New Delhi, Oct. 5 -- The GST enforcement framework might soon see significant changes with tax officers likely to lose the power to arrest evaders, as part of decriminalisation of the GST law.

The 57th meeting, to be held on October 8, is likely to take up policy reforms that include change in enforcement provision.

If the GST Council, comprising Union and state finance ministers, approves the proposal, the Goods and Services Tax enforcement could shift to judicial oversight from departmental arrest, while reserving criminal prosecution for serious and deliberate tax fraud. Here is a quick look into how the law stands as of date and what the proposed reforms in enforcement under GST 2.0 entail.

Current GST Law and Enforcement

Under the current provisions, Commissioner-level officers are empowered to authorise any Central or State Tax Officer to arrest such a person who has committed specified offences under the law.

The power to arrest is principally limited to serious offences, including issuing fake invoices, availing or utilising fraudulent ITC, and collecting tax but failing to deposit it with the government within the prescribed period.

The law also distinguishes between bailable and non-bailable offences. Offences involving the specified categories where the amount exceeds Rs 5 crore are classified as cognizable and non-bailable. Offences below that threshold, subject to the statutory framework, are generally non-cognizable and bailable.

Section 69 of GST talks about the power to a GST officer to make an arrest - "Where the Commissioner has reasons to believe that a person has committed any offence ... he may, by order, authorise any officer of central tax to arrest such person". Once arrested, the person is to be produced before a magistrate within 24 hours.

Current Arrest Mechanism

After approval from a Commissioner-level officer, GST officers can seek assistance from local police and certain other government authorities for implementing the provisions of the GST law. GST arrests are carried out by authorised Central or State Tax Officers and not by the local police.

The role of police is primarily supportive. GST officers cannot retain an arrested person in their custody indefinitely. The arrested person has to be presented before a magistrate within 24 hours.

Once the person is produced before the magistrate, the decision on bail or further remand rests with the court. The magistrate may grant bail or remand the person to judicial custody in accordance with the applicable criminal procedure law, currently governed by the Bharatiya Nagarik Suraksha Sanhita, 2023 (BNSS).

What May Change For Businesses, Tax Officers

The proposal does not mean that GST officers would not chase tax demands or that frauds would become consequence-free. Taxpayers would continue to face proceedings for recovery of tax, interest and applicable penalties.

For businesses, this reform would be a big relief as they would not be subject to "harassment" of sudden arrests by tax officers. Instead arrests would be made only after due hearing in a court of law.

For GST officers, the proposed changes would mean that they would focus on getting taxes from evaders and let law enforcement agencies deal with arrests in cases of serious offences. They would continue to have powers of search and seizure as well to summon persons to give evidence and produce documents.

Regular GST disputes are likely to be addressed through adjudication, recovery, interest and penalties, while the criminal law would be focused on cases involving genuine and substantial fraud.

Published by HT Digital Content Services with permission from Millennium Post.