26 Oct 2026
GST’s New Enforcement Era: An Assurance of Accountability Without Personal Liberty Becoming a Casualty
Partner: Jitendra Motwani
This is a link-enhanced version of an article that first appeared in Mint.
Summary
The Goods and Services Tax (GST) Council deserves credit for removing the powers of officers to arrest even without a showcause notice. This does not mean the law is going soft. For businesses, the message is clear. Just keep your dealings clean and the agencies will be out of your hair.
The Goods and Services Tax (GST) Council in its latest meeting has recommended omitting Section 69 of the Central GST Act, which lets GST officers arrest before any tax liability is established. The reform keeps every tool needed to pursue genuine fraud, but moves the decision to jail someone from the investigating officer to a criminal court.
“Personal liberty is an important aspect of our constitutional mandate.” These words of the Supreme Court in Siddharth v. State (2021) echo the Council’s aim of “a progressive and trust-based tax regime, while retaining effective deterrence against fraud and evasion.”
The government is moving from regulating the power of arrest through safeguards to removing that power altogether. This is not a retreat but a recalibration of how the fight against tax evasion is waged, and an assurance of accountability without personal liberty as its casualty.
What is 69? It empowers a commissioner to arrest a person for specified offences under Section 132 even before a showcause notice is issued. It was intended for large-scale fraud such as fake invoicing, bogus input tax credit and circular trading, not as an ordinary instrument of investigation. Its existence cast a shadow over routine probes.
To be sure, safeguards exist. The Central Board of Indirect Taxes and Customs’ instructions of 17 August 2022 and 1 September 2022 require officers to weigh the evidence, the person’s role and the necessity of arrest. The instruction of 13 January 2025 requires written grounds with the arrest memo. Still, ongoing litigation raises a larger question: is stricter compliance enough or is it time to reconsider the power itself?
Why now? The revenue department told the Supreme Court in Radhika Agarwal v. Union of India (2025) that between July 2017 and March 2024, officers probed 79,763 cases and made 1,640 arrests, roughly 2% of the cases. These figures do not prove arbitrariness. But even a small proportion deserves scrutiny when the consequence is loss of liberty before establishing guilt.
The Supreme Court upheld the arrest provisions as constitutionally valid while stressing strict statutory compliance. Recent rulings show why that emphasis matters.
In multiple cases such as Kshitij Ghildiyal v. Directorate General of GST Intelligence (2025), the courts held arrests or detention unlawful where statutory requirements, including written grounds of arrest and proper documentation, were not met.
In Amit Mehra v. Union of India (2026), the Supreme Court granted bail after more than eight months in custody without the trial having begun, underlining the dangers of prolonged pre-trial detention. These decisions are not an indictment of officers generally, but show how procedural lapses can curtail liberty.
Not a free pass: The reform does not abolish investigation, searches and seizures, summons, assessment, adjudication, recovery, civil penalties or prosecution for offences that remain punishable. Nor does it grant immunity to evaders. Criminal proceedings can still be pursued, sometimes even before a showcase notice. What changes is the path to jail.
Punishment is also being made proportionate. The prosecution threshold has been raised from ₹1 crore to ₹5 crore, the list of offences in Section 132 has been pruned and the minimum imprisonment term of six months is being removed so that a court may impose only a fine where that is just.
Going soft on fraud? Sceptics may argue that this weakens the state’s hands against sophisticated input tax credit rackets. But effective enforcement is not measured by how easily an agency can arrest. Rather, by its ability to establish wrongdoing, recover legitimate dues and secure convictions where warranted. A process grounded in evidence and tested in court may take longer, but offers a far stronger check against misuse.
From fear to discipline: For the business owner, director or chief financial officer, the message is simple. The fear of a knock at the door during an investigation is giving way to the ordinary discipline of law. Keep your records clean, respond to summons, pay what is due on time, and the system is designed to leave you alone. For the fraudster, the courtroom door remains wide open, and the department now has the time to walk through it.
The last word—trust extended, accountability intact: The government and the GST Council deserve credit for this reform. Few administrations voluntarily give up a power as potent as arrest, and fewer do so while keeping intact every tool needed to catch fraud. It is the act of a confident state, one that chooses evidence over intimidation. It also sends a signal to industry and investors: India’s tax system now extends trust first and asks for proof before it punishes.
Trust runs both ways. Taxpayers must keep their records clean, their vendors genuine and their dues paid on time. The department, in turn, must build cases that stand to judicial scrutiny. Much will depend on how these recommendations are enacted but the direction is unmistakable.
A strong tax administration is not one that arrests most readily but one that can prove wrongdoing, recover legitimate dues and deliver timely justice. The goal is neither leniency nor fear. It is the rule of law.
Ginita Bodani and Sachin Mishra of Trilegal contributed to this article.
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