This article is written by Smaranika Sen from Kolkata Police Law Institute. This article exhaustively states such offences under GST laws where the prosecution might be exposed to the Indian Penal Code. It further deals with certain case laws which shows how such prosecution can be exposed to the provisions of IPC.
Goods and services tax also known as GST is a destination-based tax. Taxes regarding GST will only be accrued by the taxing authority who has jurisdiction over the place of supply. It is an indirect tax that has replaced various taxes like excise duty, VAT, service taxes etc. The origin of GST dates back to 2000. At that time a committee was set up to draught a law. After 17 years, in 2017 the GST Bill was passed in the Lok Sabha and Rajya Sabha and it came into force on the 1st of July 2017. The Act states various do’s and don’ts. The Act also provides for offences if someone does not abide by the provisions of the stated Act. Through this article, we will try to analyse for which offences prosecution can be exposed to the Indian Penal Code for offences under GST.
Goods and services tax: An overview
As already stated above, the goods and services tax has replaced various existing taxes. The question might arise that what is the need of bringing goods and services tax and replacing all other existing taxes. The main reason for making goods and services tax is to have one single tax across the whole nation. It denotes that every state will follow the same rate for a particular product or service. It will also help the central government in deciding rates and policies. Previously, various indirect taxes were imposed upon the citizens of India. This used to create a cascading effect of taxes. The cascading effect on the sale of goods and services is used to impact the cost of goods. Due to different indirect tax laws, taxpayers could not set off the tax credits of one tax against the other.
There was no unified and centralised tax on both goods and services. However, the introduction of the GST solved this issue. Under GST, all major taxes are subsumed into one. Therefore, it eliminates the tax on tax, thereby decreasing the cost of goods and services. GST laws in India are far more stringent. It increases the taxpayer base and reduces the need for multiple documentation for the supply of goods.
Components of GST
There are three components of the goods and service tax. The three components are:
- Central goods and services tax: By the name we can understand that this tax is for the central government. The central goods and services tax is collected by the central government on an intra-state sale.
- State goods and services tax: This tax is collected by the central government on an intra-state sale. The main difference between CGST and SGST is that the tax is collected for the same interstate sale of goods and services, but in the case of CGST, it is collected by the central government and in the case of SGST, it is collected by the state government.
- Integrated goods and services tax: It is a tax that is levied on all inter-state supplies of goods or services. It is collected by the central government for an inter-state sale.
Laws before GST
Before the goods and services tax, there were taxes levied on the citizens by both the centre and the state through various indirect taxes. The state government used to collect taxes in the form of VAT or value-added tax. Interstate sale of goods was collected by the central government. Different states have different sets of rules and regulations regarding taxes. The indirect taxes and local taxes were living together by the state and central government. This used to create overlapping taxes.
Laws after GST
Any kind of offence and penalty under the goods and services tax is enlisted under the Central Goods and Services Tax Act. Sections 122 to 128 of the Central Goods and Services Tax Act state the offences and the punishments for such offences.
Offences under the Act are
- Fake or wrong invoice.
- Tax evasion.
- Supply/transport of goods in such a way that the documentations are not proper or the documentations have been destroyed, etc.
- If any person has not registered under GST but he was required to do so by the law.
- If anyone does not deduct TDS (tax deducted at store).
- If anyone does not collect TCS (tax collected at store).
- If anyone distributes input tax credit by violating the rules and regulations.
- If anyone obstructs any competent officer from doing any duty.
- If anyone does not maintain any record which he/she was prescribed by law to do.
- If anyone destroys any evidence.
If a person commits any of the offences stated above, he would be liable for a penalty. There is as such no proper definition of ‘penalty’ under the Act. However, through various judgements and judicial interpretations, it can be stated that a penalty is a form of punishment that is given to a person when they are found to have committed any offence. A penalty can be either pecuniary or corporal. It can be dealt with in both civil and criminal cases. Under GST, both pecuniary and corporal penalties are applicable.
As we know that under GST, corporal penalties are applicable. Therefore, there lies prosecution of those persons who have committed any offence. A prosecution means the legal proceedings that are taken against any person in respect to their criminal charges. Some of the offences that might lead to corporal punishment are:
- The deliberate intention of any kind of fraud.
- If any person has supplied any goods without an invoice to escape from tax.
- If any person issues any invoice without supplying any goods or services.
- If any person is found to collect GST in contravention to the laws and has not submitted the same tax to the government within 3 months.
- If any person is found to obtain any refund from the central goods and services tax or state goods and services tax by fraud.
- If anyone submits any fake financial records or documents or files fake returns to evade tax.
- If anyone deliberately acquires or receives any kind of GST even after knowing that it violates the laws.
- If anyone provides any false information during the legal proceedings.
- If anyone is found to destroy any e evidence.
- If any person helps others to commit any fraud under GST.
Generally, the offences are bailable under GST and under Section 132, the highest term of punishment is 5 years of imprisonment. There are some offences where the prosecution is exposed to the provisions of the Indian Penal Code for the offences under GST.
