Decriminalisation of offences under GST

GS Paper 3

Syllabus: Indian Economy and issues relating to Planning, Mobilization of Resources

Source: TH

 Direction: The article discusses provisions of the GST law that criminalises certain activities and the recommendations of the GST council to decriminalise such activities and their impact.

 Context: The Finance Minister chaired the 48th GST Council, which recommended decriminalising certain offences under Section 132 of the Central Goods and Services Tax (CGST) Act, 2017

Background: The GST law is still in its early stages of development. Hence, it is vital to recognise that imposing penal provisions in an uncertain ecosystem impacts an enterprise’s ability to conduct business.

About Goods and Services Tax (GST):

• It is an indirect tax (a tax which is not directly paid by customers to the government) that came into effect on July 1, 2017, as a result of the 101st Amendment to the Indian Constitution.
• It has replaced several indirect taxes in the country, including service taxes, VAT, excise, etc.
• It is imposed on both manufacturers and sellers of goods, as well as suppliers of services.
• For tax collection, it is divided into five tax slabs – 0%, 5%, 12%, 18%, and 28%.

About GST Council:

• It is an apex committee to modify, reconcile or makes recommendations to the Union and the States on GST, like the goods and services that may be subjected to or exempted from GST, model GST laws, etc.
• Article 279A of the Indian Constitution empowers the President of India to constitute a joint forum of the Centre and States called the GST Council.

Offences under GST: 

Need:

• Despite technology leverage, instances of tax evasion have surged due to culprits remaining undetected.
• The GST law imposes severe penalties and guidelines in order to combat corruption and maintain an efficient tax collection system.

Penalties under GST law:

• The department authorities have the jurisdiction to impose monetary fines and the seizure of goods as penalties for violating statutory provisions.
• Criminal penalties include imprisonment and fines but can be awarded only in a criminal court following a prosecution.
  • The amount of tax evaded, the amount of Input Tax Credit (ITC) improperly claimed or used, etc, determines the length of the prison sentence.
• The Act also divides offences into – cognisable and bailable and non-cognisable and bailable. 

Measures recommended at the 48th GST Council meeting:

• Raising the minimum tax amount for commencing a GST prosecution from one to two crore.
• Reducing the compounding amount from 50 to 150% of the tax amount to 25 to 100% of the tax amount.
• Decriminalising certain offences under Section 132 of the CGST Act, 2017, such as preventing an officer from doing his duties, deliberate tampering with material evidence and failure to supply information.
• Other suggestions include refunding unregistered individuals and facilitating e-commerce for small businesses. 

What impact will the aforementioned measures have?

• Prosecution, arrest, and imprisonment in GST cases would occur only in the most exceptional cases.
• Ease of doing business will be made more effective.

Insta Links:

GST

Mains Links:

Q. Explain the rationale behind the Goods and Services Tax (Compensation to States) Act of 2017. How has COVID-19 impacted the GST compensation fund and created new federal tensions? (UPSC 2020)

Prelims Links: (UPSC 2017)