India is contemplating a significant hike in the threshold for arrests and criminal prosecutions in cases of Goods and Services Tax (GST) evasion, as per a report by The Economic Times. The proposal aims to elevate the threshold to ₹3 crore from the existing ₹2 crore, as part of an initiative to decriminalise certain aspects of tax evasion, reducing undue pressure on businesses and fostering a more favourable environment for conducting operations, it added.
The Central Board of Indirect Taxes and Customs (CBIC), the apex body governing indirect taxes under the central government, is actively considering amendments to streamline the process of issuing summonses, as per the report. Sources told the paper the contemplation revolves around making summons more restrictive and permitting their issuance only under specific conditions.
Amidst discussions surrounding these changes, voices from the industry have raised concerns about the severity of existing penal provisions. They argue that the current law's stringent nature could potentially impede business operations. Advocates for industry reforms are pushing for alterations in the penal code, urging for a more balanced approach towards regulation.
A deliberation on this proposal is expected to be presented before the GST Council soon. Any alterations to the central and integrated GST Acts could align with the Centre's vote on account preceding the upcoming general elections. Concurrently, individual states are poised to make separate amendments to their respective GST Acts.
A senior government official highlighted that discussions involved increasing the threshold for initiating criminal proceedings to ₹3 crore, while industry representatives had pitched for ₹5 crore. Presently, Section 132 of the Central GST (CGST) Act criminalises GST evasion above ₹2 crore, warranting a three-year jail term.
Advocates for these changes argue that rationalising thresholds for decriminalisation could assist in curbing cases with smaller or ambiguous amounts involved. However, officials stressed the importance of maintaining stringent measures for cases involving fake invoices and incorrect input tax credit claims. Highlighting the prevalence of such cases, officials advised against relaxing laws at this juncture.
The Directorate General of GST Intelligence (DGGI) initiated a specialized drive in November 2022 targeting input tax credit fraud. Their efforts have resulted in the detection of 6,000 cases amounting to ₹57,000 crore in fraud, leading to 500 arrests.
In the first half of the current fiscal year, the DGGI detected 1,040 cases of GST evasion, involving ₹1.36 lakh crore. Notably, ₹14,000 crore of this amount is related to input tax credit fraud. The enforcement actions have led to a total of 91 arrests pertaining to GST-related offenses in this period.
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