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Tax Practitioner | 17+ yrs ⚖️ | PhD Scholar in Law (Intl Trade and Tax Law ) 📚 | Exploring Law, Economics & Psychology | Bridging Practice and Academia

  • An Innocent Question That Defines Modern Families

    The other evening, my 7-year-old son asked me a simple yet disarming question:
    “Dad, when I grow up, will I live separately?”

    It took me a moment to respond. I smiled and asked him,
    “Tell me, am I big or small?”
    He replied, “You’re big, Dad.”

    So I asked,
    “Then tell me, am I living separately or with whom?”
    He thought for a moment and said,
    “With Mom, Didi, and me.”

    I smiled again and said,
    “Then how can you live separately, my son?”
    He looked at me, paused, and said softly,
    “Yes, you’re right, Dad.”

    That brief exchange stayed with me.
    In that innocent question lay the truth of our times — that children today are growing up in a world where separation feels normal, and togetherness feels temporary.

    We have built societies so nuclear that the idea of living as one family seems like a memory of the past.
    And yet, in that small conversation, I found hope — a reminder that the values of love, connection, and family still live in the purest corners of a child’s heart.

    Let’s not let those values fade.
    Sometimes, the deepest lessons come not from books or laws, but from the innocent questions of our children.

    — Sidheswar Jena
    PhD Scholar – Law

  • GST and the “Double Penalty” Dilemma: Why Section 125 Cannot Apply When Section 47 Late Fees Are Paid

    By Sidheswar Jena, PhD Scholar (Law)

    Introduction

    The Goods and Services Tax (GST) regime was designed to simplify taxation, but its penalty provisions have sometimes been applied in ways that burden honest taxpayers. A recurring controversy is whether the general penalty under Section 125 of the CGST Act can be imposed in addition to the late fee under Section 47 for delayed return filing. Several recent judicial pronouncements — notably from the Madras High Court — make it clear that such double penalisation is legally unsustainable.

    —

    Statutory Scheme: Section 47 vs. Section 125

    Section 47 (Late Fee): imposes a fixed late fee for failure to furnish returns within time. It is a specific sanction tailored for delay.

    Section 125 (General Penalty): provides a residuary penalty of up to ₹25,000, but only “where no penalty is separately provided for such contravention.”

    The legislative intent is clear: if a contravention already attracts a specific fee or penalty under the Act, Section 125 cannot be invoked to duplicate punishment.

    —

    Case Law: Madras High Court’s Clarification

    In Tvl. Jainsons Castors & Industrial Products v. Superintendent of GST (2025), the Madras High Court quashed a Section 125 penalty levied in addition to the late fee under Section 47. The Court held:

    1. Section 125 is residuary and cannot be mechanically applied where a specific penal provision exists.

    2. Imposing both late fee and general penalty amounts to double jeopardy in taxation, which is impermissible.

    3. Absence of fraudulent intent or evasion makes the imposition of an additional penalty disproportionate.

    The Court’s ruling aligns with earlier practitioner commentary and guidance notes that emphasise the limited role of Section 125.

    —

    Principle of Proportionality and Harassment Concerns

    Penalties are punitive, not compensatory. The doctrine of proportionality requires that sanctions correspond to the nature of the offence. When a taxpayer has already discharged the statutory late fee, layering an additional penalty is excessive and amounts to harassment.

    Courts have consistently discouraged such administrative overreach, underscoring that tax compliance thrives on fairness and predictability — not fear.

    —

    Practical Implications for Taxpayers

    If confronted with a Section 125 penalty for late filing:

    Primary Defence: Section 47 already prescribes the sanction; Section 125 is inapplicable.

    Secondary Defence: No intent to evade, taxes duly paid, delay was procedural.

    Procedural Defence: Challenge lack of proper show-cause notice or hearing.

    Relief can be sought through writ petitions, appeals, or representation to higher authorities citing the Madras HC decision.

    —

    Conclusion

    The GST framework recognises that not all contraventions merit the same degree of punishment. Section 47 provides a specific and sufficient consequence for late filing — the late fee. Extending Section 125 to such cases is contrary to legislative intent, violates principles of fairness, and amounts to taxpayer harassment. Judicial guidance now reaffirms that officers must exercise discretion lawfully and avoid the temptation to “double punish.

