Summary: CBIC Instruction No. 02/2026-GST dated 30 October 2026 introduces interim administrative relief for taxpayers ahead of legislative amendments arising from the 57th GST Council meeting. Central Tax field formations have been directed not to make further arrests under GST, to restrict interception of goods in transit to authorised intelligence-based cases, and not to issue show cause notices under Sections 73, 74 and 74A where the aggregate tax amount involved is below Rs 10,000. The threshold is calculated by combining applicable CGST, SGST, IGST, UTGST and cess. However, the Instruction does not itself repeal statutory provisions, dispose of existing notices or automatically bind State GST authorities. This article examines the distinction between administrative directions and legislation, the treatment of demands at exactly Rs 10,000, the position of pending proceedings, State-level implementation and practical consequences for transporters and taxpayers. It also discusses relevant Supreme Court decisions on the binding nature of departmental circulars and GST arrest powers. An illustrative ITC reconciliation demonstrates how the threshold operates where proposed demands fall below or above Rs 10,000. The central compliance message is that relief from issuance of a notice does not itself extinguish any underlying tax or interest liability, while the wider reforms recommended by the GST Council remain subject to their respective implementation requirements.
- 1. Introduction
- 2. What the Instruction Directs
- 3. Law and Recommendation: What Has Actually Changed
- 4. Analysis
- 4.1 Binding on the officer, not on the statute
- 4.2 The line falls between Rs 9,999 and Rs 10,000
- 4.3 What is the amount involved?
- 4.4 Notices already issued
- 4.5 State administration
- 4.6 Arrests and conveyances
- 5. Judicial Precedents
- 6. Illustrative Case Study
- 7. Two Perspectives
- 8. Way Forward
- For the Government
- For officers
- For taxpayers
- For professionals
- 9. Conclusion
1. Introduction
Every practitioner knows the notice that costs more to answer than to pay. A residual mismatch of a few thousand rupees survives a reconciliation, the portal flags it, and a show cause notice follows, with its summary in Form GST DRC-01, a hearing date and a reply that consumes a week of professional time. The vyapari behind the file sees only the pareshani: a legal notice for an amount smaller than the fee for answering it.
On 30th October 2026 the Central Board of Indirect Taxes and Customs drew a line under this. Instruction No. 02/2026-GST (File No. CBIC-20001/3/2026-GST), issued by the GST Policy Wing, directs CBIC field formations not to issue show cause notices under sections 73, 74 and 74A of the CGST Act, 2017 where the amount involved is below Rs 10,000. The same Instruction directs that no further arrests be made under GST, and it confines the interception of conveyances to narrow, authorised cases.
The Instruction gives early effect to recommendations of the GST Council at its 57th meeting held on 8th October 2026. The Council wanted the statutory amendments to take effect from 1st April 2027. The Government has chosen to act administratively in the meantime, and that choice explains both the value of the Instruction and its limits.
2. What the Instruction Directs
Table 1: Directions in Instruction No. 02/2026-GST dated 30.10.2026
| Subject (para) | Direction to CBIC field formations |
|---|---|
| Arrests (3.1) | No further arrests under GST. The Council has recommended omission of section 69. |
| Interception (3.2(i)) | A vehicle may be stopped only on specific intelligence. An officer of Joint Commissioner rank or above must authorise the stop and put his reasons for suspecting a contravention on record. |
| Inspection and jurisdiction (3.2(ii), (iii)) | Inspection only if the supplier or recipient is registered or located in the officer’s State or Union territory. Otherwise the conveyance passes unhindered and the information goes to the jurisdictional officer. |
| No e-way bill, no origin or destination document (3.2(iv)) | Inspection, detention or seizure is permitted whichever State the supplier or recipient belongs to. |
| Detention and confiscation (3.2(v), (vi)) | No detention or seizure of goods in transit for any other reason. No confiscation under section 130 of goods in transit. |
| Show cause notices (3.3) | No notice under section 73, 74 or 74A where the amount involved is below Rs 10,000, being the sum of CGST, SGST, IGST, UTGST and cess. |
The Instruction remains in force only until the corresponding amendments to the CGST Act come into effect (para 3). It is addressed to the Principal Chief Commissioners, Chief Commissioners and Directors General of Central Tax. A copy goes to the GST Council Secretariat with a request to circulate it to State formations, which “may, if deemed appropriate, issue similar instructions”.
3. Law and Recommendation: What Has Actually Changed
The Council’s package is wider than the Instruction. Only some of it has been given interim effect, and a reader should not assume that the rest is already in force.
