No compounding yet under GST due to heavy fines, they can be reduced to prevent tax disputes: Finmin official
No compounding yet under GST due to heavy fines, they can be reduced to prevent tax disputes: Finmin official
Union Budget 2023-24 will include steps to de-crime taxation laws, remove provisions in Income Tax, GST and Customs laws which are similar to those applicable under the Indian Penal Code (IPC). and reduce the ‘prohibitive’ compounding fee. Under GST, a senior finance ministry official said on Wednesday.
Vivek Agarwal, additional secretary in the revenue department, said the compounding provision in GST, which carries a penalty ranging from 50% to 150 per cent of the tax amount involved, makes it “impossible for anyone to pay”. As a result, “there has been zero settlement for all the cases registered under the GST Act in India so far,” he said.
“It is being revisited so that it is affordable and compounding becomes the better or first choice for the taxpayer,” explained Mr. Agarwal. “We are looking at raising the threshold limits (to criminalize offences) in GST and removing the provisions that overlap with the IPC so that they become simpler as GST is streamlined,” he said.
While the thresholds for treating tax evasion as a criminal offense under the Income Tax and Customs laws were being reviewed, for example, sections of the IPC that obstruct officers from performing their duty and summons for documents were under review. If they fail to answer, there is no need to repeat them. In the tax laws, he indicated.
“As we approach the Finance Bill of 2023, you will see major changes to ease of doing business as well as criminalization of tax laws,” Mr Agarwal said at an international tax conference organized by Assocham on Wednesday. Identified as a priority sector by Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman.
While some criminal provisions in the tax laws were compoundable, the government was examining the level of compounding and the extent of discretion exercised by officials to make the process more objective.
“After examining this, we have come to the conclusion that the compounding regime has to be simplified and discretion has to be reduced. We may increase the threshold for declaring a particular Act as an offense and we may consider removing those sections in those Acts which are in fact repetitive,” Mr. Agarwal said.