Law of Arrest and Mandatory Compliance by Authorities Under GST

Since the introduction of the Goods and Services Tax (GST) in 2017, the government has consistently worked to curb tax evasion and ensure compliance. One of the most serious provisions under GST is the power to arrest taxpayers for certain offences. However, these powers are not arbitrary — they are guided by strict legal procedures and mandatory compliances that authorities must follow.

In this article, we will discuss the law of arrest under GST, the circumstances in which arrest can be made, and the mandatory compliance obligations for authorities to protect the rights of taxpayers.

📜 Legal Provisions for Arrest Under GST

The power to arrest is governed by Section 69 of the CGST Act, 2017. It authorizes the Commissioner of GST to order the arrest of a person if he has “reasons to believe” that the person has committed certain offences under Section 132 of the CGST Act.

Section 132 lists the following major offences:

Issuing fake invoices or invoices without supply of goods/services.
Availing or passing on fake Input Tax Credit (ITC).
Collecting GST but not paying to the government within 3 months.
Fraudulent refund claims.
Evasion of tax exceeding prescribed limits.

💰 Monetary Limits for Arrest

Arrest under GST is permitted only in cases where the amount of tax evaded exceeds ₹2 crore, except for repeated offences. The offences are further classified as:

Cognizable & Non-bailable offences – where the amount exceeds ₹5 crore (e.g., fake invoices, fraud).
Non-cognizable & Bailable offences – where the amount is between ₹2 crore – ₹5 crore.

This ensures that arrest powers are used only in serious cases of tax fraud and not for minor procedural lapses.

🛡️ Mandatory Compliance by Authorities

While the law gives GST officers the power to arrest, they must comply with certain mandatory safeguards laid down by the courts, CBIC, and the GST Act itself.

1. Reason to Believe

The Commissioner must have “reasons to believe” that a person has committed an offence. This reason must be recorded in writing and be based on credible evidence — not mere suspicion.

2. Proper Authorization

No GST officer can arrest anyone on their own. Written authorization from the Commissioner or an officer authorized by him is mandatory before arrest.

3. Procedure During Arrest

The person must be informed of the grounds of arrest in writing.
The person should be allowed to consult a legal practitioner of his choice.
Arrest memo must be prepared and a copy given to the arrestee.

4. Production Before Magistrate

If the offence is cognizable and non-bailable (amount > ₹5 crore), the person must be produced before a magistrate within 24 hours of arrest, as per Article 22(2) of the Constitution and Section 57 of CrPC.

5. Bail for Bailable Offences

For bailable offences, the arrested person must be offered bail by the officer-in-charge, and bail conditions must be reasonable.

⚖️ Judicial Guidelines

The Supreme Court and High Courts have repeatedly stressed that the power to arrest under GST must be exercised with utmost caution. Arbitrary arrests or harassment can be challenged in courts under writ jurisdiction.

Some key judgments emphasize:

Arrest should not be used as a tool for recovery.
Summons and investigation must precede arrest in most cases.
The right to liberty must be balanced with the need to prevent tax evasion.

🔑 Best Practices for Businesses

To avoid arrest-related complications:

Maintain accurate books of accounts and timely file GST returns.
Reconcile GSTR-1, GSTR-3B, and e-invoices regularly.
Verify vendors and ensure ITC is genuine.
Respond promptly to GST notices and summons.
Consult a GST expert or CA in case of disputes.

✨ Conclusion

The law of arrest under GST is a powerful tool to deter fraud and protect government revenue. However, it comes with checks and balances to safeguard taxpayers’ rights. Authorities must follow mandatory compliance procedures like written authorization, arrest memo preparation, informing rights, and timely production before a magistrate.

For taxpayers, understanding these provisions helps avoid fear and ensures compliance. A transparent and balanced approach can build trust between businesses and the tax department, creating a fair environment for everyone.