Government Contemplates GST Evasion Threshold Hike to Rs 3 Crore

Posted on    17 November 2023

Government Mulls Significant Reforms to Tackle GST Evasion: Arrest and Prosecution Threshold Set to Rise to Rs. 3 Crore


In a bid to enhance the business environment and alleviate concerns of harassment, the central government is contemplating a pivotal shift in the Goods and Services Tax (GST) landscape. The proposed move involves elevating the threshold for arrest and criminal prosecution in GST evasion cases from the existing Rs. 2 crore to a more lenient Rs. 3 crore. This potential revision, however, comes amid persistent challenges, as businesses initially sought an even higher exemption of up to Rs. 5 crore.

Changing Dynamics: Summonses and Rules Overhaul

Sources reveal that alongside the reconsideration of arrest thresholds, the Center is also eyeing changes in the rules governing the issuance of summonses to violators. The Central Board of Indirect Taxes and Customs (CBIC) is contemplating modifications, particularly in cases involving fraudulent invoicing. Despite notable improvements in overall compliance, a substantial number of fraudulent invoice cases persist, prompting authorities to exercise caution and resist relaxation.


Combatting Fraud: New Program and Alarming Statistics

Taking a proactive stance against GST evasion, the government is set to launch a comprehensive program in November 2023 targeting input tax credit fraud. Recent statistics paint a concerning picture, with the discovery of 1,040 cases of GST evasion amounting to a staggering Rs. 1.36 trillion in the first half of 2023-24. A significant chunk of this sum, Rs. 14,000 crore, is attributed to input tax credit fraud.

Enforcement Trends: Arrests and Compliance Challenges

Contrary to previous years, the number of arrests for GST evasion in the current fiscal year has seen a decline. With 96 individuals apprehended so far, this figure is notably lower than the corresponding numbers of 460 in FY21, 342 in FY22, and 190 in FY23. However, compliance challenges persist among small and medium-sized enterprises, with 100,000 businesses failing to adhere to the e-invoicing norms mandated by the GST regime for entities with an annual turnover exceeding Rs. 5 crore.

E-invoicing Dilemma: Impact on Compliance and Fraud Prevention

The introduction of e-invoicing, a crucial requirement for businesses with turnovers surpassing Rs. 5 crore, aims to provide real-time access to invoices and streamline the process of claiming input tax credit. Disturbingly, default rates are high, especially in businesses with turnovers ranging from Rs. 5 crore to Rs. 20 crore. According to official sources, a substantial 20-30% of businesses falling within this turnover bracket are yet to achieve compliance. Warning letters have been issued, cautioning of potential consequences if compliance is not promptly ensured.


As the government contemplates these significant reforms to curb GST evasion, the evolving landscape demands businesses to adapt swiftly to regulatory changes. The proposed amendments signify a delicate balance between facilitating ease of doing business and ensuring robust mechanisms to deter fraudulent activities in the GST domain. The effectiveness of these measures will undoubtedly shape the future of GST compliance in the country.

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