Arrest under GST: Law, Limitations and Constitutional Safeguards

GST Arrest Power: Section 69 Limitations and Section 132 Bail Provisions

Section 69 of the Central Goods and Services Tax Act, 2017 (CGST Act) empowers the Commissioner to authorize the arrest of a person for serious offences under GST. However, this power is limited by strict conditions. The Commissioner must have “reasons to believe”, based on credible evidence, that the person has committed offences specified in clauses (a) to (d) of Section 132(1), such as issuing fake invoices, availing fraudulent ITC, or collecting tax without paying it to the Government.

Arrest can be made only for serious and high-value offences, particularly where the amount of tax evaded exceeds ₹2 crore, and especially beyond ₹5 crore, which makes the offence cognizable and non-bailable. These offences are treated as major economic crimes involving deliberate fraud or evasion.

Sections 69(2) and 69(3) ensure compliance with constitutional and legal safeguards. Every arrested person must be informed of the grounds of arrest and produced before a Magistrate within 24 hours, as required under Article 22(1) of the Constitution and the CrPC. For non-cognizable and bailable offences, GST officers have limited powers to grant bail, ensuring fairness in the process.

Section 132(4) clarifies that most GST offences are non-cognizable and bailable, meaning arrest is generally not automatic. Only in exceptional and grave cases, such as tax evasion above ₹5 crore or repeat offences, can arrest and non-bailable provisions apply.

Power to arrest under Section 69

Section 69 of the CGST Act gives the Commissioner the power to order or allow the arrest of a person for certain offences under GST. However, this power cannot be used freely — there are important conditions. The Commissioner must have a “reason to believe”, based on solid evidence, that the person has committed specific offences mentioned in clauses (a), (b), (c), or (d) of Section 132(1). An arrest can be made only if these offences are serious enough to be punishable under clause (i) or (ii) of Section 132(1), or under Section 132(2). Section 69(1) of the CGST Act read as under –

“(1) Where the Commissioner has reasons to believe that a person has committed any offence specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) of section 132 which is punishable under clause (i) or (ii) of sub-section (1), or sub-section (2) of the said section, he may, by order, authorise any officer of central tax to arrest such person.”

Further offences provided under clauses (a), (b), (c), or (d) of Section 132(1) read as under-

“(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

(c) avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill;

(d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;”

Further punishment provided under clause (i) or (ii) of Section 132(1) or under Section 132(2) read as under-

(i) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds five hundred lakh rupees, with imprisonment for a term which may extend to five years and with fine;

(ii) in cases where the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds two hundred lakh rupees but does not exceed five hundred lakh rupees, with imprisonment for a term which may extend to three years and with fine;

(2) Where any person convicted of an offence under this section is again convicted of an offence under this section, then, he shall be punishable for the second and for every subsequent offence with imprisonment for a term which may extend to five years and with fine.”

Preconditions for exercising arrest power

According to Sections 69 and 132 of the CGST Act, the Commissioner can issue an authorization for arrest only when all the following three conditions are met:

1. The person has committed one or more of the offences mentioned in clauses (a) to (d) of Section 132(1).

2. The offence is punishable under clause (i) or (ii) of Section 132(1), or under Section 132(2).

3. The Commissioner has “reasons to believe,” based on evidence, that such offences have been committed.

It is also important to note that, as per Section 132(6), no person can be prosecuted for an offence under Section 132 without the prior approval of the Commissioner.

Nature of offences under Section 132(1)(a)–(d)

These are serious, fraud-based offences that strike at the core of the GST system:

These are considered economic offences involving deliberate fraud or evasion, hence arrest provisions apply.

Quantum of Punishment – The Threshold of Seriousness

Arrest can be authorized only for cases punishable under clause (i) or (ii) of Section 132(1) or under Section 132(2), which involve substantial tax evasion:

Thus, arrest power applies only to grave offences with a threshold of ₹2 crore and above, ensuring that minor procedural lapses or small tax discrepancies are not criminalized.

Ground of arrest should be informed

While Section 69(1) of the CGST Act gives the Commissioner the power to authorize an arrest, Section 69(2) explains how the arrest must be carried out. This ensures that the process follows constitutional and legal safeguards. The provision aligns with the fundamental rights guaranteed under Article 22(1) of the Constitution and the procedures laid down in the Code of Criminal Procedure (CrPC), 1973.

Section 69(2) read as under-

“(2) Where a person is arrested under sub-section (1) for an offence specified under sub- section (5) of section 132, the officer authorised to arrest the person shall inform such person of the grounds of arrest and produce him before a Magistrate within twenty four hours.”

