India is contemplating raising the threshold for arrests and criminal prosecution in cases of GST evasion from Rs 2 crore to Rs 3 crore.
This move towards decriminalisation is intended to minimise harassment and enhance the ease of doing business.
The Central Board of Indirect Taxes and Customs (CBIC), the apex body on indirect taxes under the Central government, is also considering a proposal to amend the process of issuing summonses to make it more restrictive and allowed under only "certain conditions", Economic Times reported citing sources.
This comes as the industry have called for changes in the penal provisions, arguing that the existing law is excessively stringent.
A proposal in this regard is expected to be taken to the GST Council soon and legislative changes to the central and integrated GST Acts could be moved at the time of the Centre's vote on account ahead of the next general elections, ET reported.
Additionally, states will also make corresponding changes to their respective GST Acts.
However, the board is opposed to reducing the force of law in cases involving fake invoices where no goods or services are supplied, as well as in cases of incorrect input tax credit claims.
"The threshold for initiating jail term and criminal proceedings may be further enhanced to Rs 3 crore," a senior government official was quoted as saying in the ET report,
The official added that the industry had pitched for Rs 5 crore.
At present, under Section 132 of the Central GST (CGST) Act, illegal credit to evade GST is deemed a criminal act.
Evasion of GST amounting to Rs 2 crore or more leads to a three-year imprisonment.
The GST Council, in December 2022, approved a phased increase in this threshold, which was raised to Rs 2 crore in March.
According to the official cited in the report, due to the prevalent issue of counterfeit invoices and incorrect 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 said.
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