India is contemplating a significant increase in the threshold for arrests and criminal prosecutions related to Goods and Services Tax (GST) evasion, according to a report by The Economic Times. The proposal aims to raise the threshold from the current ₹2 crore to ₹3 crore, part of an initiative to decriminalize specific aspects of tax evasion. This move seeks to alleviate undue pressure on businesses and create a more favorable environment for operations.
The Central Board of Indirect Taxes and Customs (CBIC), the apex body overseeing indirect taxes under the central government, is actively considering amendments to streamline the process of issuing summonses. The contemplation revolves around making summonses more restrictive, allowing their issuance only under specific conditions.
Amid discussions on these changes, voices from the industry have expressed concerns about the severity of existing penal provisions, suggesting that the stringent nature of the current law could impede business operations. Advocates for industry reforms are calling for alterations in the penal code to achieve a more balanced approach to regulation.
A proposal on these changes 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. Simultaneously, individual states are poised to make separate amendments to their respective GST Acts.
A senior government official noted that discussions involve increasing the threshold for initiating criminal proceedings to ₹3 crore, while industry representatives had proposed ₹5 crore. Presently, Section 132 of the Central GST (CGST) Act criminalizes GST evasion above ₹2 crore, warranting a three-year jail term.
Advocates for these changes argue that rationalizing thresholds for decriminalization could help curb cases with smaller or ambiguous amounts involved. However, officials emphasized the importance of maintaining stringent measures for cases involving fake invoices and incorrect input tax credit claims, advising against relaxing laws in such instances.
In November 2022, the Directorate General of GST Intelligence (DGGI) launched a specialized drive targeting input tax credit fraud, resulting in the detection of 6,000 cases amounting to ₹57,000 crore in fraud and 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, with ₹14,000 crore related to input tax credit fraud. Enforcement actions in this period led to 91 arrests related to GST offenses.