Table 2: 57th Council recommendations and the position under the Instruction
| Subject | Council recommendation (08.10.2026) | Given effect by Instruction 02/2026? |
|---|---|---|
| Arrest (s.69) | Remove the power of arrest. | Yes, as a direction not to arrest. The section stays on the statute until amended. |
| Notice threshold (ss.73, 74, 74A) | Minimum Rs 10,000 (CGST + SGST + IGST + cess). Pending notices and appeals below it to be decided as if the threshold had been in force when the notice issued. | Prospective direction only. Pending notices are not addressed. |
| Conveyances (ss.68, 129, 130) | Intelligence-based, authorised interception; physical check to follow information. | Yes, as directions in para 3.2. |
| Penalty in non-fraud cases | Reduced penalty of 5% where tax and interest are paid within 30 days (s.73) or 60 days (s.74A) of the adjudication order. Minimum penalty of Rs 10,000 removed. | No. Needs amendment. |
| General penalty (s.125) | Reduced from Rs 25,000 to Rs 10,000. | No. Needs amendment. |
| Prosecution | Threshold raised from Rs 1 crore to Rs 5 crore; minimum punishment removed. | No. Needs amendment. |
| Pre-deposit (ss.107(6), 112(8)) | Cap of Rs 40 crore (Rs 20 crore CGST, Rs 20 crore SGST) where the order involves only penalty. | No. Needs amendment. |
4. Analysis
4.1 Binding on the officer, not on the statute
The threshold appears nowhere in sections 73, 74 or 74A as they stand. It rests entirely on the Instruction.
Applied here, the two operate side by side. An officer in a CBIC formation who issues a notice for Rs 8,000 acts against a direction that binds him, and the taxpayer may fairly ask for the notice to be withdrawn as arbitrary. What the taxpayer cannot safely argue is that the notice is void for want of jurisdiction, because the Act still confers the power. The realistic remedy is a written request to the officer, with writ jurisdiction as the fall-back.
4.2 The line falls between Rs 9,999 and Rs 10,000
The text says that notices “may not be issued” where the amount involved is below Rs 10,000. A demand of Rs 9,999 is therefore protected and a demand of exactly Rs 10,000 is not. The maxim de minimis non curat lex (the law does not concern itself with trifles) captures the spirit of the provision, but the Instruction fixes a numerical line rather than adopting the maxim as a general rule. Tax of Rs 10,000 or more continues to attract a notice.
4.3 What is the amount involved?
The Instruction defines the amount as the sum under the CGST, SGST, IGST and UTGST Acts together with cess. The Council’s press release speaks of the “tax amount involved”, so interest and penalty should not be counted. That is the reading that helps the taxpayer, because a notice whose tax is below the line stays below it however much interest has run.
One question is unresolved: whether the test applies per notice, per issue or per financial year. The Instruction speaks of “show cause notices”, which points to the notice as a whole. On that reading a notice that bunches three years at Rs 4,000 each is a notice of Rs 12,000 and may issue. In the author’s view the taxpayer should contest such bunching on its own ground and should not rely on the threshold alone.
4.4 Notices already issued
The Instruction says that notices “may not be issued”, so it does not deal with notices already served. The Council, however, recommended a statutory provision under which pending notices and appeals below Rs 10,000 are to be decided as if the threshold had been in force when the notice was issued. Until that provision is enacted, a taxpayer holding a small pending notice has policy on his side but not law. A written request to the adjudicating officer, citing both the Instruction and the Council’s recommendation, is the proper course. Officers may hesitate to drop a demand they cannot later revive once limitation runs out, and the taxpayer should expect that hesitation.
4.5 State administration
The Instruction is a direction of the Central Board to its own officers. State officers proceed under the State GST Acts, and the Instruction reaches them only if the State adopts it. The same position holds mutatis mutandis for the SGST component of a notice. A taxpayer under State administration should therefore look for a State circular before relying on para 3.3.
4.6 Arrests and conveyances
Section 69 and the offence provisions remain on the statute. The Instruction is a direction not to arrest, and it binds CBIC officers alone. The Supreme Court had upheld the arrest power in Radhika Agarwal v. Union of India subject to procedural safeguards, so the Instruction goes further than the law required.
On conveyances, para 3.2 follows the Council’s decisions, but its wording needs a careful read. The Council’s note speaks of inspection by the State of origin and the State of destination. The Instruction ties inspection to the registration or location of the supplier or recipient in the officer’s State. The practical protection is the same, and para 3.2(iv) is the exception that matters: where there is neither an e-way bill nor any document showing origin or destination, any officer may inspect, detain or seize.
