Impact of proposed GST prosecution and arrest reforms on pending and past cases

This article examines how the proposed amendments to Section 69 and Section 132 of the CGST Act, 2017 may eventually affect ongoing and concluded GST criminal matters.

It is relevant now because assessees are already seeking relief in investigations and prosecutions by invoking the October 2026 GST Council decisions, even though those decisions are not yet reflected in an amending Act.

The 57th GST Council Meeting on 8 October 2026 recommended a substantial re‑design of the GST criminal framework:

  • Possible withdrawal / omission of departmental arrest powers under Section 69.
  • Increase of the basic prosecution threshold under Section 132 to ₹5 crore.
  • Removal or narrowing of some offences listed in Section 132.
  • Reduction of punishment, including fine‑only options for certain categories.

At the same time:

  • As of 20 October 2026, no amendment to Section 69 or Section 132 has been brought into force.
  • The reported target date of 1 April 2027 is only a policy target; it is not a deemed commencement date.
  • The governing law today remains the unamended Section 69 and Section 132, read with the Code of Criminal Procedure, 1973 and other applicable statutes.

For practitioners, the questions are essentially about timing (when changes take effect) and reach (how far they extend to acts committed in the past and to proceedings that are already in motion).

Issue, law, position, action: effect on the ₹5 crore prosecution threshold

Issue

Whether the proposed upward revision of the monetary limit for prosecution under Section 132 to ₹5 crore will affect:

  • Investigations where the alleged amount is below ₹5 crore.
  • Sanction proposals yet to be approved.
  • Criminal complaints already filed below ₹5 crore.
  • Trials and appeals in sub‑₹5 crore cases.

Governing law

Key legal elements:

  • Current Section 132 prescribes offence categories and punishment slabs linked to specified tax amounts; present thresholds are lower than ₹5 crore.
  • Recommendations of the GST Council do not modify the CGST Act; amendments require:
    • A Central amending Act for CGST.
    • Corresponding SGST amendments.
    • Commencement notifications.
  • Article 20(1) of the Constitution of India:
    • Bars retrospective creation of offences.
    • Bars retrospective enhancement of punishment.
    • Does not compel retrospective application of every later reduction in punishment or change in prosecution thresholds.
  • Section 6 of the General Clauses Act, 1897:
    • When a Central enactment (or part) is repealed, then unless a different intention appears:
      • Prior rights, obligations, liabilities, penalties and punishments remain unaffected.
      • Investigations, legal proceedings and remedies may be continued or enforced as if the repealing Act had not been passed.

Position

  1. Before the amendment is notified

    • Until the amending Act is passed and brought into force, the existing, lower thresholds under Section 132 are fully operative.
    • Authorities are legally entitled to:
      • Continue investigations already initiated below ₹5 crore.
      • Process proposals for sanction in such cases.
      • File new complaints and continue trials using present thresholds.

    Reliance solely on the October 2026 Council decision is insufficient to claim that no prosecution can be launched or continued below ₹5 crore.

  2. After the amendment commences (prospective view)

    If Parliament enacts a simple prospective increase of threshold to ₹5 crore without additional transitional language:

    • For conduct after the commencement date:
      • Only cases meeting the ₹5 crore threshold would be fit for prosecution under the amended Section 132.
    • For conduct before commencement:
      • Liabilities and offences crystallised under the earlier law are, in principle, preserved by Section 6 of the General Clauses Act.
      • Investigations, complaints, trials and appeals below ₹5 crore may continue “as if the repealing Act had not been passed”, unless the amending Act indicates a different intention.

    Courts generally require clear words in the amending statute to infer that the Legislature intended pending prosecutions below a new threshold to end.

  3. Scope for argument by assessees

    Even in the absence of express transitional relief:

    • Assessees can assert that a higher threshold reflects a considered legislative assessment that lower‑value cases should not be criminally prosecuted.
    • On that basis, they may:
      • Seek discharge before the trial court.
      • Move High Courts under Section 482 CrPC for quashing.
    • The Department can oppose by invoking Section 6 and arguing that:
      • The offence and liability “were incurred” when the earlier threshold applied.
      • The Legislature has not directed that pending matters below ₹5 crore be closed.

    Till courts pronounce on the precise amending text, the outcome remains legally open.

Action points for practitioners

  1. During investigations below ₹5 crore

    • Record in correspondence that the case would be below the proposed threshold, preserving the point.
    • Seek deferment of sanction or complaint filing on administrative grounds, emphasising the possible legislative shift.

  2. At sanction / pre‑complaint stage

    • File reasoned submissions to the sanctioning authority highlighting the forthcoming policy and requesting administrative restraint in borderline cases.

  3. For pending complaints / trials / appeals

    • Track the progress and language of the amending Bill.
    • Once enacted, carefully compare:
      • Date of offence,
      • Amount involved,
      • Exact clause invoked.
    • Evaluate whether a discharge, quashing or “no‑prosecution” argument is viable on the basis of the text and any savings clause.

Issue, law, position, action: narrowing or omission of specific offences in Section 132

Issue

Whether removal or narrowing of specific offence clauses in Section 132 (for instance, changes to clauses covering issue of invoices without supply or wrongful ITC) will cause ongoing or past prosecutions relying on those clauses to fall.

Governing law