Ahead of the Union Budget, an inter-ministerial working group, consisting of the Finance Ministry, NITI Aayog, Labour Ministry, Department for Promotion of Industry and Internal Trade (DPIIT), and the Ministry of Skill Development and Entrepreneurship, has been tasked with accelerating the identification of provisions that can be decriminalised in various laws, according to three people familiar with the development.
“The provisions of the Payment of Gratuity Act are being looked at by the Labour Ministry. The Finance ministry is looking at the provisions in the Securities and Exchange Board of India Act, Securities Contracts (Regulation) Act, Depositories Act, National Bank for Agriculture and Rural. Development Act, National Housing Bank Act, Deposit Insurance and Credit Guarantee Corporation Act and Banking Regulation Act for decriminalisation,” a government official told Moneycontrol.
A number of other Acts, including the Employees' State Insurance Act, Factoring Regulation Act, Payment and Settlement System Act, RBI Act, Credit Information Companies (Regulation) Act, State financial corporations Act, Insurance Act, Life Insurance Companies Act, The Competition Act, Insolvency and Bankruptcy Code (Amendment) Act, Limited Liability Partnership Act, Companies Act, and Environment (Protection) Act are also under assessment for decriminalisation of certain provisions.
“The working group on decriminalisation of provisions consists of 22 members divided into sub-groups from various ministries, which is studying all the provisions under these laws. The group will shortlist provisions in which imprisonment can be done away with. A penalty provision is likely to be brought in instead. About 3-4 meetings have already happened with the working group,” he said.
The government has asked the group to expedite the identification of provisions that can be decriminalised. Presentations will be soon made after which the finalisation of such provisions is likely to happen. The decriminalisation of the second set of provisions will be a part of the Jan Vishwas Bill II, the official added.
Tax laws
Though the provisions of tax laws have not been decriminalised so far, this time the Income-tax Act, Central Excise Act, and Central Goods and Services Tax Act are also under review by the working group, he added.
During stakeholder discussions held recently, industry had sought decriminalisation 50-60 provisions in the tax laws.
“The industry has given representation to DPIIT to decriminalise 50-60 provisions from criminal prosecution in tax laws, including direct tax, GST and customs. It will be a confidence boosting measure. Courts, too, are overburdened to handle so many prosecution cases. It’s time for tax laws to be taken up,” a person familiar with the development told Moneycontrol.
There is scope for offences like delayed payments to be decriminalised. There are criminal prosecution provisions for delayed payment of TDS.
“Delayed TDS payment creates a huge issue because even directors of a company are prosecuted. Industry has suggested replacing it with a penalty. Only in cases of more grave offences should criminal prosecution be there. The penalty should be as a deterrence and TDS payment delays should be treated as a civil liability, according to the industry,” he said.
In Customs Act, for evasion of duties or wrongful declaration there are criminal consequences with low thresholds.
“There are cases where valuation is in dispute or is being assessed by a special valuation branch of customs. Industry has suggested it should be kept out of prosecution and should be a civil penalty. For duty evasion, the threshold has been increased from Rs 50 lakh to Rs 1 crore, which is still low, according to the industry,” he said.
The tax department has put in a system wherein more data is available in the hands of law enforcement agencies, making evasion and non-compliance difficult. Scrutiny and investigations are happening on the basis of the data. “If the government decriminalises some tax provisions it will send out a good message to businesses,” he added.
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