Firms likely to move court against arrest provisions under GST laws

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Companies are likely to file a petition in the Orissa High Court (HC) next week challenging constitutional validity of jail provisions under the goods and services tax (GST) laws.


While the government claims that companies are booked under GST laws for fraudulently claiming the input tax credit (ITC), experts find loopholes in the provisions, particularly those related to arrests.


According to the Orissa HC’s observation in a case pertaining to jail of a businessman, 1,620 cases of fraudulent claims for ITC involving a sum of Rs 11,251.3 crore were registered during 2018-19. The number of cases stood at 535 involving a sum of Rs 2,565.40 till June 25 during 2019-20, the court said.




Abhishek Rastogi, partner at Khaitan & Co, who is arguing the cases of arrest of businessmen in various courts, said the Section 69 of the central GST Act is arbitrary since it gives powers to GST commissioners to arrest a person if he has “reasons to believe” that the person has claimed fraudulent ITC.


Commissioners can order up to five years of arrest of a person who he has reasons to believe is engaged in fraudulent claims.


“Reasons to believe are subjective in nature and are prone to misuse,” Rastogi said, adding the constitutional validity of the provision would be challenged in Orissa HC next week.


He wondered as to how arresting a person serves the purpose of the authorities to check fraudulent claims. “You (authorities) seize his accounts and books that could be sufficient to serve the purpose,” he said. Without giving show cause notices, the authorities are putting persons in jail when the charges are not even proved, he said.

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