Understanding Arrest Provisions under India's Goods and Services Tax Law
This article provides a comprehensive overview of arrest provisions under India's Goods and Services Tax (GST) law. It covers the specific offenses under Section 132 that can lead to arrest, outlines the conditions for such arrests, and clarifies the distinction between cognizable and non-cognizable offenses within the GST framework. Additionally, the article discusses the powers of tax authorities to summon individuals and inspect business premises, while also offering a critical perspective on the perceived severity of these provisions in a tax-related legislation.
This article delves into the provisions concerning arrest under the Goods and Services Tax (GST) framework in India, building upon previous discussions on inspection, search, and seizure, offenses and penalties, and prosecution within GST.
Recent updates have brought changes to GST regulations, impacting demand orders and enforcement powers.
Recent Updates on GST Provisions
July 5, 2022 Updates
The department extended the time limit under Section 168A until September 30, 2023, via Notification No. 13/2022. This provision allows tax officers to issue demand orders for unpaid or underpaid taxes, interest, fees, and penalties in non-fraud cases. The period from March 1, 2020, to February 28, 2022, was excluded when calculating the limitation period for these demand orders.
December 21, 2021 Amendments
Amendments on December 21, 2021, clarified that officers can issue Section 74 notices to multiple individuals for fraudulent underpayment of tax or excessive Input Tax Credit (ITC) claims. Additionally, officers gained the power to confiscate and seize goods or vehicles even after penalty proceedings against all liable parties have concluded.
February 1, 2021 Union Budget Changes
The Union Budget 2021, effective February 1, 2021, brought several changes:
- Seizure and confiscation of goods and conveyances in transit are now treated as distinct proceedings from tax recovery under Section 74.
- Self-assessed tax under Section 75 of the CGST Act now includes outward supplies/sales declared in GSTR-1 (Section 37) but not reported in GSTR-3B (Section 39).
- Provisional attachments remain valid from the initiation of proceedings until one year after the order is issued.
Conditions for Arrest Under GST
A person can be arrested by an authorized CGST/SGST officer if the Commissioner of CGST/SGST has sufficient reason to believe they have committed an offense under Section 132. The individual must be informed of the grounds for their arrest and, in the case of a cognizable offense, presented before a magistrate within 24 hours.
Offenses Under Section 132 Leading to Arrest
The following offenses, as defined under Section 132, can lead to arrest provisions:
- A taxable individual provides goods or services without a proper invoice or issues a fraudulent invoice.
- Issuing an invoice or bill without the actual supply of goods or services, violating GST regulations.
- Collecting GST but failing to remit it to the government within a three-month period.
- Failing to deposit GST collected in violation of provisions to the government within three months, which constitutes an offense.
- Having a prior conviction for an offense under Section 132, making the current offense a repeated violation.
Essentially, Section 132's arrest provisions apply when tax evasion exceeds INR 100 lakhs or if the person has a previous conviction under this section.
Distinction Between Cognizable and Non-Cognizable Offenses
Cognizable offenses permit police to make an arrest without a warrant and are typically severe crimes such as murder, robbery, or counterfeiting. Conversely, non-cognizable offenses are less serious, like public nuisance or assault, and require a warrant for an arrest by a police officer.
Judicial Cognizance of GST Offenses
A court cannot take official notice of any punishable offense under GST without prior authorization from the designated authority. Only a Magistrate of the First Class or higher is competent to preside over such cases.
Bail Availability for Arrested Persons
For offenses classified as non-cognizable and bailable, the individual who has been arrested may be released on bail.
Authority to Summon Individuals for Evidence
A proper officer has the authority to summon any person to provide testimony or produce documents. The summoned individual must appear either personally or through an authorized representative, and their statement will be recorded under oath.
Access and Inspection Powers on Business Premises
The Joint Commissioner of CGST/SGST can authorize a CGST/SGST officer to access a registered taxable person's business premises. This access allows the officer to inspect accounts, documents, computers, and other relevant items for auditing or verification purposes to protect revenue interests.
Officers Required to Assist GST Authorities
Various government officers are mandated to assist CGST/SGST officers, including those from:
- Police departments
- Railways
- Customs departments
- State and Central Government officials involved in GST collection
- Officers responsible for collecting land revenue
- Village officials
The Commissioner of CGST/SGST can also direct other classes of officers to provide assistance.
Critique of Arrest Provisions in GST Law
The provisions for seizure and arrest within GST are often perceived as stringent, given that GST is primarily an economic tax law rather than criminal legislation. The Commissioner's discretionary power to arrest based on 'reasons to believe' introduces subjectivity. Concerns arise for honest taxpayers who might face arrest or seizure due to a genuine misinterpretation of the law, where a penalty might be more appropriate than an arrest. There is a strong argument for greater clarity in the GST law regarding the specific circumstances warranting arrest, especially considering it is a relatively new legal framework prone to initial errors.