GST Offenses Will Be Relaxed: Threshold Limit Can Increase, Compounding Interest Reduce

By raising the threshold limit for launching prosecution as well as lowering the charges for compounding of offence, the government is working on decriminalisation of certain offences under GST.

GST Offenses Will Be Relaxed: Threshold Limit Can Increase, Compounding Interest Reduce

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.

Threshold Level Being Reconsidered 

Vivek Aggarwal, Additional Secretary (Revenue), Finance Ministry said that “We are working on making the provision under GST Act for prosecution 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”.

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

In order to encourage the taxpayers encouraged to compound their offences instead of going into litigation, the compounding charges for offences under GST would also be lowered
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.

Aggarwal said that “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”.

More Tax Collections Paving Way for Taxpayer Friendly Reforms

As per him, more taxpayer friendly reforms can be attributed to the robust growth in tax collection both in direct and indirect tax collections. This in turn has facilitated 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.

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