Maximum prison term for GST offences rationalised, says finance ministry FAQ

Prosecution under the goods and services tax will now be launched only for offences where the evaded amount is over Rs 5 crore and the maximum term of imprisonment is being rationalised, said the finance ministry on Friday.
Cases where the amount involved exceeds Rs 10 crore can lead to imprisonment up to five years, or fine, or both. Cases where the amount involved is between Rs 5 crore and Rs 10 crore can lead to imprisonment up to two years, or fine, or both.

In a set of frequently asked questions on rationalisation and decriminalisation of arrest and prosecution provisions in GST, the finance ministry also said that someone who is convicted will not compulsorily be imprisoned.

“The punishment is proposed to be changed from ‘imprisonment and fine’ to ‘imprisonment or fine or both’, so that the Court may have discretion of awarding punishment,” it said. Further, the requirement of a minimum imprisonment of six months under section 132(3) is being removed, so as to confer discretion on the Court.

The GST Council in its 57th meeting on October 8 had decided raising prosecution threshold and complete withdrawal of arrest powers under GST by tax officers.

Meanwhile, in another set of FAQs, the finance ministry explained that changes in the refund system will be done in two phases as per system readiness. In the first phase, the time limit for acknowledgement or deficiency memo will be reduced to 10 days from 15 days, and in case no action is taken by the officer in 10 days, the application will be deemed to be acknowledged and the system will give the acknowledgement.

The system will automatically sanction a provisional refund of up to 90% of the claimed refund amount for acknowledged low-risk refund claims pertaining to zero-rated supplies or an inverted duty structure. There will be automated sanctioning of final refund by the system in case of refund claim on account of any balance in electronic cash ledger.

In the second phase, auto acknowledgement of refund application would be done by the system after validation of information in the refund application. In case of any mismatch, the system would communicate these to the taxpayer for rectification and filing of a fresh application. Further, in case of low-risk zero-rated supply refund claims, final refund shall also be automatically given by the system.

Refund of unutilized ITC for low-risk refund claims pertaining to zero-rated supplies or inverted duty structure are eligible for automated provisional refund. In case of low-risk refund applications on account of zero-rated supply and inverted duty structure, the system will automatically sanction 90% of the claimed amount on a provisional basis, it further said.