    The message is simple: no double penalty where the law already speaks once.

  • EDUCATION IS FREEDOM, EDUCATION IS LIFELINE

    By: Sidheswar Jena
    PhD Scholar – Law

    EDUCATION IS FREEDOM, EDUCATION IS LIFELINE

    Education is more than classrooms and textbooks—it is the heartbeat of a society. It shapes individuals, defines values, and determines whether a nation rises or collapses. Without education, a society does not just stand still; it slowly disintegrates.

    Education is freedom. Education is lifeline. It liberates minds from ignorance, empowers people to question injustice, and ensures that societies remain alive and progressive.

    WHY A SOCIETY CANNOT SURVIVE WITHOUT EDUCATION

    Education is the foundation of progress. It builds informed citizens, skilled workers, responsible leaders, and ethical thinkers. A society that ignores education breeds ignorance, inequality, and chaos. From technology to healthcare, from democracy to economy—every system collapses in the absence of educated citizens.

    ➡️ In short, NO EDUCATION MEANS NO DIRECTION.

    THE POWER OF QUALITY EDUCATION

    But not just any education will do. QUALITY EDUCATION is what makes the real difference.

    It encourages innovation.

    It sharpens critical thinking.

    It empowers individuals to solve problems creatively.

    Poor-quality education, on the other hand, creates blind followers instead of independent leaders. A society’s future is directly tied to the quality of education it provides today.

    WHO FEARS EDUCATION?

    It is not the poor who dislike education—it is the powerful who fear it. Dictators, corrupt leaders, and extremist groups see education as a threat. Why? Because educated people ask questions, resist propaganda, and refuse to be controlled.

    📖 History shows us: every oppressive regime first attacks schools, teachers, and books.

    WHY EDUCATION IS SO COSTLY

    If education is so vital, why is it out of reach for so many?

    The truth is, education has become commercialized. In many parts of the world, it is treated as a business, not a right.

    Private institutions charge unchecked fees.

    Government investment often remains inadequate.

    Quality education becomes a privilege of the wealthy, leaving the poor behind.

    COUNTRIES THAT PRIORITIZE EDUCATION

    Some nations prove that when governments invest in education, societies thrive:

    Finland: Stress-free, student-focused learning.

    Singapore: Discipline, competitiveness, and global skills.

    Germany: Free or affordable higher education, ensuring equal access.

    Japan: Strong values of discipline and ethics built into schooling.

    ✅ These nations see education not as an expense, but as an investment in their future.

    THE PROBLEM OF EDUCATION GOONS

    In many countries, private schools and coaching centers exploit parents with sky-high fees.

    But countries like Germany and Finland have strict rules to regulate costs, prevent exploitation, and maintain fairness. Strong governance ensures that education remains a right—not a luxury.

    HITLER’S HATRED TOWARD EDUCATION

    Adolf Hitler understood the power of free thought—and feared it.

    He closed educational institutions.

    He censored books.

    He promoted Nazi ideology in schools to create obedient followers.

    His example shows what happens when education is suppressed: societies become tools of tyranny.

    MY TAKE: EDUCATION IS FREEDOM, EDUCATION IS LIFELINE

    Education is not optional—it is the lifeline of a free and progressive society. Without it, there is no innovation, no democracy, and no justice.

    Education is freedom. Education is lifeline.

     Nations that empower education build leaders.

    Nations that suppress it breed slaves.

    The choice is clear: to survive and thrive, we must invest not just in education, but in QUALITY EDUCATION FOR ALL.

     By: Sidheswar Jena

    PhD Scholar – Law

  • Why Do People Believe Lies Over Truth?

    By Sidheswar Jena
    PhD Scholar – Law

    We often hear people say society is “intelligent.” But if that is true, why does the crowd so easily follow someone who keeps lying—even when those lies are exposed in broad daylight? At the same time, a person who speaks truth clearly and directly is ignored, even abandoned. This contradiction is not just politics or culture—it is psychology.

    Repeated Lies Feel Like Truth

    Psychologists explain something called the illusory truth effect: when a lie is repeated many times, our brain starts to accept it as truth. Familiar words feel safer than unfamiliar facts. Lies are repeated loudly, again and again, while truth is usually quiet, serious, and said only once. Naturally, the crowd remembers the lie, not the fact.

