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19th December 2022 (8 Topics)

Decriminalisation of offences under GST


As per the conclusion of the 48th GST Council meeting, the GST Council chaired by Finance Minister recommended decriminalising certain offences under Section 132 of the Central Goods and Services Tax (CGST) Act, 2017. 

Key highlights of the meeting:

  • The council has recommended various measures to ‘decriminalise the GST offences’ such as;
  • Raising the minimum threshold of tax amount for launching prosecution under GST from one crore to two crores,
  • Except for the offence of issuance of invoices without a supply of goods or services or both,
  • Reducing the compounding amount from the present range of 50 to 150% of the tax amount to the range of 25 to 100%, and
  • Decriminalising certain offences specified under Section 132 of the CGST Act, 2017, such as obstructing or preventing any officer from doing his duties, deliberate tempering of material evidence and failure to supply information.

What was previously criminalised under GST Act?

  • The GST law establishes stringent penalties and guidelines that taxpayers must abide by in order to ensure smooth intrastate or interstate trade of goods and combat corruption and maintain an effective tax collection system.
  • The GST Law provides for two different types of penalties. They may be both concurrent and simultaneous.
  • The department authorities have the authority to impose monetary fines and the seizure of goods as penalties for violating statutory provisions.
  • Criminal penalties include imprisonment and fines, which are also provided by GST Law but which can only be awarded in a criminal court following a prosecution.
  • Sections 122 to 131 of the CGST Act of 2017 contain provisions relating to penalties, while Sections 132 to 138 contain provisions relating to prosecution and compounding.

What are the offences being included under CGST Act, 2017?

  • Under the CGST Act, if a group of two persons or more agree to commit an illegal act like tax evasion, fraud etc. they are held liable under the act of criminal conspiracy.
    • Section 69 of the CGST Act provides the power to arrest a person by an order of a commissioner when he believes that a person has committed any offence under Section 132.
    • Section 67 of the CGST Act defines that only an officer not below the rank of joint commissioner can authorise in writing an inspection or search.
  • IPC and CrPC provisions:
    • Section 120A of the Indian Penal Code (IPC), defines criminal conspiracy,
    • Section 120B deals with punishment for the same and
    • Section 46 of the Code Of Criminal Procedure (CrPC) deals with how the arrest is made.
    • Section 67 of CrPC states that if a summons is issued outside the local authority, a duplicate copy of that summons should be send to the Magistrate of that outside authority to serve the summons.
    • Section 165 of CrPC deals with the search by the police officer.

Impacts of decriminalisation:

The GST law is still developing and is in its infancy which makes the same difficult and uncertain to enforce. 

  • Conflicts between legal and Constitutional provisions: There are instances of conflict between court decisions and rulings.
  • Existing confusion between laws and GST act provision: It is important to recognise that imposing penal provisions in an ambiguous ecosystem significantly alters how businesses perceive risk and uncertainty, directly impacting their ability to conduct business.
  • The law already contains sufficient penalties that serve as a deterrent against tax evasion.
  • More restrictions for investors: Investors may be discouraged by the fear of criminal sanctions in small, trivial, and petty matters, even before their engagement in any business activity or investment.

Other major recommendations:

  • The GST Council in its 47th meeting had also granted in-principle approval for allowing unregistered suppliers and composition taxpayers to make intra-state supply of goods through E-Commerce Operators (ECOs), subject to certain conditions.
  • The Council approved the amendments in the GST Act and GST Rules, along with the issuance of relevant notifications, to enable the same.
  • Further, considering the time required for the development of the requisite functionality on the portal as well as for providing sufficient time for preparedness by the E-Commerce Operators (ECOs), the Council has recommended that the scheme may be implemented from October 2023.

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