GST Council Meeting to Discuss Reforms, States Seek Additional Arrest Powers

As states and the Centre converge in Delhi for the 57th Goods and Services Tax (GST) Council meeting Thursday to discuss process reforms that include a proposal mandating the removal of the arrest provision, at least five major states are learnt to have expressed concern over any sweeping curtailment of the taxmen’s powers. Maharashtra, Gujarat, Uttar Pradesh, Karnataka and Andhra Pradesh are among states that have expressed reservations regarding the scrapping of arrest powers under GST in multiple meetings held between the state and Central government officials in the run-up to the Council meeting. A key demand by states has been that the indirect tax regime should not be rendered “toothless”, and pre-prosecution arrests should be graded with an additional layer enabling “civil arrest in cases of serious violations”, a state minister told The Indian Express . While the proposal entails removal of arrest altogether, except for prosecution, states are asking for an additional layer of arrest powers even in the pre-prosecution stage. “Many states feel that taking away such powers will make it completely toothless. While there can be a provision for ‘no arrest’ in normal cases, there can be a provision for ‘civil arrest’ in cases of serious violations under GST,” the minister said. The Council meeting got deferred by a day to Thursday, and the additional day in between is learnt to have been utilised by Union government officials to reach out to GST chief commissioners across zones to iron out residual issues, especially concerns over the ‘no-arrest’ proposal. On Thursday, the Council, in a bid to boost investor sentiment and allay concerns about overreach by tax authorities, is set to take up the proposal to decriminalise offences including removal of arrests, as was reported by The Indian Express last Sunday. The underlying intent, an official said, is to make enforcement work through money rather than custody, and through a system that detects fraud rather than a provision that deters it. As per the proposal to be discussed at the Council meeting, tax disputes are aimed to be resolved through civil consequences, namely recovery of tax, interest for the delay, and penalty, while keeping prosecution available for a higher threshold of Rs 5 crore as against Rs 1 crore at present. “The idea is to focus on detection and not deterrence. The proposal is to remove pre-prosecution arrests and the Council will debate it. In the last 8-9 months, several rounds of discussions were held between states and the Centre, including three national coordination meetings. So far, 3-4 states have expressed their concerns, especially about how they will get to trace offenders. The Council will take a final call on the form that the arrest powers should take, keeping in mind the criticism regarding threats of criminalisation,” the official said.