Government working on decriminalising certain offences under GST, lower compounding charges

The government is working on decriminalisation of certain offences under GST by raising the threshold limit for launching prosecution and also lowering charges for compounding of offence, an official said on Wednesday.

Currently, the law provides for launching prosecution against offenders in cases where the amount of Goods and Services Tax (GST) evasion or misuse of input tax credit is more than Rs 5 crore.

"We are working on making the provision under GST Act for prosecution more simpler and friendly for taxpayers. We have Section 132 under CGST Act which criminalises illegal credit for GST evasion. The threshold level (for launching prosecution) are being reconsidered," finance ministry additional secretary (revenue) Vivek Aggarwal said at an Assocham event here.

Launching of prosecution by taxmen means commencement of legal proceedings against the offender.

The compounding charges for offences under GST would also be lowered so that taxpayers are encouraged to compund their offences instead of going into litigation.

Under GST Act, the amount payable for compounding of offences shall be 50 per cent of the tax amount involved subject to a minimum Rs 10,000. Maximum amount for compounding is 150 per cent of the tax or Rs 30,000, whichever is higher.

"The compounding provision in GST are prohibitive. It requires 50 per cent to 150 per cent as compounding fees which is impossible to pay. That's why there is zero compounding for all cases under GST. That is being relooked at so that it becomes affordable and compounding becomes a first or better choice for taxpayer," Aggarwal said.

The revenue department official further said that the robust growth in tax collection both in direct and indirect tax collections has paved the way for bringing in more taxpayer friendly reform to ensure ease of doing business and decriminalisation of tax laws.

The changes proposed in the GST law with regard to changes in prosecution threshold and compounding is likely to be placed before the GST Council in its next meeting.