GST EVASION – Prosecution is applicable only on evidence of tax evasion above Rs5 crore
According to guidelines released on Friday by the goods and services tax (GST) investigation division of the Central Board of Indirect Taxes and Customs (CBIC), the presence of sufficient evidence of tax evasion of more than Rs5 crore will result in criminal prosecution against offenders.
The guidelines, which aim to implement sufficient safeguards before bringing charges, could provide relief to the different industry sector and businesses.
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In a circular, it was said that prosecution should typically begin when the amount of tax evasion, ITC (input tax credit) misuse, or illegally acquired refund regarding offences listed under sub-section (1) of Section 132 of the CGST Act, 2017 exceeds Rs5 crore.
This financial threshold, however, will not be applicable in cases involving habitual evaders or situations where arrests have already been made when the investigation began.
A company/taxpayer would be treated as a habitual evader, if it has been observed that in two or more cases of confirmed demand (at the first adjudication level or above) of tax evasion/fraudulent refund or misuse of ITC involving fraud, hiding of facts, etc, in the past two years such that the total tax evaded and/or total ITC misused and/or fraudulently obtained refund exceeds Rs5 crore.
Such habitual evaders could be located using the DIGIT database, according to the CBIC.
However, the amount of tax evaded, ITC improperly claimed, refund improperly taken, and the type and quality of evidence gathered are a few of the factors that the recommending authority must take into account before recommending prosecution.
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