Arrest under GST: Legal Framework and Judicial Insights
Rohit Parasrampuria
Rohit Parasrampuria is a seasoned lawyer with 8+ years of experience in litigation and dispute resolution. A first-class commerce graduate from St. Xavier’s College, Kolkata, and a law graduate, he also holds dual memberships with ICAI and ICSI, along with a certification in Forensic Accounting and Fraud Detection. Rohit specializes in tax disputes, IBC matters, and resolving both family and corporate conflicts. His strong blend of legal and financial expertise makes him a trusted advisor and effective litigator.
Introduction:
The Goods and Services Tax (GST) law in India provides tax officials with a variety of enforcement options to ensure compliance. One such key power is the “Power of Arrest” conferred by the Central Goods and Services Tax Act, 2017. This provision aims to prevent substantial tax evasion and fraud under the GST regime. The Power of Arrest under GST is principally governed by Section 69 of the CGST Act, 2017, which allows the Commissioner to arrest a person if he believes the individual has committed specified offences under Section 132 of the Act.
Purpose:
- Prevent tax evasion and fraudulent activity.
- Maintain compliance with GST laws and regulations.
- Create a legislative tool to punish repeat offenders or those involved in systematic tax fraud.
Section 69 – Power to Arrest:
1. Authority to Arrest:
Under Section 132 of the CGST Act, the Commissioner of CGST may approve an individual’s arrest if he has reasonable suspicion that the individual has committed one of the stated offenses.
2. Offenses for Which Arrest Is Permitted (Section 132): Only the following cognizable and non-bailable offenses are eligible for arrest:
a. Supplying goods or services without issuing an invoice to evade tax.
b. Generating invoices (sometimes known as phony invoices) without supplying goods or services.
c. Using fictitious invoices to get input tax credits.
d. Collecting GST but failing to deposit it with the government within three months.
e. Involvement in offenses worth more than ₹2 crores (for arrests without a warrant; in other cases, greater criteria apply)
3. Classification of Offences:
Offence Type | Bailable / non-bailable | Cognizable / non-cognizable |
Tax evasion ≥ ₹5 crore | Non-bailable | Cognizable |
Tax evasion between ₹2 crore and ₹5 crore | Bailable | Non-cognizable |
Other minor offences | Bailable | Non-cognizable |
4. Procedure for Arrest:
a. The reason for the arrest must be disclosed to the individual taken into custody.
b. A person must be released on bail if they have committed a crime that is subject to bail.
c. If the offense is not subject to bail, the offender must appear before a magistrate within 24 hours.
5. Judicial Oversight:
The GST Law adheres to the following criminal jurisprudential principles:
a. Protection under Article 22 guarantees the right to legal advice and to know the reasons for an arrest.
b. Arrest and bail are subject to the requirements of the Code of Criminal Procedure (CrPC).
Constitutional View and Fundamental Rights on Arrest under GST Law:
1. Article 22 – Protection Against Arbitrary Arrest and Detention:
Grants specific rights to the individual who has been arrested, including:
a. The right to know why they were arrested.
b. The right to seek legal advice.
c. The right to appear before a magistrate within 24 hours.
2. Article 14 – Equality Before Law:
“The State shall not deny to any person equality before the law or the equal protection of the laws.”
a. The power of arrest must be applied uniformly and not exercised selectively or discriminatorily.
b. The exercise of discretion by GST officers must be based on objective criteria (e.g., thresholds)
3. Judicial Supervision and Writ Authority:
If someone’s constitutional rights are being infringed, they can file:
a. Writ of Habeas Corpus (Article 32 or 226) to prevent unlawful detention.
b. Writ of Mandamus or Certiorari to contest abuse of authority or noncompliance with GST procedure.
Latest judicial pronouncements:
Union of India v. Radhika Agarwal (2025):
The Supreme Court affirmed the constitutionality of the arrest provisions under the Customs Act and the CGST Act in a landmark ruling on February 27, 2025. The Court made clear that:
According to Article 246-A of the Constitution, the court made clear that: the authority to tax and collect GST is incidental to and ancillary to the authority to call, arrest, and prosecute. The authority to arrest must be exercised based on credible evidence, not mere conjecture.
To ensure due process is followed, authorities must record their ‘‘reasons to believe‘‘ before making an arrest.
Director General of GST Intelligence, Delhi v. Kshitij Ghildiyal (2024):
The Delhi High Court decided that the arrested person must receive written notice of the reasons for their detention under the GST. The Court decided that:
The grounds for arrest must not be communicated verbally. Written communication protects individual rights against arbitrary imprisonment by guaranteeing transparency and adherence to natural justice norms.
Understanding through a case:
“Vigneshwara Transport Company v. Additional Commissioner of Central Tax, Karnataka (2024)”:
The Karnataka High Court’s decision in M/s. Vigneshwara Transport Company v. Additional Commissioner of Central Tax & Ors. on November 28, 2024, addresses significant procedural compliance concerns under the Goods and Services Tax (GST) statute.
The petitioner, who transported arecanut to gutkha makers, was investigated by an official who was not recognized as a “proper officer” under the CGST Act. The Court ruled that only a proper officer can undertake inquiries, searches, and seizures. As a result, any action taken by an unauthorized officer is void ab initio.. The show cause notice issued following such an investigation was declared illegal because it depended on “borrowed satisfaction” without an independent assessment. The Court ruled that the petitioner’s deposit of ₹50 lakh should be refunded, highlighting the imperative of strict adherence to procedural requirements under the GST framework.
Conclusion:
To sum up, the purpose of the arrest measures under the GST regime is to discourage significant tax evasion and fraudulent activity. To avoid abuse, these authorities are subject to judicial review and legal protections. Before exercising the power of arrest, courts have consistently emphasized the necessity of well-reasoned justification and adherence to procedural protections.
Although the legislation gives authorities the authority to take decisive action in serious situations, judicial observations emphasize how crucial it is to strike a balance between enforcement and taxpayer rights. Sustaining public trust requires ensuring proportionality, due process, and transparency. Therefore, the goal of the GST’s arrest laws is to protect constitutional rights while maintaining compliance.
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