{"id":127411,"date":"2026-10-04T11:11:41","date_gmt":"2026-10-04T05:41:41","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=127411"},"modified":"2026-10-04T12:18:32","modified_gmt":"2026-10-04T06:48:32","slug":"gst-2-0-proposed-shift","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/gst-2-0-proposed-shift\/","title":{"rendered":"GST 2.0 &#8211; Proposed Shift Towards Decriminalising Tax Offences"},"content":{"rendered":"<h2 style=\"text-align: justify;\"><b>GST 2.0 Latest News<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">More than nine years after the rollout of the Goods and Services Tax (GST) in <\/span><b>July 2017<\/b><span style=\"font-weight: 400;\">, the GST regime, now dubbed as GST 2.0, is considering a significant change &#8211; removal of arrest powers under GST laws.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposal is expected to be discussed at the 57th GST Council meeting on October 7, 2026. The move follows consultations between the Centre and States over the past eight-nine months.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Businesses have raised concerns that arrest provisions have sometimes resulted in <\/span><b>overreach, harassment and uncertainty<\/b><span style=\"font-weight: 400;\">, affecting the ease of doing business.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">If approved, the proposal would require legislative amendments to the GST laws, potentially during the Winter Session of Parliament.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Need to Decriminalise GST Offences<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Industry representatives have raised concerns that arrest powers can be used as a <\/span><b>bargaining tool<\/b><span style=\"font-weight: 400;\">, particularly in sectors such as banking and insurance, compelling businesses to settle tax disputes or penalties to avoid prolonged litigation.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed reform seeks to &#8211;<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Improve taxpayer confidence and investor sentiment.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Reduce perceptions of fear and harassment by tax authorities.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Strengthen the ease of doing business (EoDB).<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Separate genuine tax administration from criminal enforcement.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, intentional fraud and deceit would continue to attract prosecution. In such cases, arrests could be undertaken under the <\/span><b>Bharatiya Nyaya Sanhita (BNS)<\/b><span style=\"font-weight: 400;\"> rather than through GST-specific arrest provisions.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Existing GST Arrest Framework<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Under the Central Goods and Services Tax (CGST) Act, tax violations can attract &#8211;<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Penalty under Section 122;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Interest under Section 50;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Recovery of tax dues; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In serious cases involving deliberate tax evasion, arrest and prosecution.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Section 69<\/b><span style=\"font-weight: 400;\"> of the CGST Act empowers the Commissioner to authorise an arrest where there are \u201creasons to believe\u201d that a person has committed specified offences.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These include cases involving &#8211;<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fake invoices;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fraudulent availment of Input Tax Credit (ITC);<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Invoices without actual supply;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Collection of GST without depositing it with the government; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Availing ITC without receiving goods or services.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The law requires the reasons for arrest to be supported by credible evidence, recorded in writing, and authorised by the Commissioner.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Scale of Enforcement<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Between 2021-22 and 2024-25, Central GST formations made<\/span><b> 887 arrests <\/b><span style=\"font-weight: 400;\">in 72,393 GST-offence cases. Arrests undertaken by State authorities are additional.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Common fraud mechanisms include &#8211;<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Creation of fake identities and mule accounts;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Generation of fake invoices without actual supply;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Fraudulent claims of input tax credit;<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Undervaluation of goods; and<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Supplying taxable goods or services without paying GST.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">These practices can undermine tax compliance and cause significant revenue leakage.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Throwback to the VAT Regime<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed removal of arrest powers would bring GST enforcement closer to the pre-GST Value Added Tax (VAT) framework, which generally did not provide tax authorities with direct arrest powers.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Interestingly, concerns over GST arrest provisions existed even before GST was launched.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">During the fifth GST Council meeting in December 2016, representatives of Maharashtra and West Bengal questioned whether granting arrest powers to tax authorities was consistent with EoDB and existing VAT practice.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At the same time, the <a href=\"https:\/\/vajiramandravi.com\/current-affairs\/central-board-of-indirect-taxes-and-customs-cbic\/\" target=\"_blank\"><strong>Central Board of Indirect Taxes and Customs (<\/strong><\/a><\/span><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/central-board-of-indirect-taxes-and-customs-cbic\/\" target=\"_blank\"><strong>CBIC<\/strong><\/a><span style=\"font-weight: 400;\"><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/central-board-of-indirect-taxes-and-customs-cbic\/\" target=\"_blank\"><strong>)<\/strong><\/a> had defended arrest provisions as necessary to <\/span><b>deter unscrupulous tax evaders<\/b><span style=\"font-weight: 400;\"> and maintain discipline in tax administration.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It highlighted <\/span><b>safeguards <\/b><span style=\"font-weight: 400;\">such as Commissioner-level authorisation and specified\/severe offences and monetary thresholds (combined evasion of duty was Rs 2 crore or more).<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Towards Wider Tax Decriminalisation<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The proposed GST reform is part of a broader movement towards decriminalisation of tax-related defaults.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">On the direct-tax side, the Central Board of Direct Taxes (CBDT) removed arrest and detention provisions from tax-recovery rules through the Income-Tax (Fourth Amendment) <\/span><b>Rules, 2026<\/b><span style=\"font-weight: 400;\">, with retrospective effect from April 1, 2026.<\/span><\/li>\n<\/ul>\n<h2 style=\"text-align: justify;\"><b>Conclusion<\/b><\/h2>\n<ul style=\"text-align: justify;\">\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The issue highlights the <\/span><b>need to balance<\/b><span style=\"font-weight: 400;\"> revenue mobilisation and tax compliance with taxpayer rights, due process, EoDB and administrative accountability.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">It also raises important questions about <\/span><b>cooperative federalism<\/b><span style=\"font-weight: 400;\">, as GST administration requires coordination between the Centre and States through the GST Council.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Thus, GST 2.0 should aim to create a tax system that is both enforcement-oriented and taxpayer-friendly.\u00a0<\/span><\/li>\n<\/ul>\n<p style=\"text-align: justify;\"><b>Source: <\/b><a href=\"https:\/\/indianexpress.com\/article\/business\/arrest-powers-gst-regime-tax-authorities-10905662\/\" target=\"_blank\" rel=\"nofollow noopener\"><b>IE<\/b><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The GST regime, now dubbed as GST 2.0, is considering a significant change &#8211; removal of arrest powers under GST laws.<\/p>\n","protected":false},"author":19,"featured_media":127455,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[2497,60,22,59],"class_list":["post-127411","post","type-post","status-publish","format-standard","has-post-thumbnail","category-upsc-mains-current-affairs","tag-gst-2-0","tag-mains-articles","tag-upsc-current-affairs","tag-upsc-mains-current-affairs","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/127411","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/19"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=127411"}],"version-history":[{"count":4,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/127411\/revisions"}],"predecessor-version":[{"id":127457,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/127411\/revisions\/127457"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/127455"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=127411"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=127411"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=127411"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}