In India’s tax system, there are rules to help honest taxpayers by allowing inspections, searches, seizures, and arrests. These rules separate those who follow the law from those trying to avoid paying taxes, ensuring fairness and protecting the government’s rightful income.


The Central Goods & Services Tax Act of 2017 includes built-in protections for arrests, making sure that such actions are only taken with the Commissioner’s clear approval. The law specifies that arrests can only happen when someone is involved in specific offences outlined for arrest and the amount of tax related to that offence goes beyond a set limit. This ensures a controlled and authorised approach to arrests under the CGST Act.

Section 69 of the CGST Act discusses such powers:

  • If the Commissioner has sufficient reason to believe that a person has committed an offence under Section 132(1) (a) to (d) of the CGST Act, they may by order authorise to arrest of that person.
  • The Officer authorized to arrest must then inform the person of the grounds of arrest and produce them before a Magistrate within twenty-four hours.
  • The person is then admitted to bail or custody of the Magistrate.
  • In case of a non-cognizable and bailable offense, the Deputy/Assistant Commissioner can release a person on bail since they have the same powers as an officer-in-charge of a police station

What offences could lead to an arrest under the CGST Act?

Section 132 of the CGST Act lists out the offences under the CGST Act which can lead to an arrest

  • Sells goods or services without issuing a proper invoice to avoid paying taxes.
  • Issues invoices without actually providing goods or services, leading to wrongful tax benefits.
  • Tries to claim tax benefits using fake invoices.
  • Collects tax from others but doesn’t pay it to the government for more than three months.
  • Commits tax evasion, fraudulent tax credit claims, or gets refunds through deceitful means.
  • Falsifies financial records, produces fake documents or gives false information to dodge tax payments.
  • Obstructs or hinders tax officers from doing their job.
  • Gets involved with goods they know are subject to confiscation under the law.
  • Deals with services they know violate the tax rules.
  • Alters or destroys evidence or documents.
  • Doesn’t provide required information or provides false information under the tax rules.


The GST Act has a rule (Section 132) allowing authorities to arrest someone if they evade taxes by more than 2 crores. Essentially, if a person is caught evading taxes beyond this limit, they can be arrested by the authorized GST authorities.

These measures are in place to curb widespread tax evasion and stop individuals, who have faced punishment for similar violations before, from breaking GST rules again. The idea is to uphold the integrity of the taxation system and encourage people to follow tax laws. To achieve this, authorities have introduced arrest provisions for those involved in significant tax evasion and for repeat offenders.


Arrests under Section 69 of the CGST Act can happen before assessment if there’s a reasonable belief in committing an offense. While the arrest authorization doesn’t need these grounds, they should be separately recorded.

Considering Sections 69 and 132 empowering Proper Officers, the Punjab and Haryana High Court, in Akhil Krishan Maggu v. DGGI, specified limited situations for arrest. It should not be arbitrary, for recovery, or to create fear but reserved for exceptional circumstances during investigation

Such as,

  • Substantial tax evasion without a permanent business place
  • Repeated non-appearance despite summons
  • Being a habitual offender
  • Potential flight from the country,
  • Involvement in fake invoice
  • Clear evidence of tax evasion in records.


Section 138 of the CGST Act allows for Compounding of offenses, which means that if someone admits to their mistake, they can pay a compounding fee to resolve the issue. The fee is capped at the maximum fine applicable. Compounding is only permitted after settling all tax, interest, and penalty dues. The compounding fee is 50% of the tax involved, with a minimum of INR 10,000 and a maximum of 150% of the tax or INR 30,000, whichever is higher.

On payment of the compounding amount, no further proceedings can be initiated against the accused person for the same offence and any criminal proceedings, if already initiated, will be abated. Compounding will not be available for-

  • a person who has been allowed to compound once in respect of any of the offences specified in Section 132 (1) clauses (a) to (f) of the CGST Act.
  • A person who had committed an offence before under the ambit of the CGST Act involving supplies above INR 1 crore and has been allowed to compound
  • A person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force
  • Any person convicted by a court under
  • Any person giving false information during proceedings or preventing the officer from his duty or destroying

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