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There is no single automatic “GST prosecution limit.” Section 132 of the Central Goods and Services Tax Act, 2017 sets punishment bands according to the amount of tax evaded, input tax credit (ITC) wrongly availed or utilised, or refund wrongly taken. Separately, CBIC Instruction No. 04/2022-23 says prosecution should normally be launched when the relevant amount is more than ₹5 crore. That administrative guideline is not the same as a statutory trigger, and crossing either figure does not by itself prove an offence or guarantee prosecution.
What the GST prosecution threshold actually refers to
People use “GST prosecution threshold” to mean two different rules:
- Statutory punishment bands: Section 132(1) of the CGST Act links possible imprisonment to the amount involved in specified offences.
- CBIC’s prosecution-launch guideline: Instruction No. 04/2022-23, dated 1 September 2022, says prosecution should normally be launched when the relevant amount is more than ₹5 crore, subject to stated exceptions and a case-specific assessment.
The first rule concerns the punishment range after a prosecution and conviction. The second is an internal administrative standard for deciding when a prosecution proposal would ordinarily be appropriate. Neither rule means that every taxpayer above a figure is automatically prosecuted.
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Outbyte Driver Updater FREEFix the driver behind crashes, sound loss and screen glitchesFind Drivers →Outbyte PC Repair FREEClear out junk files and repair common Windows errorsFree Scan →The statutory amount is not turnover and is not simply every unpaid tax demand. Section 132’s explanation treats “tax” as tax evaded, ITC wrongly availed or utilised, or refund wrongly taken under the CGST, State GST, IGST and Union territory GST laws, together with cess under the GST Compensation to States Act. The alleged amount must therefore be matched to the particular offence and its legal ingredients.
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Section 132 punishment bands
The Act uses the word “exceeds.” An amount that merely equals a figure should not be described as crossing that band.
| Amount involved | Statutory punishment for the relevant Section 132(1) offences | What the band means |
|---|---|---|
| More than ₹5 crore | Imprisonment that may extend to five years and fine | The highest monetary band. The cognizable, non-bailable exception is narrower than this amount alone; see the procedure section below. |
| More than ₹2 crore and not more than ₹5 crore | Imprisonment that may extend to three years and fine | Applies to the offences placed in this band by Section 132(1). |
| More than ₹1 crore and not more than ₹2 crore | Imprisonment that may extend to one year and fine | Applies to the residual covered offences for which this band is prescribed. |
Section 132 also provides a separate punishment of up to six months, or fine, or both, for specified conduct such as obstruction, certain goods-related offences, and tampering with or destroying material evidence or documents. Section 132(2) prescribes a higher punishment for a person convicted again under the section. These provisions are distinct from the three amount-based bands.
How the ₹5 crore CBIC guideline works
CBIC Instruction No. 04/2022-23 describes “more than Five Hundred Lakh rupees” (₹5 crore) as the normal limit for launching prosecution. The instruction refers to tax evasion, ITC misuse and fraudulently obtained refunds. It is a prosecution decision guideline, not an amendment to the punishment language in Section 132.
Exception 1: habitual evaders
The usual limit does not apply in the stated habitual-evader situation. The guidance describes a company or taxpayer involved in at least two cases of confirmed demand at the first adjudication level or above during the preceding two years, where the aggregate tax evaded, ITC misused or fraudulent refund exceeds ₹5 crore. The facts of the individual cases and the aggregate calculation still need to be established; the label is not automatic merely because a business has received multiple notices.
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Exception 2: an arrest during investigation
The normal limit also does not apply to cases in which an arrest has been made under Section 69 during the investigation. An arrest is a procedural fact, not a finding of guilt. The prosecution decision remains subject to the evidence and the statutory requirements.
Case-specific judgment remains necessary
CBIC instructs officers to consider the nature and gravity of the offence, the amount involved, and the nature and quality of the evidence. The instruction therefore does not create a mechanical formula in which an amount is entered and prosecution follows.
Why a confirmed demand is not enough
CBIC expressly states: “Prosecution should not be filed merely because a demand has been confirmed in the adjudication proceedings.” A tax demand and a criminal conviction use different standards. For prosecution, the evidence must be capable of establishing the person’s guilty mind, knowledge, fraudulent intention or other required mens rea beyond reasonable doubt.
The guidance cautions against prosecution in technical cases and in disputes where additional tax results from a difference of opinion about legal interpretation. That does not decide every disputed classification or credit case in advance; it means the file should contain evidence of deliberate criminal conduct rather than only an arguable interpretive error.
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When can prosecution be filed?
CBIC says the decision would normally be taken after adjudication. However, a complaint may be filed before adjudication in specified circumstances, including a grave offence, strong evidence, an apprehension that waiting would cause undue delay, or an arrest during investigation.
The instruction refers to the Supreme Court’s decision in Radheshyam Kejriwal when discussing the independence and relationship of adjudication and criminal proceedings. A taxpayer should not assume that a criminal case is impossible before an adjudication order, nor that an adjudication order automatically establishes criminal liability. The procedural posture and the evidence in the particular case matter.
Is GST prosecution bailable?
