According to guidelines released 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 Rs 5 crore will result in criminal prosecution against offenders.
The guidelines, which aim to implement sufficient protections before bringing charges, could provide relief to the sector and enterprises.
When tax evasion, ITC (input tax credit) abuse, or fraudulently obtained refunds related to the offences listed under sub-section (1) of section 132 of the CGST Act, 2017 exceed Rs 5 crore, prosecution should typically be initiated. However, this monetary threshold will not be applicable in the case of habitual evaders or in situations where arrests have been made at the time of the investigation.
A company/taxpayer would be considered a habitual evader if it had been associated with two or more confirmed demands (at the first adjudication level or above) of tax evasion/fraudulent refund or misuse of ITC involving fraud, suppression of facts, etc. in the previous two years such that the total tax evaded and/or total ITC misused and/or fraudulently obtained refund exceeded Rs5 crore.