Proposal to scrap GST officers' arrest powers based on 'trust'; states likely to back move: Sources

The Goods and Services Tax (GST) Council is considering a proposal to remove the arrest powers of GST officers, based on the principle of trusting taxpayers, according to Finance Ministry sources. This move is expected to receive support from states, as arrest powers were previously unique to excise duties. The proposal does not eliminate the arrest provision entirely, but requires criminality to be proven before an arrest can occur.

This change is part of a broader decriminalization exercise where the threshold for prosecution is proposed to increase from Rs 1 crore to Rs 5 crore.

The GST officer's power to arrest originated from the Excise Act, which was integrated into the GST framework when it was introduced in 2017. Prior to GST, tax officers lacked arrest powers under VAT, service tax, or other taxation laws. The arrest power was implemented as a deterrent against fake invoicing, as technology for invoice matching was limited at that time. However, with advancements in technology, the deterrence provided by the arrest power is now addressed by the system itself.

Currently, a tax officer's primary responsibility is to collect taxes, while law enforcement agencies handle criminal cases. The proposal aims to shift the focus of GST officers towards tax collection rather than arrest. If there is a tax due, the emphasis should be on recovering it. If criminal activity is involved and prosecution is pursued, arrests can only be made based on a court order.

The changes are set to be discussed at the 57th meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman, on October 8. Some states may resist the proposal due to sensitivity regarding the loss of arrest powers. However, it is hoped that they will reconsider and support the move.