Promoters & GST Authority Becomes Rival for Illegitimate Arrests

According to a recent update, a contention related to GST and taxman’s power has reached the Delhi High Court. Promoters of companies which are suspected in evasion of Good and Services Tax (GST) are now knocking the door of the high court.

Several promoters have filed a petition against the validity of GST statutory provisions related to arresting the company’s promoters and freezing their bank accounts. The court also accepted the petition for further hearing.

This dispute is a result of the ongoing rift between the Promoters and Indirect tax departments:

• At first, several promoters have been arrested by the indirect tax department in cases where the department suspected their companies to be indulging in circular trading or supplying goods without an appropriate invoice to avoid paying GST or avail input tax credits A complete guide for understanding the basics of input tax credit and it calculation with detailed examples under GST (Goods and Services Tax) India.
• Then Bombay high court, in March, criticized the department and also granted bail to several promoters who were arrested.
• Later in June, the Indirect tax department went to Supreme Court and claimed that it could take such measures under the law and also their previous steps are also under LAW.
• The matter is still before the top court, and during this, the department again started to arrest promoters of companies which are suspected to be indulging in circular trading or supplying goods without an invoice.
• Now on Tuesday, promoters have filed the petition against the power of taxman and validity of GST statutory provisions.

Abhishek A Rastogi, a partner at Khaitan & Co. come up with a statement that ” The arrest is the applicability of section 132 and section 69. So read down these provisions very carefully in case there is no avoidance of taxes. Section 132 and section 69 and their sub-sections have provisions related to the power of the tax department and also in the matters of selling goods and services without appropriate invoices.