5. Judicial Precedents
Table 3: Authorities relevant to the binding force of the Instruction
| Case and citation | Court | Principle laid down | Relevance |
|---|---|---|---|
| Commissioner of Customs v. Indian Oil Corporation Ltd., (2004) 3 SCC 488 | Supreme Court | Circulars of the Board bind the department; an officer cannot act contrary to them. | Notice below Rs 10,000 breaches a binding direction. |
| Ratan Melting & Wire Industries, (2008) 13 SCC 1 (Constitution Bench) | Supreme Court | A circular cannot override the statute and does not bind the courts. | The threshold is not a statutory bar; the Act still confers the power. |
| Radhika Agarwal v. Union of India, decided 27.03.2025 | Supreme Court | Arrest power under the GST Act upheld, subject to safeguards. | The Instruction restrains arrest as policy; it does not alter the section. |
6. Illustrative Case Study
M/s Verma Auto Components Pvt. Ltd., a Ludhiana-based manufacturer under CBIC jurisdiction (an illustrative entity), receives an intimation for FY 2022-23 alleging that ITC claimed in Form GSTR-3B exceeds the ITC shown in Form GSTR-2B. After its own hisaab-kitaab the company agrees with part of the difference. Two outcomes are possible, and the Instruction treats them very differently.
Table 4: Effect of the Rs 10,000 threshold (illustrative figures)
| Head of tax | Scenario A (Rs) | Scenario B (Rs) | Scenario B after explaining timing items (Rs) |
|---|---|---|---|
| IGST | 6,400 | 7,000 | 6,300 |
| CGST | 1,300 | 1,500 | 1,300 |
| SGST | 1,300 | 1,500 | 1,300 |
| Cess | 0 | 1,000 | 1,000 |
| Total tax involved | 9,000 | 11,000 | 9,900 |
| Notice permissible under para 3.3? | No | Yes | No |
In Scenario A the amount is below Rs 10,000 and the notice should not issue. The company’s response is a one-page working and a short letter citing para 3.3. In Scenario B the amount is Rs 11,000 and a notice may issue. If the company can show that Rs 1,100 of the difference is a timing item, such as an invoice reflected in GSTR-2B for the following month, the tax involved falls to Rs 9,900 and the notice drops below the line. The company should make that showing at the intimation stage, because the argument is far harder once a notice has issued.
In neither scenario is the tax itself waived. If the difference is genuinely payable, the company still owes the tax with interest under section 50, and paying it through Form GST DRC-03 stops the interest clock.
7. Two Perspectives
Table 5: Taxpayer and Department views
| Area | Taxpayer perspective | Department’s concern |
|---|---|---|
| Small notices | Relief from low-value litigation whose cost exceeds the demand. | Leakage on small mismatches, particularly across a large number of taxpayers. |
| Arrest | End of the threat of arrest in what is essentially a tax-recovery regime. | Deterrence against fake invoicing. The Council’s answer is that system matching now detects such cases. |
| Interception | Fewer random stops; a consignment is no longer open to checks in every State on the route. | Evasion in transit. Para 3.2(iv) keeps the power where documents are missing. |
| Legal form | Immediate relief, with no wait for legislation. | An Instruction can be withdrawn or varied, and does not bind State officers or the courts. |
8. Way Forward
For the Government
- Issue a short FAQ on the meaning of “amount involved” (per notice, per issue or per period) and confirm whether a notice at exactly Rs 10,000 may issue.
- Extend the direction to pending notices by the same Instruction, without waiting for 1 April 2027.
- Urge States to issue mirror instructions, since the SGST component sits inside the threshold figure.
- Prescribe a format for the Joint Commissioner’s written reasons for interception, so that the record can be audited.
For officers
- Record a threshold check, with a head-wise working, in every notice file.
- Do not bunch periods or split issues to cross or avoid the line.
- Record the authorisation and the reasons to believe before a vehicle is stopped, not afterwards.
For taxpayers
- Reconcile before replying. If the true tax figure is below Rs 10,000, attach a one-page working and cite para 3.3.
- Treat the threshold as relief from a notice and never as a waiver. Tax and interest that are genuinely due should be paid, with sawdhani on the DRC-03 narration.
- Transporters should carry the e-way bill and the origin and destination documents in the vehicle, because para 3.2(iv) removes the protection when both are missing.
For professionals
- Add a threshold ground to the preliminary objections in every reply, alongside DIN, limitation and service.
- Check at the outset whether the client is under Central or State administration.
- Watch the text of the amending provisions due from 1 April 2027, which may define the amount involved differently from the Instruction.
9. Conclusion
The Instruction is a sensible and overdue step. It acknowledges that a notice below Rs 10,000 serves neither the revenue nor the taxpayer, and it ends the threat of arrest and the routine stopping of trucks before the legislature has acted. It is, however, a direction to officers and not a rule of law. Its protection depends on the officer reading the amount correctly, on the State following the Centre, and on the Government not withdrawing the Instruction before the statute catches up.
The questions to watch are three: how the amending Act defines the amount involved, whether the transitional clause for pending notices is enacted as the Council recommended, and how the first High Court deals with a notice issued below the threshold. Der aaye, durust aaye, and the sahi disha is clear. The professional’s task for now is to use the Instruction fully while advising clients not to build their compliance on it.
The views expressed are the author’s personal views and do not constitute legal or professional advice. Readers should consult a professional before acting on the contents.
