Home » The Budget Would Reset Tax Regulations to Decriminalise Elements of I-T and GST: Finance Ministry

The Budget Would Reset Tax Regulations to Decriminalise Elements of I-T and GST: Finance Ministry

No GST compounding yet due to severe fines, which may be reduced to reduce tax disputes: Finmin representative.

New Delhi: A senior Finance Ministry official said on Wednesday that the Union Budget 2023-24 would include steps to decriminalise taxation laws, remove provisions in the Income Tax, GST, and Customs laws that are similar to sections that can be invoked under the Indian Penal Code (IPC), and reduce ‘prohibitive’ compounding charges under GST.

The GST compounding clauses, which impose penalties ranging from 50% to 150% of the tax amount, make it “difficult for anyone to pay,” according to Vivek Aggarwal, Additional Secretary in the Department of Revenue. As a result, “zero compounding has occurred in India until now for all cases filed under the GST Act,” he stated.

“That is being reconsidered so that it gets more affordable and compounding becomes a better or first choice for a taxpayer,” Mr Aggarwal said. “We are considering raising the threshold limitations (for designating offences criminal) in GST, as well as deleting clauses that overlap with the IPC so that they become simpler as GST becomes more streamlined,” he said.

While the thresholds for considering tax evasion a criminal offence was being reviewed under the Income Tax and Customs laws, he indicated that sections of the IPC dealing with obstructing officers from performing their duties and failing to respond to a summons for documents, for example, did not need to be replicated in tax laws.

“As we approach the Finance Bill of 2023, you will see major changes for ease of doing business as well as the decriminalisation of tax laws,” Mr Aggarwal said at an international tax conference hosted by Assocham on Wednesday, noting that Prime Minister Narendra Modi and Finance Minister Nirmala Sitharaman had identified this as a priority area.

While some criminal provisions in the tax laws were compoundable, the government investigated the scope of compounding and the amount of discretion exercised by authorities to make the procedure more objective.

“After careful consideration, we concluded that the compounding regime needed to be simplified and discretion decreased.” “We can raise the thresholds for calling a specific act a crime, and we can look at deleting provisions in those Acts that are truly redundant,” Mr Aggarwal added.