SC refuses to extend GST amnesty scheme
Amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined amount, in exchange for forgiveness of a tax liability (including interest and penalties) relating to a previous tax period(s) and without fear of criminal prosecution. In some cases, legislation extending amnesty also imposes harsher penalties on those who are eligible for amnesty but do not take it. Tax amnesty is one of voluntary compliance strategies to increase tax base and tax revenue. Introduction of amnesty in any fiscal year is to help a state treasury raise tax revenues, adding beneficiaries who have not declared their assets previously.
From the time GST was introduced in July 2017, there has been a lot of non-compliance due to the – ambiguity in the GST provisions, regular amendments, lack of knowledge, etc. Further, the non-filers chose to not be compliant because of the penalty and late fee applications. Therefore, the GST Amnesty Scheme was introduced to encourage non-filers to voluntarily come forward and file their GST returns by providing a one-time relief from late fees.
The notification for the GST amnesty scheme was issued by the GST Council on June 24, 2020, giving time till September 30, 2020, for filing of returns between July 2017 and July 2020. It had also capped the late fee at Rs 500. For any subsequent delay, a late fee of Rs 50 per day was levied. The Supreme Court declined to issue directives on extending the GST amnesty scheme, saying it was “a policy decision exclusively within the domain of the government”.
Petition filed for Extension of GST Amnesty Scheme
- A petition was filed by petitioner Satyakam Arya who had assailed the notification issued by the GST council pertaining to the GST Amnesty Scheme.
- The petitioner asked for an extension of the scheme by two months, besides reimbursement of the late fee already collected.
- The petitioner had argued that small traders had not been able to avail of these schemes because they neither had the infrastructure like big business houses nor had they the liberty to step out and do the needful because of the lockdown last year due to the Covid-19 pandemic.
- Except for some essential services and activities, the rest of India’s $2.9-trillion economy remained shuttered during the lockdown period. Economic activity came to a grinding halt in the country.
Observations of the Supreme Court (SC)
- A SC bench comprising justices Dhananjaya Y Chadrachud and MR Shah dismissed a petition by the trader from Chhattisgarh’s Bilaspur who had urged the court to direct the Central government and the GST council to extend the amnesty scheme, giving more time to small businesses and MSMEs to file their returns.
- In SC’s view, the reliefs, as sought in the petition, pertained in the realm of policy decisions.
- It would be inappropriate for SC to entertain a petition of this nature, such as extension of the amnesty scheme; a cap on the late fee to be collected; exemption of late fee paid for a period between March 25, 2020 and June 30, 2020 and refund of the amount already collected towards late fee.
- The court emphasised that the amnesty scheme was itself a “policy intervention” by the government of India and that “the terms on which the amnesty scheme was executed in the realm of a policy decision.”
Amnesty Schemes also has many opponents because of the long-term effects on society. Tax amnesty gives an advantage to those who break the law. People lose confidence in justice and punishments lose its effectiveness. It may lead to decreasing morality and increasing tax crimes. Some of these negative effects may be eliminated with strict regulation and careful choice of who will be tax amnesty applied on.