05:12.2022: Decriminalisation of GST Act: Why it can be a big reprieve for small businesses in India

The introduction of Goods and Services Tax (GST) was a bold step towards digital transformation of tax administration. GST introduced the concept of uniform tax on supply of goods and services and subsumed over 17 large taxes and 13 cess. The new system was framed to be much more transparent in nature, easy to monitor, administer, simplified the registration processes, and significantly reduce the compliance filing requirements.

Pre-GST, indirect taxes were divided into several Central Taxes (i.e. central excise, service tax, central sales tax, etc.) and State Specific Taxes (i.e. VAT, entry taxes, etc.). These indirect taxes created a complicated regulatory framework with severe consequences for non-compliance.

The Central Excise Act provided for harsh penal provisions for non-compliances which included monetary penalties as well as criminal provisions like imprisonment between 3-7 years. The regulators had the rights to initiate criminal proceedings in case of the below mentioned circumstances:

  • Possession of goods mentioned under schedule II (tobacco, pan masala, rubber tyres, etc.) of the act in a quantity that ‘exceeds’ the prescribed limit
  •   Cases where assessee evades tax liability or takes incorrect / false credit of duty;
  • Failure on part of assessee to provide required information
  • Cases where assessee deals in goods which were liable for confiscation

With so many inter-lacing compliances, businesses had a hard time covering all their compliance obligations.

Proposed Changes in GST ACT

To promote ease of doing business for small businesses and clearly distinguish between minor offenses and wilful evasion of duty, government is initiating one of the major overhauls of the GST provisions after 5 years. The initiative is likely to raise the threshold limit for launching criminal proceedings and also revisit the current compounding provisions as well.

The proposal is to increase the limits to Rs 20 crore and possibility of reducing the jail term for instances where tax evasion value does not exceed Rs 5 crore. Additionally, it is expected that the revised provisions may also eliminate the provision of attachment of assessee’s property in case the tax evasion does not exceed the new threshold limits.

In recent years, there have been several policy decisions being taken to promote ease of doing business in India. One of the most prevalent of them is the push for decriminalization of laws, rules, and regulations that govern business activity.

Source: https://economictimes.indiatimes.com/small-biz/gst/decriminalisation-of-gst-act-why-it-can-be-a-big-reprieve-for-small-businesses-in-india/articleshow/95992517.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

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