Further, section 132(5) read as under-

“(5) The offences specified in clause (a) or clause (b) or clause (c) or clause (d) of sub-section (1) and punishable under clause (i) of that sub-section shall be cognizable and non-bailable.” 

Section 132(5) of the CGST Act provides that offences under clauses (a), (b), (c), or (d) of Section 132(1), when punishable under clause (i),  that is, where the amount of tax evaded exceeds ₹5 crore,  are cognizable and non-bailable. These are treated as serious offences, including cases involving large-scale tax evasion or repeat violations.

Accordingly, Section 69(2) comes into play only in the following situations:

• When the alleged offence involves tax evasion of more than ₹5 crore, or
• When the person is a repeat offender under Section 132(2).

Such offences are considered grave economic crimes, comparable in seriousness to offences under general criminal law

Article 22(1) of the Constitution requires that any person who is arrested must be immediately informed of the specific reasons and legal grounds for the arrest. If this is not done, the arrest becomes illegal. In addition, a person cannot be kept in custody for more than 24 hours without the permission of a Magistrate. This rule ensures that there is judicial oversight and prevents misuse of executive power.

Procedural Safeguards and Legal Obligations

The sub-section imposes two mandatory duties on the arresting officer:

(a) Duty to Inform Grounds of Arrest

• The arrested person must be informed clearly, immediately, and in writing of the specific reasons for the arrest.
• This ensures transparency and prevents misuse of power.
• Supported by constitutional and judicial precedents:
  • Article 22(1) of the Constitution,
  • K. Basu v. State of West Bengal (1997) 1 SCC 416 — Supreme Court mandated that reasons of arrest must be communicated, and arrest memo must be prepared.

(b) Duty to Produce Before Magistrate within 24 Hours

• The arrested person must be produced physically before the nearest Magistrate within 24 hours of arrest, excluding travel time.
• The Magistrate then decides whether to remand, release on bail, or grant custody.
• Any detention beyond this period without judicial authorization violates Article 22(2) and Section 57 of CrPC, rendering the arrest unlawful.

Bail procedure in non-cognizable and bailable offence

Section 69(3) of the CGST Act lays down the procedure for granting bail when an arrest is made under GST law. It ensures that the process of bail or custody follows the principles of the Code of Criminal Procedure (CrPC). At the same time, it gives GST officers limited powers similar to those of police officers for handling such situations. The provision of Section 69(3) can be read as follows:

“(3) Subject to the provisions of the Code of Criminal Procedure, 1973 (2 of 1974),-

(a) where a person is arrested under sub-section (1) for any offence specified under sub-section (4) of section 132, he shall be admitted to bail or in default of bail, forwarded to the custody of the Magistrate;

(b) in the case of a non-cognizable and bailable offence, the Deputy Commissioner or the Assistant Commissioner shall, for the purpose of releasing an arrested person on bail or otherwise, have the same powers and be subject to the same provisions as an officer-in-charge of a police station.”

Section 132(4) of the CGST Act states that, notwithstanding anything in the Code of Criminal Procedure, 1973, all offences under the Act — except those mentioned in Section 132(5) — are non-cognizable and bailable. This means that, under GST law, almost all offences are non-cognizable and bailable, except for the most serious ones covered under Section 132(5).

Section 132(4) also clarifies the nature of offences under the CGST Act, whether they are cognizable (where arrest can be made without a warrant) or non-cognizable (where a warrant or bail is required).

Accordingly, Section 69(3) governs how bail is to be handled in these non-cognizable and bailable cases. The arrested person must be released on bail upon furnishing the required bond. If bail cannot be furnished, the person must be presented before a Magistrate.

In this way, Section 132(4) acts as a check on the arrest powers under Section 69, ensuring that arrest is used only in exceptional cases. It reinforces that most GST offences are bailable, and the accused has the right to be released on bail — either by the Deputy/Assistant Commissioner or by the Magistrate.

Conclusion

Sections 69 and 132 of the CGST Act together create a balanced system. They allow the government to take strong action against serious cases of tax fraud, but also make sure that the rights of taxpayers are protected through legal and constitutional safeguards. The law makes it clear that the power to arrest should be used carefully and only in genuine cases where there is clear evidence of large-scale tax evasion. It also ensures that every arrest follows proper legal procedures and remains under the supervision of the courts. In short, arrest under GST should be the last option, used only for serious and deliberate frauds, not for small mistakes or minor violations.