The Goods and Services Tax was introduced in India in the year 2017 and since then Central Goods and Services Tax, is a single domestic indirect tax for the whole of India. The Central Goods and Services Tax Act, 2017 ("CGST Act”), imposes penalties, fines and imprisonment for offences. This article will highlight the offences under the CGST Act and elucidate the prosecution that can be initiated and the punishment prescribed for committing such offences.
Under former taxation laws, the central government levied taxes on the manufacture of goods in the form of central excise duty, interstate sale of goods in the form of central sales tax, and certain services that provide in the form of service tax. Likewise, the state government levy tax on retail in the form of value-added tax, purchase tax, luxury tax, and entry of goods in the state.
Now, all the above mentioned taxes are subsumed in a single tax called the goods and services tax which will be levied on supplies which includes goods and services at each stage of supply chain starting from manufacture or import and till the last retail level. So any tax which were levied by the Central Government or the State Governments on the supply of goods or services has now been converged in goods and services tax, which is a dual levy where the Central Government will levy and collect tax in the form of central goods and services tax and the State Government will levy and collect tax in the form of state goods and services tax on intra-State supply of goods or services or both.
Criminal Prosecution under the CGST ACT
Offences provided for under Section 132 are liable for prosecution depending upon the gravity of the offences. Section 132 (1) states that : Whoever commits any of the following offences, namely:-
|Section 132 (1) sub clause:||Amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken||Punishment|
|(i)||Exceeds Rupees Five Crores||Imprisonment - 5 years + fine|
|(ii)||Rupees Five Crores - Rupees Two Crores||Imprisonment - 3 years + fine|
|(iii)||Rupees Two Crores - Rupees One Crore||Imprisonment - 1 year + fine|
If any person commits or abets the commission of an offence specified under Section 132(1) in clause (f), (g) or (j), they shall be punished with imprisonment for a term not exceeding 6 months and/or fine.
For any offence committed by a company, both the officer in charge (such as director, manager, secretary) as well as the company will be held liable. For LLPs, HUFs, trust, the partner/Karta/managing trustee will be held liable.
According to the provisions of Section 132(2) of the CGST Act, if any person who has already been convicted of an offence under this Section, is convicted again, then the person shall be punished for the subsequent offence with imprisonment for a term which may extend to five years and with fine.
Section 132(5) of the CGST Act makes the offences enumerated in clauses (a), (b), (c) and (d) wherein the amount of tax evaded or the amount of input tax credit wrongly availed or utilised or the amount of refund wrongly taken exceeds Rupees Five Crore, cognizable and non-bailable meaning the perpetrator can be arrested without a warrant. The remaining offences shall be non-cognizable and bailable.
Where the Commissioner has reasons to believe that a person has committed any offence specified in Section 132(1) (a), (b), (c) or (d) which is punishable under Section 132(2) (i) or (ii) he may, by order, authorise any officer of central tax to arrest such person.
A person shall not be prosecuted for any offence under Section 132 of the CGST Act, except with the previous sanction of the Commissioner. No court inferior to that of a Magistrate of the First Class, shall have the jurisdiction to try any such offence.
Chapter XIV of the CGST Act deals with powers of inspection, search, seizure and arrest. Section 67 of the Act confers power of inspection, search and seizure on an officer who should not be below the rank of a Joint Commissioner. This officer may authorize any officer of central tax to carry out inspections, search and seize documents or goods. Section 67(10) of the CGST Act provides that the provisions of the Code of Criminal Procedure, 1973 relating to search and seizure, shall, so far as may be, apply to search and seizure under Section 67 subject to the modification that Section 165(5) of the Code shall have effect as if for the word “Magistrate”, wherever it occurs, the word “Commissioner” were substituted.
Compounding of offences under the CGST Act
Compounding of offences is an alternative method to avoid litigation. In the case of prosecution for an offence in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. Court proceedings are time-consuming and expensive. In compounding, the accused is not required to appear personally and can be discharged on payment of the compounding amount. Section 138 of the CGST Act allows for compounding of certain offences either before or after the institution of prosecution and can be compounded by the Commissioner on payment of the compounding amount. The amount for compounding of offences under this Section shall be such as may be prescribed, subject to the minimum amount not being less than Rs. 10,000/- (Rupees Ten Thousand Only) or 50% of the tax involved, whichever is higher, and the maximum amount will not be less than Rs. 30,000/- (Rupees Thirty Thousand Only) or 150% of the tax, whichever is higher.
However, compounding of offences will not be available for:
A person under the CGST Act can only be arrested if the amount of tax evasion is more than Rupees Two Crore. All offences in which tax evasion is less than Rupees Five Crore are bailable and only grave offences involving tax evasion of Rupees Five Crore and above are non-bailable and cognizable. Under CGST Act, almost all burden is placed on an accused person to defend. Normally, for prosecution under the Indian Penal Code, 1860 the burden is on prosecutor/complainant to prove the charge. However, due to the specific provision under Section 135 of the CGST Act which states that there shall be a presumption of the existence of culpable mental state, the burden is shifted on the accused person.
By - Lakshmi Raman & Vedanta Kishanchandani