With an aim to reduce harassment and enhance the ease of doing business, India is considering a substantial 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 proposed adjustment seeks to raise the threshold from the current ₹2 crore to ₹3 crore. This initiative is part of a broader effort to decriminalize specific aspects of tax evasion, aiming to alleviate undue pressure on businesses and create a more favourable environment for conducting operations.
The Central Board of Indirect Taxes and Customs (CBIC), the apex indirect taxes body under the Centre, is also exploring a proposal to amend the process of issuing summonses, making it more restrictive and allowed only under “certain conditions,” according to sources.
The industry has been advocating for changes in the penal provisions, asserting that the current law is overly severe. A proposal in this regard is anticipated to be presented to the GST Council soon, and legislative changes to the central and integrated GST Acts may be proposed during the Centre’s vote on account before the next general elections. States will independently amend their own GST Acts.
However, the board is not inclined to reduce the legal impact in cases involving fake invoices without any supply of goods or services and in instances of incorrect input tax credit claims.
“The threshold for initiating jail term and criminal proceedings may be further enhanced to Rs 3 crore,” EY quoted a senior government official as saying, adding that the industry had pitched for Rs 5 crore. Currently, under Section 132 of the Central GST (CGST) Act, illegal credit for GST evasion is a criminal offence. GST evasion of Rs 2 crore and above attracts a three-year jail term.
The GST Council, in December 2022, approved an increase in the threshold in phases. It was enhanced to Rs 2 crore in March, it said.
The official cited above said that given the high cases of fake invoices and wrong input tax credit claims, the board has recommended keeping such cases out of the decriminalisation initiative. “While compliance has certainly improved, fake invoice cases are still high, so this may not be the right time to give any relaxation,” the official told ET.
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