The short answer is: generally, yes, but there is a defined exception.
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Section 132(4) says offences are generally non-cognizable and bailable. Section 132(5) creates an exception for offences specified in clauses (a) to (d) of Section 132(1) when they are punishable under the highest band in clause (i)—that is, the specified offences involving an amount exceeding ₹5 crore. Those offences are cognizable and non-bailable.
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It is therefore inaccurate to say that every GST offence above ₹5 crore is automatically non-bailable or cognizable. The classification depends on both the particular clause of Section 132(1) and the punishment band that applies.
Sanction required before prosecution
Section 132(6) requires the Commissioner’s previous sanction before prosecution. CBIC’s instruction sets out the sanctioning authority for CGST matters and for cases investigated by the Directorate General of GST Intelligence (DGGI). Sanction is a statutory safeguard and an administrative step; it does not replace the need to prove the offence in court.
If you receive a prosecution proposal, complaint or summons, identify the investigating formation, the alleged Section 132 clauses, the amount calculation and the sanctioning authority. Those details can affect both the legal analysis and the available procedural remedies.
Can directors be prosecuted under GST?
Not every director is automatically criminally liable. Section 137 addresses offences by companies and other entities. It permits proceedings against the company and against people who were in charge of, and responsible for, the conduct of its business, subject to the section’s conditions. It also addresses an offence committed with the consent or connivance of, or attributable to neglect by, a director, manager, secretary or other officer.
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Section 137 provides a defence where the person proves that the offence occurred without their knowledge or that they exercised due diligence to prevent it. CBIC cautions against indiscriminate prosecution of all directors of a public limited company. The focus should be on people who oversaw day-to-day operations and actively participated in, consented to, connived in or negligently allowed the alleged conduct.
Board title alone is therefore not a complete answer either way. Job descriptions, signing authority, reporting lines, email and accounting records, approval workflows and evidence of actual involvement can become important when assessing an individual’s exposure.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.How to analyse a possible prosecution
- Identify the alleged offence. Read the notice, summons or complaint for the exact Section 132(1) clauses. “GST evasion” is too broad to calculate the applicable band.
- Reconcile the amount. Separate tax evaded, wrongly availed or utilised ITC, and allegedly fraudulent refund. Check the relevant CGST, SGST, IGST, UTGST and compensation-cess components and the period used.
- Check whether the amount actually exceeds a band. ₹5 crore exactly is not the same wording as an amount that exceeds ₹5 crore. The charging clause and the calculation date also matter.
- Test the CBIC guideline. Ask whether the proposed case is over the normal ₹5 crore launch guideline, falls within the stated habitual-evader exception, or involves an arrest under Section 69.
- Assess intent and evidence. Look for proof of knowledge, fraudulent intention, deliberate concealment or other required mens rea. A pure legal-interpretation dispute may be materially different from fabricated invoices or knowingly false records.
- Map each person’s role. For a company, document who controlled the relevant transactions and who did not. Do not treat every director or employee as interchangeable.
- Check procedure. Confirm the adjudication status, whether a pre-adjudication complaint is being justified by an identified exceptional circumstance, the Commissioner’s sanction, and whether the alleged offence falls within the cognizable/non-bailable exception.
- Preserve records and obtain specialist advice. Keep invoices, e-way bills, returns, ledgers, contracts, reconciliations, correspondence, access logs and board or management approvals. A qualified GST-litigation lawyer can assess the live file, deadlines and any arrest or bail risk.
Illustrative situations
| Situation | What the threshold does—and does not—tell you |
|---|---|
| An alleged ITC misuse of ₹5.2 crore in one case | The amount is above the normal CBIC launch guideline and the highest statutory amount band, but prosecution is not automatic. The exact offence, evidence of knowledge or fraud, sanction and procedural facts remain decisive. |
| An alleged tax difference of ₹3 crore caused by a disputed classification | The amount sits in the more-than-₹2-crore to ₹5-crore punishment band if the charged offence fits it. CBIC’s warning about technical cases and differences of legal interpretation may be relevant; the amount alone does not establish mens rea. |
| Two confirmed demands over two years with an aggregate above ₹5 crore | The stated habitual-evader exception may remove the normal launch-limit protection. Officers must still apply the case-specific evidence and gravity assessment. |
| A director with no operational role | Section 137 does not make title alone conclusive. The prosecution must address the statutory basis for proceeding against that individual and the evidence of responsibility, consent, connivance or neglect. |
Important limits on this explanation
The figures and procedure above are drawn from Section 132 of the CGST Act as hosted by CBIC and CBIC Instruction No. 04/2022-23 dated 1 September 2022. The retrieved CBIC Act page did not state a consolidation date. GST legislation and instructions can be amended, and State GST enactments or state-specific directions may affect a particular matter. Before relying on a threshold in a live investigation, verify the current central and applicable state law and obtain advice on the facts.
For a taxpayer, the practical question is not simply “Am I over ₹5 crore?” It is whether the alleged amount is calculated under the correct offence, whether the conduct is supported by evidence of criminal intent, whether a stated exception applies, and whether the procedural and sanction requirements have been met.
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