Ease of doing business: India may do away with arrests for sub-Rs 3 crore GST evasion

New Delhi: India is considering a higher ₹3-crore threshold, up from ₹2 crore, for arrests and criminal prosecution in GST evasion cases. The decriminalisation initiative is aimed at reducing harassment and improving ease of doing business.

The Central Board of Indirect Taxes and Customs (CBIC), apex indirect taxes body under the Centre, is also considering a proposal to amend the process of issuing summonses to make it more restrictive and allowed under only "certain conditions," people aware of details told ET.

The industry has sought changes in the penal provisions, saying the current law is too harsh.


A proposal in this regard is expected to be taken to the GST Council soon and legislative changes to the central and integrated GST Acts could be moved at the time of the Centre's vote on account ahead of the next general elections. States will separately amend their own GST Acts.

The board is, however, not in favour of lessening the force of law in cases involving fake invoices without any supply of goods or services, and also in instances of incorrect input tax credit claims.

"The threshold for initiating jail term and criminal proceedings may be further enhanced to Rs 3 crore," a senior government official said, adding that the industry had pitched for Rs 5 crore.

Currently, under Section 132 of the Central GST (CGST) Act, illegal credit for GST evasion is a criminal offence. GST evasion of Rs 2 crore and above attracts a three-year jail term. The GST Council, in December 2022, approved an increase in the threshold in phases. It was enhanced to Rs 2 crore in March.

"Rationalisation of these limits for decriminalisation will help in reducing those cases where the amount involved is significantly less or has ambiguities," said Abhishek A Rastogi, founder of Rastogi Chambers.

The official cited above said that given the high cases of fake invoices and wrong input tax credit claims, the board has recommended keeping such cases out of the decriminalisation initiative. "While compliance has certainly improved, fake invoice cases are still high, so this may not be the right time to give any relaxation," said the official.

The Directorate General of GST Intelligence (DGGI), in November 2022, initiated a special drive against input tax credit fraud. So far, 6,000 cases involving Rs 57,000 crore of input tax credit fraud have been detected and 500 persons have been arrested.

In the first half of the current financial year, DGGI detected 1,040 cases involving Rs 1.36 lakh crore of GST evasion, of which Rs 14,000 crore is related to input tax credit fraud. A total 91 GST-related arrests have been made in the first half of the current fiscal year.