CBIC Gives Immediate Effect to GST Arrest Reform

In a major relief, the Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 02/2026-GST directing its field formations to implement, as an interim trade facilitation measure, certain recommendations made at the GST Council’s 57th meeting on 8 October 2026.

The reforms cover withdrawal of arrest powers, rationalisation of e-way bill related inspection and verification procedures, and a minimum threshold of ₹10,000 for issuance of show cause notices. These changes require amendments to the Central Goods and Services Tax Act, 2017 (CGST Act) and the corresponding provisions of the respective State GST Acts. The GST Council had recommended that the amended provisions come into force with effect from 1 April 2027.

Scope and duration

The directions take effect from the date of issue and remain in force until the amendments come into effect. They are administrative, do not amend the CGST Act, and bind CGST officers only. The GST Council Secretariat has been asked to circulate the instruction to State GST formations, which may issue similar directions.

Reforms given immediate effect:

1. Removal of arrest provision:

Council’s recommendation: The Council recommended withdrawal of arrest powers under GST by omission of Section 69. This Section empowers the Commissioner to authorise arrest if there are reasons to believe that a person has committed specified offences. Further, the tax amount involved in such an offence must exceed the specified limit. This Section, as well as the arrest guidelines, incorporates certain safeguards.

CBIC’s instruction: Though Section 69 remains on the statute book until it is omitted, CBIC has directed that no further arrests may be carried out under GST.

Impact: The reform is a taxpayer-friendly measure and removes any perception of arrests being used as a harassment tool. Until Section 69 is omitted, however, the protection rests on an administrative direction and not on a change in the law.

2. Rationalisation of e-way bill  related  provisions:

Council’s recommendation: The Council recommended amendments to Sections 68 (inspection of goods in movement), 129 (detention, seizure and release of goods and conveyances in transit) and 130 (confiscation of goods or conveyances and levy of penalty).

CBIC’s instructions:

• • Inspection conditions: A conveyance may be intercepted only on specific intelligence, duly authorised by an officer not below the rank of Joint Commissioner, who must record in writing the reasons to believe the goods are being transported in contravention of the Act or Rules.
  • Jurisdiction: Inspection is permitted only if the supplier or recipient is registered, or located if unregistered, in the State or Union Territory of the intercepting officer’s jurisdiction. If a contravention is found, goods may be detained or seized under Section 129.
  • Transit State officers to pass on information: If, on interception of a conveyance and verification of documents, it is found that neither party falls within that jurisdiction, the conveyance must be allowed to pass unhindered. Where there is a prima facie opinion of contravention, the officer only passes the information to the jurisdictional officer.
  • Missing documents: Where no e-way bill is generated and no document shows the origin or destination, inspection, detention or seizure may proceed irrespective of jurisdiction.
  • No confiscation in transit: Goods and conveyances in transit may not be detained or seized on any other ground, and may not be confiscated under Section 130.

Impact: These reforms should support smoother movement of goods and conveyances and improve supply and transportation efficiency. A conveyance cannot be intercepted on a random basis to verify the e-way bill.

3. Minimum threshold for issuance of show cause notices:

Council’s recommendation: To reduce low value litigation and the resulting compliance burden on taxpayers, the Council recommended amendments to Sections 73 and 74 (periods up to FY 2023-24) and 74A (FY 2024-25 onwards), to inter alia provide a minimum threshold of ₹10,000 for issuance of show cause notices. This is the sum of the amounts under the CGST, SGST/UTGST, IGST and compensation cess.

CBIC’s instruction: Show cause notices under these Sections may not be issued where the amount involved is below ₹10,000.

Impact: This should substantially reduce the compliance burden and litigation associated with low value notices.

Point to note

The instruction, including the arrest halt, is addressed only to Central formations. State officers are not bound by it. They retain their arrest powers under the respective SGST Acts, and are not bound by the e-way bill and show cause notice directions, until their State issues similar instructions or amends its law. Central officers also retain the statutory power to arrest for now; they have been directed not to use it. Stakeholders would do well to check the State GST position.