Arrest for GST default signals strict enforcement of new law

New Delhi: Even as legal experts are debating police powers to launch search operations in cases of offences under CGST Act, a team of central tax officers has arrested the director of a private firm who failed to pay taxes within the stipulated time in the new indirect tax regime.

The development signals that the initial phase of leniency shown by the government is over and screws would now be tightened over tax evaders and other economic offenders.

Tax authorities have already started cracking down on transporters not carrying e-way bill for movement of goods in some states and are likely to invoke penalty provisions more frequently to check tax evasion.

In the latest case, a director of a private company has been arrested for his alleged failure to remit the Goods and Services Tax (GST) collected by him to the CGST office at Navi Mumbai.

The accused, Rajpal Singh, director of OTS E-Solutions Pvt Ltd, was arrested by Navi Mumbai GST Commissionerate for alleged default to the tune of Rs 5.78 crore. A case of non-payment of service tax of Rs 3.06 crore is also pending against him.

A few weeks ago, officers of CGST Mumbai had arrested two businessmen for creating fictitious invoices and availing of ineligible credit.

The new indirect tax regime was rolled out last July making India a common market with uniform tax rates across the country.

Some tax experts have been of the view that search and seizure provisions in the new system are rather harsh given that it is an economic legislation.

Under the CGST law, power to arrest is provided under Section 69 of the CGST Act, 2017 and is to be exercised by the Commissioner in cases of outright fraud where the amount of tax evaded or the amount of input tax credit wrongly availed of is more than Rs 2 crore.

Senior lawyer Ashok Saraf said that Section 132 of the CGST Act, 2017 prescribes punishment for certain offences.

It provides that whoever commits any of the offences enumerated in sub-section (1) of Section 132 of the Act, shall be punishable with imprisonment for different terms on the basis of the nature of offence.

“Sub-section (4) of Section 132 provides that notwithstanding anything contained in the CrPC, 1973, all offences under the Act, except the offences referred to in sub-section (5) of Section 132 shall be non-cognisable and bailable.

Sub-section (5) of Section 132 provides that the offences specified in clause (a), (b), (c) or (d) of sub-section (1) and punishable under clause (i) of sub-section (1) of Section 132 shall be cognisable and non-bailable,” Saraf said.

The GST law notes that a court cannot take cognisance of any offence punishable without the prior permission of the designated authority. Only a Magistrate of the First Class (and above) can try such an offence.

Supplies of goods or services without any invoice and issuing of invoice or bill without supply of goods among others to evade tax in excess of Rs 5 crore is considered cognisable offence under GST law and are non-bailable. The other offences under the act are non-cognisable and bailable.

Cognisable offences are basically those which are very serious in nature. In these cases, a police officer has the authority to make an arrest without a warrant and to start an investigation with or without the permission of a court.

Non-cognisable offences refer to less serious offences and therefore a police officer does not have the authority to make an arrest without a warrant and an investigation cannot be initiated without a court order.