Decriminalisation of offences under GST

Prelims level : Taxes and Taxation Mains level : GS-II Functions and responsibilities of the Union and the States, issues and challenges pertaining to the federal structure, devolution of powers and finances up to local levels and challenges therein.
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Why in News?

  • 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

What is the issue?

  • 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.

What is Goods and Services Tax?

  • GST was introduced through the 101st Constitution Amendment Act, 2016.
  • It is one of the biggest indirect tax reforms in the country.
  • It was introduced with the slogan of ‘One Nation One Tax’.
  • The GST has subsumed indirect taxes like excise duty, Value Added Tax (VAT), service tax, luxury tax etc.
  • It is essentially a consumption tax and is levied at the final consumption point.
  • This has helped mitigate the double taxation, cascading effect of taxes, multiplicity of taxes, classification issues etc., and has led to a common national market.
  • The GST that a merchant pays to procure goods or services (i.e. on inputs) can be set off later against the tax applicable on supply of final goods and services.
  • The set off tax is called input tax credit.
  • The GST avoids the cascading effect or tax on tax which increases the tax burden on the end consumer.

Offences under GST: 

  • 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.
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