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At its 57th meeting on 8 October 2026, the GST Council recommended withdrawing arrest powers under GST, raising the prosecution threshold from ₹1 crore to ₹5 crore, cutting the maximum general penalty under section 125 of the CGST Act from ₹25,000 to ₹10,000, and capping pre-deposits for penalty-only appeals at ₹40 crore. These are recommendations. The Press Information Bureau (PIB) summary of the meeting does not establish that any of them has been enacted, notified or is in force, and it does not give commencement dates or final statutory wording for the enforcement and penalty proposals.
Recommendations, not law yet
The PIB release describes these as recommendations of the GST Council. Recommendations become binding only after the necessary amendments are passed by Parliament or the relevant legislature, or through notifications where the law allows. Until that happens, the existing provisions continue to govern assessments, prosecutions and appeals. Anyone quoting these figures in a live dispute should treat them as proposed values and check the enacted text first.
Arrest powers
The most significant proposal is the complete withdrawal of GST arrest powers. The Council recommended omitting section 69 of the CGST Act, 2017, which is the provision that gives the department power to arrest a person. The PIB summary states this in these words: “The Council has recommended complete withdrawal of arrest powers under GST by omission of section 69 of CGST Act, 2017.”
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Prosecution is a separate track from tax recovery and penalty. The Council recommended raising the monetary threshold for prosecution, which the PIB summary puts as “The monetary threshold for prosecution to be raised from ₹1 crore to ₹5 crore.” A higher threshold means that fewer cases would meet the monetary condition for prosecution.
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The package also changes the list of offences in three ways:
- One listed offence would be removed.
- Specified wording would be deleted from two other clauses.
- One offence would be limited to fraudulent input tax credit availed without receipt of goods or services, or without an invoice or bill.
The Council also recommended rationalising punishments. The PIB summary does not set out a complete offence-by-offence schedule of revised punishments, so the exact new penalty for each remaining offence cannot be stated from that source.
Penalties and early payment
The general maximum penalty under section 125 would fall from ₹25,000 to ₹10,000. The early-payment proposals are narrower and depend on whether the case involves fraud. The table below sets out what the PIB summary describes.
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| Situation | Proposed treatment | Condition | Status |
|---|---|---|---|
| General maximum penalty (section 125) | Reduced from ₹25,000 to ₹10,000 | As stated in the PIB summary; no fraud split given for this row | Recommendation; effective date not stated |
| Non-fraud case under section 73 | 5% penalty | Tax and interest discharged within 30 days | Recommendation; effective date not stated |
| Non-fraud case under section 74A | 5% penalty | Tax and interest discharged within 60 days | Recommendation; effective date not stated |
| Non-fraud case, minimum penalty | Existing minimum of ₹10,000 removed | Non-fraud cases only | Recommendation; effective date not stated |
The 5% figure is therefore not a general rate. It applies only in the specified non-fraud cases, and only if the tax and interest are paid inside the stated window. Fraud cases are outside this early-payment relief as the summary describes it.
Show-cause notices and appeal pre-deposits
Show-cause notice threshold
The Council recommended a minimum threshold of ₹10,000. Under the proposal, no show-cause notice would be issued for amounts below that figure. The PIB summary attaches the words “subject to the final provision,” so the precise drafting may change before it becomes law.
Pre-deposit for penalty-only appeals
Filing an appeal normally requires a pre-deposit. For orders that impose a penalty but no tax demand, the Council recommended capping the pre-deposit at ₹40 crore, made up of ₹20 crore CGST and ₹20 crore SGST/UTGST. The cap is a ceiling on the pre-deposit for that category of order. It is not a fixed payment, and the summary does not describe how the cap would apply where a tax demand also exists.
Interception of goods conveyances
A related recommendation concerns vehicles carrying goods. The Council recommended that a conveyance could be intercepted only on specific intelligence and with authorisation from an officer at least at Joint Commissioner rank. This is a procedural safeguard on movement checks. It does not change the prosecution threshold or the penalty figures above.
Other measures in the same package
The recommendations go beyond enforcement. The PIB summary also covers:
- simplified rules for some registration changes and cancellations;
- refunds of accumulated input tax credit in specified cases;
- removal of input tax credit restrictions for several listed categories;
- under proposed changes to rule 86A, an opportunity for taxpayers to object, and a personal hearing, before an amount is blocked in the electronic credit ledger.
These items are not penalty reforms, and they should not be read as part of the punitive changes.
What is not yet settled
- Commencement dates for the enforcement and penalty proposals.
- Final statutory wording, including the exact show-cause notice provision.
- The complete revised punishment for each retained offence.
- How the penalty-only pre-deposit cap interacts with cases that also carry a tax demand.
Until these are resolved in amending legislation or notifications, the figures in this article describe the Council’s proposals, not the law a taxpayer must follow today.
The Bottom Line
The GST Council has proposed a substantial softening of enforcement: no arrest powers, a ₹5 crore prosecution threshold, a ₹10,000 general penalty ceiling under section 125, and a ₹40 crore pre-deposit cap for penalty-only appeals. Before relying on any of these in a notice, reply or appeal, check the enacted text of the amendments and the notified effective date, since the PIB summary of the 8 October 2026 meeting does not provide either.
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