GST Investigation Wing: Prosecution Can’t be Launched Indiscriminately Against All Directors

The Central Board of Indirect Taxes and Customs (CBIC) has issued guidelines for tax officers on launching prosecution under the Goods and Services Tax (GST) law.

The GST investigation wing released a circular and instructed tax officers not to launch prosecution indiscriminately against all directors of the company and that it should be only restricted to persons who manage daily operations.

Also, it said the prosecution could not be filed: 

  • Merely because demand has been confirmed in the adjudication proceedings, or 
  • In cases of technical nature, or 
  • In case of additional Input Tax Credit (ITC) claims due to different interpretations of the law.

The circular stated that the decision should be based on the case and consider various factors, such as the nature of the offence, tax evaded, ITC wrongly availed, or refund wrongly taken and the evidence collected.

Also, the investigation wing further clarified that the prosecution could be launched when the amount of tax evasion, misuse of ITC, or fraudulently refund is more than Rs 5 crore. However, this limit does not apply to repeated evaders and arrest cases.

Recently, the department revised the monetary limit for prosecution under the Customs Act and issued guidelines specifying the conditions and procedure for arrests under the GST Act.

Similarly, the GST investigation wing has issued guidelines that launching prosecution will have severe implications for the person involved. Both tax officers and taxpayers shall take note of these guidelines and ensure compliance.

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