Critical decisions

GST Council is expected to improve business conditions

After a long gap, the Goods and Services Tax (GST) Council chaired by Union Finance Minister Nirmala Sitharaman will meet this week to decide some important issues. One of the subjects the Council is expected to take up is decriminalisation of some offences. As reported by this newspaper, the Council is expected to increase the evasion threshold to Rs 2 crore from Rs 1 crore for arrests. As things stand today, tax evasion or incorrectly availing of the input tax credit of Rs 5 crore or above attracts a prison term of up to five years. Tax evasion amounting to between Rs 1 crore and 2 crore can lead to a jail term of one year. Besides, it is reported that the Council would consider removing such offences from the GST law that are covered under the Indian Penal Code.

The GST Council is also expected to reduce the fee charged for certain offences. If the Council agrees to the reported proposals, it will lead to significant decriminalisation of the indirect tax regime and help improve the ease of doing business. It is worth noting that while it is important that tax evaders are caught in time, the tax administration should not be unduly harsh to relatively small offences and impose disproportionate punishments. It is also critical in this context that honest taxpayers are not harassed and given sufficient opportunity to present their side. Another important aspect that the Council is expected to decide is the setting up of Goods and Services Tax Appellate Tribunals.

This is a long pending issue and should have been decided much earlier. The Council in this regard will consider the report prepared by a group of ministers (GoM) chaired by Haryana Deputy Chief Minister Dushyant Chautala. The group is said to have recommended that each bench should have a president, judicial members, and technical members from both the Centre and the state. The president of the appellate tribunal could be a retired judge of the Supreme Court or former chief justice of a high court. The GoM is said to have recommended a principal bench in New Delhi and similar benches in the states. States with less than 50 million population are expected to have up to two benches. No state is expected to have more than five benches.

While the GST council would do well to initiate the process of setting up the tribunal, the number of benches can always be adjusted depending on the caseload. It is likely that states and cities with relatively higher business activity would have more cases. Adjustment in the number of benches depending on the caseload would lead to quicker resolution over time. At a broader level, the Goods and Services Tax Appellate Tribunals would aid the ease of doing business. Thus, the Council is expected to move in the right direction and the said decisions would help strengthen the GST system. Besides, the Council is expected to discuss issues related to tax evasion in particular sectors. However, one big disappointment at this stage is that the issue of rate rationalisation is not said to be on the agenda. The Council would be well advised to speed up the process in this direction. This would not only help simplify the tax system, but also improve revenue collection and ease the fiscal pressure.