    The Pull of the Crowd

    Another reason is herd mentality. Most people do not like to stand alone. If the majority believes in a lie, joining them feels safe, while supporting the truth feels risky and isolating. It is easier to move with the tide than against it.

    Lies Are Attractive, Truth Is Heavy

    Lies are often sweet. They promise quick fixes, easy answers, or someone to blame. Truth is harder—it demands responsibility, patience, and sometimes sacrifice. People turn away from truth not because they cannot see it, but because they do not want the burden that comes with it.

    The Contradiction of “Intelligent Mass”

    This creates a painful contradiction. Society, which prides itself on being educated and progressive, ends up rewarding liars while punishing truth-tellers. In reality, the “intelligent mass” often acts not with intelligence, but with fear, greed (lalach), and emotion.

    Has Truth Lost Its Value?

    Today, truth seems less about facts and more about agreement. If enough people believe a lie, it starts to look like reality. This is why a repeated liar can be celebrated, while an honest person is left alone.

    The Hard Reality

    The sad truth is this: lies survive because they are easy to hear, while truth is difficult to accept. Until society learns to choose truth over comfort, the liar will continue to be cheered in daylight, and the truth-teller will continue to stand in silence.

  • Allegations and Accountability: The Crossroads of Government and Opposition

    By Sidheswar Jena
    PhD Scholar – Law

    Indian democracy thrives on contest, scrutiny, and accountability. At its core lies not only the power of governments to enact laws but also the responsibility of opposition leaders to question them. Recently, Rahul Gandhi’s allegations against the current government have generated heated debate. The real questions are: what happens if these allegations are proven true—or if they are proven false? And what if nothing happens either way? Who compensates the loss of public trust suffered by the common citizen?

    I cannot comment on matters under the Election Commission of India’s jurisdiction, but one must ask: isn’t it the prime duty of the ECI to address such issues with seriousness rather than dismissive remarks? Allegations of this scale are not merely about politics—they strike at the integrity of the nation and the credibility of its institutions. Should the Supreme Court or even the President not consider taking suo motu cognisance, rather than allowing the issue to boil unchecked?

    Why can’t we, as citizens, demand from both sides—government and opposition—fair justice, transparency, and responsibility?

    If Allegations Prove True: A Question of Legitimacy

    For the Government:

    • Constitutionally, laws passed by Parliament remain valid regardless of later discrediting. They can only be repealed by Parliament or struck down by courts.
    • But the moral legitimacy of the government would face a severe blow. Policies would be seen less as governance and more as actions under suspicion.
    • Critics argue this could deepen political divisions, creating a climate of distrust and instability.

    For Rahul Gandhi:

    • Vindication would give him political capital and reinforce his narrative of accountability.
    • The younger generation, often skeptical of politics, may begin to see him as a credible challenger.
    • He would move from being a critic to a leader who stood vindicated against power.

    If Allegations Prove False: A Crisis of Credibility

    For the Government:

    • Rejection of the allegations would consolidate its standing.
    • The ruling party would present itself as vindicated, portraying the accusations as baseless.
    • This would reinforce its authority while weakening its critics.

    For Rahul Gandhi:

    • His credibility would suffer.
    • The electorate, particularly younger voters, may view him as raising charges without evidence.
    • The broader opposition would also weaken, as future criticisms risk being dismissed as rhetoric.

    The Shared Risk: Polarisation

    Regardless of the outcome, polarisation remains the common danger. Allegations of this magnitude divide citizens along ideological lines, eroding faith in institutions and in each other. Whether the government emerges stronger or the opposition vindicated, democracy suffers if debates do not translate into transparency and accountability.

    Here, responsibility lies with:

    1. The Election Commission of India – to uphold electoral credibility.
    2. The Supreme Court – to act when constitutional balance is at stake.
    3. The President of India – as the guardian of constitutional morality.
    4. The Common Citizen – to demand accountability without bias.

    If these actors fail to respond responsibly, then India—one of the world’s strongest democracies—risks long-term damage. It will not just be today’s citizens but also our future generations who suffer.

    The Larger Democratic Lesson

    This moment reflects a deeper truth: both government and opposition bear responsibility.

    • Governments must ensure transparency to prevent suspicion.
    • Opposition leaders must back challenges with substance, so credibility is not lost in overreach.

