GST panel relaxes prosecution norms | The Financial Express

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With regard to decriminalisation under GST, the council decided to raise the minimum threshold of tax amount for launching prosecution under GST to Rs 2 crore from Rs 1 crore, except for offence of issuance of fake invoices.

GST panel relaxes prosecution normsRevenue secretary Sanjay Malhotra said there were two major agenda items — relating to tax rates and procedural and law related changes.

The Goods and Services Tax (GST) Council on Saturday decided to decriminalise certain offences that are not directly linked to tax evasion and doubled the threshold for launching prosecution to Rs 2 crore, but stopped short of accepting the businesses’ demand for a much more lenient approach on both aspects.

The council also sought to clear ambiguity over the definition of ‘sports utility vehicle’ (SUV), a product that is subject to a higher 22% compensation cess, in addition to the 28% marginal GST rate. The GST fitment panel would review whether mutli utility vehicles (MUVs) too can be added to this definition to come under the higher cess.

The council decided to lower the compounding amount from the present range of 50-150% of tax amount to 25-100% with a view to reducing the workload of courts.

Also Read: GST Council doubles limit for launching prosecution to Rs 2 cr; defines SUVs for 22 pc cess

It, however, could not take up reports by the Group of Ministers on GST Appellate Tribunal and on capacity-based taxation of pan masala and gutkha firms due to paucity of time.

A third report by the GoM on online gaming, horse racing and casinos was not circulated to the council and was also not taken up.

Currently, a taxpayer can be punished with six-month imprisonment or fine or both in case he/she tampers with evidence or obstructs the officer to perform his/her duty or provides false information. The council’s decision means these offences will be decriminalised with necessary changes in the Central GST and state GST acts. To be sure, these offences won’t lead to arrest or jail term of the taxpayer, but will only attract penalties once the laws are amended.

However, more serious offences like issue of fake invoices, suppression of sales, wrongful use of input tax credit or not depositing the tax collected with the government will continue to lead to arrests and attract jail terms above the tax value threshold of Rs 2 crore.

Currently, specified offences involving tax amount of Rs 1-2 crore can attract jail term of up to one year. Also, the jail term can be up to three years if tax amount involved is Rs 2-5 crore and up to five years if the amount is higher than Rs 5 crore; the offence becomes non-bailable for serious offences like fake invoicing.

Also Read: Online gaming industry for 28% GST on gross gaming revenue not on entry amount

“We had about 15 items on the agenda…we completed eight of the agenda points. The rest would be carried on to the next, hopefully in-person meeting of the council,” Union finance minister Nirmala Sitharaman, who chairs the council, briefed reporters

Revenue secretary Sanjay Malhotra said there were two major agenda items — relating to tax rates and procedural and law related changes.

With regard to decriminalisation under GST, the council decided to raise the minimum threshold of tax amount for launching prosecution under GST to Rs 2 crore from Rs 1 crore, except for offence of issuance of fake invoices.

Under compounding of offences under GST, the accused won’t be required to appear in the court. The charges can be instead be relieved on the payment of compounding fee, which should not be higher than the maximum fine applicable to the offence.

The amendments may, however, take some time. While the Centre hopes to table the amendments with the Finance Bill in the Union Budget 2023-24, states would also need to get their own laws passed by their respective legislatures, Malhotra said.

“While the increase in prosecution threshold was expected, it is necessary to gradually increase it further so that only very serious and high-value cases are subjected to the rigours of prosecution,” said MS Mani, partner, Deloitte India.

The FM said the GST council meeting did not approve any tax increase on any item. “Anything done was to issue clarification where ambiguity of taxation exists,” she said.

On SUVs, the council agreed that the higher rate of compensation cess of 22% is applicable to such vehicles fulfilling all four conditions. These include that the vehicle is popularly known as SUV, has engine capacity exceeding 1500 cc, length exceeding 4,000 mm and a ground clearance of 170 mm or above. SUVs are currently taxed at the highest GST rate of 28% and a cess of 22% is levied over and above it. But states were using different criteria to decide what constitutes such a vehicle, leading to confusion.

“This clarification is not a new tax. It is more to say what defines that commodity, which is under taxation as SUV,” said Sitharaman.

Industry body SIAM welcomed the decision and said it has brought clarity. “This is on the lines of SIAM’s recommendations and based on the earlier discussions SIAM had with the ministry of finance,” it said in a statement. However, experts believe there could still be some ambiguity. “Words like popularly known as SUV will be subject matter of interpretation and future disputes,” said Asish Philip, partner, Lakshmikumaran and Sridharan Attorneys.

A circular will also be issued to clarify that No Claim Bonus offered by the insurance companies to the insured is an admissible deduction for valuation of insurance services and is not a part of the taxable value for levy of GST.

The council clarified the rates on various items reduced the GST on ethyl alcohol supplied to refineries for blending with petrol to 5% from the current 18% and exempted husk of pulses including chilka and concentrates including chuni/churi, khanda from the levy of the tax, and also brought supply of mentha arvensis under reverse charge mechanism as has been done for mentha oil.

It has also decided that no GST is payable where the residential dwelling is rented to a registered person if it is rented it in their personal capacity for use as their own residence and on their own account and not on account of their business. Incentive paid to banks by the Centre for promotion of RuPay Debit Cards and low value BHIM-UPI transactions are in the nature of subsidy and not taxable.

Further, to facilitate e-commerce for micro-enterprises, the council also decided to allow e-commerce operators to supply products of unregistered vendors, dealers as well as composition taxpayers. The council in its 47th meeting had granted in-principal approval for allowing unregistered suppliers and composition taxpayers to make intra-state supply of goods through e-commerce operators.

CAIT national president BC Bhartia and secretary-general Praveen Khandelwal said this decision will empower small traders who are below GST threshold limit to expand their business through e-commerce.

(With inputs from Swaraj Baggonkar in Mumbai)

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