IPC Sections used in GST
Some sections of the Indian Penal Code are used in goods and service taxes law. The relation between the provisions of IPC and GST laws makes the prosecution exposed to the provisions of the Indian penal code for the offences committed under any GST laws. The following Sections are:
Section 120A and Section 120B
As per the Indian penal Code, Section 120A of IPC status about criminal conspiracy. It states that whenever two or more persons agree to do any illegal act or any act which is not illegal by illegal means, such an agreement is designated to be a criminal conspiracy. It further states that no agreement except an agreement to commit an offence will be deemed a criminal conspiracy unless some act besides the agreement is done by one or more parties to such agreement in pursuance thereof.
Section 120B of IPC states the punishment of criminal conspiracy. It states that anyone who is a party to a criminal conspiracy to commit an offence which is punishable with the death penalty, imprisonment for life, or imprisonment for a term of 2 years or upwards, will be punished in the same manner as if the person had abetted such offence. In case anyone is a party to a criminal conspiracy other than a criminal conspiracy to commit an offence will be punished with imprisonment for a term of not exceeding 6 months or with a fine or with both.
The relation between Section 120A of IPC and GST law is that in the case of goods and service tax if a group of two or more persons agree to commit any illegal act, they will be held liable under the act of criminal conspiracy.
Section 463 to Section 468
Section 463 to Section 468 of IPC falls under Chapter XVII which states the offences relating to documents and property marks. Section 463 states about forgery. It states that anyone who makes any false documents or false electronic record or part of a document or an electronic record with an intent to cause damage or injury to the public at large or to any other person or support any claim or to cause any person to part with property or with an intent to commit any fraud denotes the commission of forgery.
Section 464 states the making of false documents.
Section 465 states the punishment of forgery. The punishment for forgery is either imprisonment for a term that may extend up to 2 years or a fine, or both.
Under GST, the value of documents or records is huge. Documentations play a very vital role in filing returns or in claiming refunds, etc. Therefore, if a forgery is committed related to the documents, the accused is liable under the above-stated Sections.
Cases where offences are exposed to IPC
At certain times, some offences fall under the GST law as well as IPC at the very same time. This leads to a question of whether the accused should be exposed to IPC for the offences committed under the GST laws. Let us analyse a case to solve this issue.
In the case Shri Sentu Dey v State of Tripura and others (2021), the petitioner challenged an order under which she was sent a criminal case for investigation under Section 156(3) of the Code of Criminal Procedure to the concerned police station.
In the case, it was observed that the petitioner was a proprietor of M/S Sentu Dey, which was registered under Tripura State Goods and Service Tax Act 2017, later on, referred to as the SGST Act. On the 27th of November 2020, the superintendent of state taxes, Bishalgarh, under Section 190 read along with Section 200 of the CrPC, filed a complaint before the sub-divisional magistrate of Bishalgarh. The complaint stated that the petitioner had declared outward taxable turnover and thereby paid list access from August 2017. The complaint also stated that the sizable demand was Rs 19.74 crores including taxes out of which the petitioner only paid Rs 1.18 crores.
The remaining amount was still unpaid. The purchasing dealers of the petitioner stated that they had already paid their taxes to the petitioner for their purchases made by them from the petitioner. The complaint also added another allegation against the petitioner that he had collected the taxes from the purchasing dealers but had not deposited the same in the government revenue. Therefore, the petitioner was charged under Section 132 of the SGST Act and Section 406 and Section 409 of IPC. The case was first transferred to the magistrate who initially fixed the case for examination under Section 200 of CrPC. Then the complaint was registered as an FIR and called for a report. The petitioner filed a writ petition containing that the offence alleged against the petitioner is punishable under Section 132 of the SGST Act. therefore the general provisions of the Indian penal code in such a case cannot be invoked.
The honourable High Court of Tripura observes that the provisions of Section 132 of the SGST act provide punishment for offences related to goods and services tax. The further observed that there are certain acts or omissions which fall within the ambit of a special penal statute like the SGST Act and sometimes there might be some offences that also have an element of an offence under the provisions of IPC. The honourable high court also refers to various Supreme Court decisions where it has been shown that the accused in a situation will be answerable for the special statute offence or the general offence. Regarding the present case, an act or omission on part of the dealer will only be an offence under the SGST Act. However, the other facts of this case indicate that there are certain ingredients of the provisions of IPC as well. Therefore the high court stated that the tax administration of the state should not invoke provisions of the IPC without application of mind in every case. Therefore the high court quashed the order of the magistrate for police investigation.
Any offences under the Central Goods and Services Tax Act, 2017 or State Goods and Services Tax Act, 2017 are grievous. At times it also can constitute an offence under the Indian penal Code thereby leading to criminal proceedings against the offenders. However, to invoke the provisions of IPC for the offences committed under the GST laws, the tax department should take necessary questions to establish the guilt or reference of the assessee and not merely casually file a complaint before the magistrate.
The GST laws are vital in our country to have a well established financial condition. Every citizen must pay their taxes. Taxes help to build a nation, create various welfare schemes, improve the health care system and education systems of a country, etc. In simpler words, we can state that by paying taxes to the government, we are benefiting ourselves. Therefore, to fight against those offenders who do not pay their taxes and try to escape from their duties, there should be strict actions taken against them. If the offences are grave, the tax department authority should establish enough facts to make the offender liable for criminal charges.
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