and Council recommendations have, on occasion, been modified or deferred between recommendation and notification.

Key Takeaways

• The 57th GST Council has recommended omitting Section 69 (GST arrest power) entirely — a bigger move than the pre-meeting reports of shifting arrest authorisation to a judicial officer.
• The Section 132 prosecution threshold is recommended to rise from ₹1 crore to ₹5 crore, with several offence clauses narrowed or removed.
• None of this is law yet. By the Council’s own account, these recommendations take effect only through the specific circulars, notifications and CGST Act amendments that follow.
• Until that happens, Section 69 continues to operate exactly as it does today — including the Supreme Court’s Sunil Biyani safeguard requiring the Commissioner’s “reasons to believe” order to be communicated to the person before any arrest.
• Beyond arrest and prosecution, the Council also recommended substantial refund automation, ITC relaxations under Section 17(5), a ₹10,000 show-cause-notice floor, and several penalty reductions.

Practical Implications

Until a CGST Act amendment is actually enacted, Section 69 remains fully operative, and so does the Sunil Biyani safeguard: no arrest without the Commissioner’s “reasons to believe” order being communicated to the person first, including electronically via the email or mobile number on the Rule 8 registration record. A client under live investigation today is still governed by today’s law, not today’s recommendation. The same caution applies to every other item above — the ₹5 crore threshold, the ₹10,000 show-cause floor, and the refund and ITC changes all require a notification, circular or legislative amendment before they can be relied upon in a filing, a notice reply, or client advice.

Action Checklist

• Do not advise clients that arrest risk has already been removed. Every communication this week should say “recommended” or “the Council has proposed,” never “the law now provides” — until the actual CGST Act amendment is notified.
• For any client facing a live Section 69 situation today, the operative safeguard remains Sunil Biyani: insist that the Commissioner’s “reasons to believe” order has been communicated, in writing or via the registered email/mobile, before accepting that an arrest is procedurally valid.
• Track the implementing notification or Finance Bill provision once introduced — the Section 69/132 changes will very likely need to go through Parliament, which can take months and can also change the detail of what was recommended today.
• Flag the refund and ITC changes to clients with pending claims — several (the cash-ledger refund automation, the Rule 89(4)(C) cap removal) could materially improve cash flow once notified, but should not be assumed in current working-capital planning yet.

Relevant Sections

Section 69, CGST Act, 2017 — Power to arrest (recommended for omission in full).
Section 132, CGST Act, 2017 — Punishment for certain offences (recommended threshold and clause changes, as above).
Section 125, CGST Act, 2017 — General penalty (recommended reduction, ₹25,000 → ₹10,000).
Section 17(5), CGST Act, 2017 — Blocked credit (recommended relaxations for several categories).

Relevant Notifications

No Gazette notification, CGST Act amendment, or Council press release carrying the formal, detailed text of today’s recommendations has been issued as of this article — what exists so far is the Press Information Bureau’s release summarising the Council’s recommendations (posted this evening, 8 October 2026) and the 5 October 2026 Office Memorandum (F.No. 1392/57th GSTCM/GSTC/2026) that had rescheduled today’s sitting. Readers should watch for the formal notifications and, for the Section 69/132 changes specifically, the Finance Bill provision that would actually amend the CGST Act.

FAQs

Has Section 69 already been removed from the CGST Act? No. The Council has recommended its omission; it remains in force, unchanged, until Parliament amends the CGST Act.

Is the ₹5 crore prosecution threshold already in effect? No, for the same reason — it is a Council recommendation pending a CGST Act amendment.

Does this mean GST arrest is currently unrestrained? No. The Supreme Court’s Sunil Biyani ruling already requires the Commissioner’s arrest-authorisation order to be communicated before arrest, and that safeguard continues to operate independently of today’s recommendations, for as long as Section 69 remains on the books.

When will these changes actually take effect? Not announced. The Council’s recommendations typically move to implementation through specific notifications, circulars or (for Act provisions like Sections 69, 125 and 132) a Finance Bill amendment — a process that has, in the past, taken anywhere from weeks to well over a year, and can alter details along the way.

Internal Links

Arrest Under GST Is Not Off the Table — But It’s Not a Blank Cheque Either: The Safeguards Every Practitioner Should Know Cold
Supreme Court: No Post-Dismissal Arrest Protection in GST Pre-Arrest Bail Matters — But Section 69 Arrest Orders Must Be Communicated Before Arrest
57th GST Council Meeting Confirmed for 7 October 2026 — Correction to Finoscape’s 31 August Article

This article reports the 57th GST Council’s recommendations from its 8 October 2026 meeting, based on the Press Information Bureau’s release and corroborating reports from TaxGuru, A2Z Taxcorp LLP, CAclubindia and other outlets. These are Council recommendations, not enacted law — they take legal effect only through the circulars, notifications and legislative amendments that follow, none of which has been issued as of publication. This is not legal or professional advice; readers should consult a qualified professional and track the formal notifications before acting on any aspect of this report.