GST officers can launch prosecution in cases over Rs 5 crore evasion, says Finance Ministry

GST officers can now launch prosecution against offenders in cases where the amount of evasion or misuse of input tax credit is more than Rs 5 crore, the Finance Ministry has said.

However, this monetary threshold will not be applicable in the case of habitual evaders or in cases where arrests have been made at the time of investigation.

"One of the important considerations for deciding whether prosecution should be launched is the availability of adequate evidence, the GST investigation wing under the Finance Ministry said, while issuing instructions for launching prosecution. Prosecution should normally be launched where the amount of tax evasion, or misuse of ITC, or fraudulently obtained refund is more than Rs 5 crore," it said.

Launching of prosecution by taxmen means commencement of legal proceedings against the offender. This limit will not apply and prosecution can be launched in the case of a company or taxpayer habitually involved in tax evasion or misusing Input Tax Credit (ITC) facility or fraudulently obtained refund.

"A company/taxpayer would be treated as habitual evader, if it has been involved in two or more cases of confirmed demand (at the first adjudication level or above) of tax evasion/fraudulent refund or misuse of ITC involving fraud, suppression of facts etc. in past two years such that the total tax evaded and/or total ITC misused and/or fraudulently obtained refund exceeds Five Hundred Lakh rupees. "DIGIT database may be used to identify such habitual evaders," the CBIC said.

The instruction further said that where arrests have been made during the course of investigation, and no bail has been granted, all efforts should be made to file prosecution complaint in the Court within 60 days of arrest.

In all other cases of arrest, prosecution complaint should also be filed within a definite time frame.

Decision should be taken on case-to-case basis considering various factors, such as, nature and gravity of offence, quantum of tax evaded, or ITC wrongly availed, or refund wrongly taken and the nature as well as quality of evidence collected, the guidelines for launching prosecution said.

AMRG & Associates Senior Partner Rajat Mohan said the guidelines have elucidated numerous practical scenarios related to procedural aspects of launching prosecution, arrests cases, withdrawal of prosecution, publication of names of persons convicted and compounding of offences. This will pave the way for a good and simple tax, he said.

KPMG in India Partner Indirect Tax Abhishek Jain said a while back the monetary limit for prosecution under the Customs Act were revised and also guidelines were issued by the GST investigation wing specifying the conditions and procedure pursuant to which arrest can be made.

"On similar lines, considering that launching of prosecution has serious implications for the person involved, the GST investigation wing has issued guidelines to ensure that the same is not made routine. Both field formations and taxpayers should take note of these guidelines and ensure compliance," Jain added.