Budget 2023 update (to be notified):
(1) The minimum and maximum limits for compounding the offences have been reduced to 25% and 100% of the tax involved.
(2) Taxpayers can avail compounding of offences (involving supplies worth more than Rs 1 crore value) more than once.
(3) More offences have been made ineligible for compounding, such as fake ITC claims, possession of goods liable for confiscations, supplying services in contravention to act, obstructing officers from performing duties, tempering evidence, and non-submission of proper information.
Prosecution is the conducting of legal proceedings against someone in respect of a criminal charge.
Any person committing the following offences (i.e., deliberate intention of fraud) becomes liable to prosecution, i.e., face criminal charges.
The person committing any of the offences above shall be punished as follows:
|Tax amount involved
|Above 500 lakhs
|Bailable or Non-Bailable
|Upto 1 year
|Upto 3 years
|Upto 5 years
**If a person commits the following offences AND the amount involved exceeds 500 lakhs then the offences are non-bailable-
This is in keeping with the government’s anti-tax evasion stance by bringing in stricter measures.
For destroying evidence, preventing the officer from his duty, falsifying information or helping someone in the same, he is liable for up to 6 months imprisonment with fine
If the offense is repeated a second time then punishment can extend up to 5 years with fine. A person can not be prosecuted without the prior sanction of the Commissioner.
Compounding of offences is a shortcut method to avoid litigation. In the case of prosecution for an offence in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. Court proceedings are time-consuming and expensive. In compounding, the accused is not required to appear personally and can be discharged on payment of compounding fee which cannot be more than the maximum fine leviable under the relevant provisions. GST Act also allows for compounding of offences.
Compounding will not be available for-
*Removed and ^included through Budget 2023. CBIC is yet to notify these changes.
Compounding will be allowed only after payment of all tax, interest and penalty dues.
The amount payable for compounding of offences shall be 50% of the tax involved subject to a minimum Rs. 10,000. Maximum amount for compounding is 150% of the tax OR Rs. 30,000 -Whichever is higher.
However, Budget 2023 reduced the minimum and maximum limits for compounding the offences to 25% and 100% of the tax involved. CBIC is yet to notify this amendment.
On payment of the compounding amount, no further proceedings shall be initiated against the accused person for the same offence and any criminal proceedings, if already initiated, will be abated. Apart from prosecution, the offender can also be arrested. Please read our article on arrest under GST. Thus, we find that GST has severe prosecutions to punish tax evaders and the corrupt thus keeping in mind the government’s anti-tax evasion stance.
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