Guidelines for launching of prosecution under GST

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Guidelines for launching of prosecution under GST

Provisions of section 132 of the Central Goods and Services Tax Act, 2017 empower the institution of criminal proceedings and prosecution. Importantly, the prosecution is the institution/ commencement of legal proceedings against the offender.

The prosecution exhibits a formal charge against the offender. Accordingly, detailed guidelines are being issued by the GST- investigation wings in respect of launching of prosecution. The same is taken up and explained in the present article.

Guidelines to be followed for sanction of prosecution –

As per the guidelines issued by GST-investigation wings, vide instruction no. 04/2022-23 dated 1st September 2022, the general points to be taken care of prior to sanction of prosecution are –

  • The nature of the evidence collected at the time of investigation should be assessed carefully;
  • The decision of prosecution needs to be taken on a case-to-case basis considering factors like –
    • Nature as well as the gravity of the offence,
    • Amount of tax evaded/ wrongly availed input tax credit/ refund wrongly taken, and
    • The nature and quantity of evidence collected.
  • The prosecution should not be –
    • Filed merely because the demand is confirmed in the adjudication proceedings;
    • Launched in cases of technical nature;
    • Launched in cases, wherein, an additional claim of tax is because of difference of opinion regarding the interpretation of the law.
    • Launched indiscriminately against all the directors of the company.

Monetary limit for launching prosecution –

The prosecution can be launched only when the amount of any of the following is more than INR 5 Crores –

  • Tax evasion;
  • Mis-use of the input tax credit;
  • Fraudulently obtaining refund relating to offences specified u/s 132(1) of the Central Goods and Services Tax Act.

However, the above monetary limit of INR 5 Crores will not be applicable in the following cases –

  • Cases, wherein, arrest under section 69 is made during the course of an investigation; or
  • In the case of habitual evader i.e. when the taxpayer has been involved in two or more cases in the past two years, wherein, the demand exceeding INR 5 Crores is confirmed either at the first adjudication level or above on account of tax evasion or fraudulent refund or mis-use of input tax credit involving fraud or suppression of facts, etc.

Sanction of authority –

The prosecution complaint for prosecuting a person can be filed after obtaining mandatory sanctions as follows –

Particulars Authority from whom the sanction is to be obtained
Cases investigated by the Directorate General of GST Intelligence (DGGI) Pr. Additional Director General or Additional Director General, the DGGI of the concerned zonal unit or Hqrs.
Any other case Pr. Commissioner or Commissioner of CGST [section 132(6) of the Central Goods and Services Tax Act, 2017]

The time period within which prosecution complaint should be filed –

Particulars Time period within which prosecution complaint should be filed
Cases, wherein, the arrest has been made, however, bail is not granted Within 60 days of the arrest
In all other arrest cases Within a definite time frame

Filing of prosecution –

  • Cases which are deemed fit for prosecution even before adjudication –

Here, the Additional/ Joint Commissioner or Additional/ Joint Director, DGGI shall forward the prosecution proposal to the sanctioning authority after recording the reason for the same.

  • In any other case –

The adjudicating authority should, at the time of passing the order, mention that according to him the case is fit for prosecution.

However, if the adjudicating authority has not taken any view, then, in such case, the file should be re-submitted, within a period of 15 days from the date of issue of adjudication order, to the adjudicating authority for taking a view on the prosecution.

It is important to note here that in the case of companies, both the natural person and the legal person are liable for prosecution. Further, after obtaining sanction for prosecution, an authorized officer is required to file prosecution in the court within 60 days.

Guidelines to be followed for withdrawal of prosecution –

Withdrawal of prosecution is possible when the prosecution is sanctioned, however, the complaint is not filed and some new facts/ evidence has come to light. Accordingly, withdrawal of prosecution can be sanctioned in the following manner –

Particulars Sanction of withdrawal of prosecution
In DGGI case Principal Director General should sanction the withdrawal of prosecution
In any other case Principal Chief Commissioner/ Chief Commissioner should sanction withdrawal of prosecution

In case the complaint is already filed, withdrawal of prosecution should be done in the following manner –

  • It should be found on merits that there is no contravention of the provisions in the adjudication proceedings and the order should have attained finality.
  • Prior approval of Pr. Chief Commissioner/ Chief Commissioner or Pr. Director General/ Director General is needed for filing an application for withdrawal of prosecution.
  • Post approval, Pr. Commissioner/ Commissioner or Pr. Additional Director General/ Additional Director General should ensure the filing of an application in the court via a public prosecutor to allow withdrawal of prosecution.
  • Such withdrawal of prosecution can be affected only with the approval of the court.

General guidelines to be followed –

Some of the general guidelines to be followed are –

  • In case of inadequate punishment/ acquittal –

When Pr. Commissioner/ Commissioner is of the view that lighter punishment is given to the accused person. Then, in such a case, an appeal should be filed, within the stipulated time, against the order.

  • Filing of prosecution should not be kept in abeyance based on the ground that the taxpayer has gone in appeal or revision.
  • Section 159 of the Central Goods and Services Tax Act, 2017 empowers the Pr. Commissioner/ Commissioner or any other authorized officer to publish the name and other particulars of the convicted person under the Act.
  • Once the prosecution is launched, the same should be followed vigorously.

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CA Poonam Gandhi is a Chartered Accountant and a Lawyer. With a wide practice experience and deep understanding of different laws and taxes, she has been an independent professional writer in the field of taxation, finance and laws.