The Central Government is contemplating a revision of the arrest and criminal prosecution threshold in cases of Goods and Services Tax (GST) evasion, considering an increase from ₹2 crore to ₹3 crore. The primary aim of this initiative to decriminalise certain aspects is to reduce harassment and improve the overall ease of conducting business.
The Central Board of Indirect Taxes and Customs (CBIC), the apex body overseeing indirect taxes under the central government, is actively reviewing a proposal to amend the process of issuing summonses. According to the words of the officials said to the ET, the proposed changes seek to make the issuance of summonses more restrictive, allowing them only under specific conditions..
In response to concerns expressed by industry stakeholders regarding the severity of existing penal provisions, discussions are in progress to introduce amendments. This proposal is expected to be presented to the GST Council soon, and legislative modifications to the central and integrated GST Acts might take place during the Centre’s vote on account preceding the next general elections. Individual states will independently amend their respective GST Acts.
While the board is open to considering adjustments to certain aspects, it remains steadfast in maintaining legal consequences in cases involving fraudulent invoices with no actual supply of goods or services and instances of incorrect input tax credit claims.
Presently, under Section 132 of the Central GST (CGST) Act, the fraudulent claiming of credit for GST evasion constitutes a criminal offence. The offences involving GST evasion of ₹2 crore or more can result in a three-year jail term. The GST Council had previously approved a phased increase in the threshold, reaching ₹2 crore in March 2022. However, the industry has asked for the raise of threshold to Rs. 5 crores.
The scheme of punishment provided in section 132(1) is as follows:
| Offence involving | Punishment (imprisonment extending to) |
| Tax evaded exceeding ₹ 5 crore or repeat offender 250 lakh | 5 years and fine |
| Tax evaded between ₹ 2 crore and ₹ 5 crore | 3 years and fine |
| Tax evaded between ₹ 1 crore and ₹ 2 crore | 1 years and fine |
| False records Obstructing officer Tamper records | 6 months |
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