The Central Board of Indirect Taxes and Customs (CBIC), through four different communiqués this week, has altered the enforcement processes for tax evaders in both customs as well as Goods and Services Tax (GST) matters. First, it significantly raised the monetary thresholds for initiating prosecutions and arrests under the Customs Act. Separately, the board laid down elaborate guidelines for GST officials before they exercise their powers to arrest and issue summons under the central GST law. While such norms were laid down for legacy laws governing taxes such as central excise, that are now subsumed into the GST, CBIC felt the need to issue fresh guidelines. The summons checklist, for instance, takes note of routine issuance of summons to top officials of firms even for procuring records available on the GST portal, and specifies that CXOs and MDs of any firm must not ‘generally’ be summoned in the first instance, but only when their involvement in tax evasion is clearly indicated. An approval process that requires officers to record reasons for issuing summons has been mooted to ensure that the power is exercised judiciously, even as they have been advised to consider where simple letters may suffice.
The norms spelt out for arrest and bail for GST offences, that stem from a Supreme Court judgment, are far more exhaustive and aimed at preventing ‘routine and mechanical’ arrests. The pre-requisites laid out before an arrest include the availability of credible evidence of wrongdoing as a starting point. However, approvals to arrest would hinge on whether the intent to evade tax or wrongfully avail tax benefits is evident and mens rea or guilty mind is palpable. Mere disagreements on interpreting a tax levy should not result in an arrest, the Board has said, underlining that the power to arrest must be exercised carefully as it impinges on personal liberty. Although the CBIC took a year to respond to the apex court’s conclusion that an arrest must not be made just because it can be made, its latest diktats will assuage discomfort among GST payers about tax terror of a new variety. While the GST Council will continue to navigate the remaining clean-up of exemptions and inverted duty structures and revamp of the messy multiple tax rates with an eye on ramping up revenues from the still-evolving tax regime, easing its compliance hassles is equally critical. Taxpayers and officials can always differ on what the fine print means, and oversights or mistakes may crop up in filings that may not necessarily be mala fide. Distinguishing these from genuinely evasive ploys of a few taxpayers, and following a well-reasoned process to prosecute those who err by design, will go a long way in making the GST a truly Good and Simple Tax for businesses rather than a fresh fear factor to fret over.
