I haven't been in game for a while, but I've read on the forum I think that there is no longer a spell effect with the 'see invisiblity' potion.
What happens in a lot of situations, is that a lesser of two evils is overlooked. If you have a powerful witch storming through Vallaki or the outskirts, and the vallaki garda have no chance of survival without the aid of folks who use things they normally frown upon, they often have no choice but to focus on the real threat at hand.
Plus, there are ways to notice an invisible "witch" without the use of witchcraft. As far as the garda knows, someone invisible was noticed just the way they themselves might notice someone invisible without the use of 'see invisibility.' And if someone is screaming "witch," unless if that garda is green and naive, he'd be wiser to prepare himself for the potential of their really being a dangerous witch.
Also keep in mind, that Barovians have a greater fear of witchery than hate for it. When I played a Barovian garda for a brief time years ago, if someone screamed "witch!," he was moving in the opposite direction. In a dm event, my garda was tasked with heading to a house in Vallaki with some outlanders to where a known drow witch was said to be in hiding. My garda's hands were shaking so bad during the encounter that he was basically useless when in melee with a witch.
Barovians, and I imagine most garda, would be more inclined to avoid someone using witchcraft than having to arrest them. It would take a rare Barovian to have the stomach and nerves to be in the business of arresting witches.