    Ultimately, democracy depends less on who wins a political battle and more on whether public trust survives the contest.

    Possible Scenarios

    • If the allegations prove true: The Government faces a legitimacy crisis while Rahul Gandhi gains credibility.
    • If false: The Government consolidates authority while Rahul Gandhi suffers a credibility crisis.
    • If undecided: The citizens are the real losers—left with doubts but no answers.

    Either way, India’s true test lies in rising above polarisation and ensuring that accountability—on both sides—remains the foundation of its democratic spirit.

  • Audit Trail Mandate in India: Real Impact or Just Another Compliance Burden?

    By Sidheswar Jena- PhD Scholar-Law

    Introduction

    On March 24, 2021, the Ministry of Corporate Affairs (MCA) issued Notification No. G.S.R. 205(E) introducing the Companies (Accounts) Amendment Rules, 2021. These rules made it compulsory for companies to maintain accounting software with an audit trail (edit log) feature. The intent was clear: stop backdated manipulation, ensure every change is logged with a timestamp, and make auditors accountable for reporting compliance.

    After two years of deferment, the requirement finally came into force from April 1, 2023 for the financial year 2023–24. This was hailed as a milestone for corporate governance and financial transparency. But the real question remains: Has this mandate delivered any real benefits, or is it simply another costly compliance burden?

    Under the amended rules, companies must ensure that:

    • Their accounting software has a non-disableable audit trail/edit log.
    • Every transaction and subsequent change is recorded with date and user details.
    • Audit logs are preserved as per record-retention norms.
    • Auditors, under Rule 11(g), report on whether:
      1. The company used audit-trail-enabled software.
      2. It remained operational throughout the year.
      3. It was tamper-proof.
      4. The records were properly preserved.

    Promised Benefits of Audit Trails

    • Transparency – A clear, verifiable record of all entries and changes.
    • Forensic Use – Stronger tools for SFIO, SEBI, or tax authorities to trace misconduct.
    • Deterrence – Making it harder for companies to manipulate books without leaving evidence.
    • Investor Confidence – Reinforcing the trustworthiness of corporate disclosures.

    The Reality After Mandate

    1. Fictional Transactions Remain
      If the underlying data (invoice, receipt, adjustment) is false, the audit trail only preserves a well-documented fiction. Fraudulent inputs create fraudulent logs.
    2. Compliance Costs Are Heavy
      • Technology upgrades: Companies upgraded to compliant ERPs.
      • Operational effort: Employees must maintain logs meticulously.
      • Audit fees: Auditors charge more for verifying audit trail compliance.
        For many SMEs, this feels like paying extra for more accounting work without obvious value.
    3. No Documented Public Wins Yet
      Despite the mandate, no high-profile case has been publicly reported where audit trail evidence was decisive in uncovering fraud. Investigative agencies may already be leveraging logs, but the successes are not credited or highlighted in public domain.

    Where Government Could Benefit

    Even though results are not yet visible, audit trails can strengthen governance in key ways:

    • Regulatory Oversight – MCA and SEBI can demand verifiable logs to check tampering.
    • Tax Enforcement – Discrepancies between declared tax returns and company books could be traced back to edits.
    • Forensic Investigations – Agencies like SFIO or ED could prove misconduct by showing who changed what, and when.
    • Investor Protection – For listed firms, non-tamperable trails increase investor trust.
    • Internal Governance – Companies can prevent small-scale frauds like duplicate invoicing or unauthorized payments.

    The Illusion of Control

    The biggest risk is that audit trails become a box-ticking exercise:

    • If regulators check only for existence of logs, not substance.
    • If auditors issue certificates without deeper verification.
    • If management overrides systems or colludes internally.

    In such cases, audit trails create an illusion of transparency—adding cost but not accountability.

    My Take:

    The audit trail mandate is an important step towards digital transparency. But as of now, it remains more of a burden than a boon for many companies. The government and regulators have not yet demonstrated measurable benefits, such as fraud prevention, improved enforcement, or cost savings to the public. For audit trails to achieve their potential, they must move beyond software compliance. Regulators must actively use them in enforcement, auditors must apply rigorous verification, and companies must embrace them as governance tools rather than obligations. Only then can the audit trail evolve from a costly ritual into a meaningful safeguard of accountability

  • Is Accounting Really Difficult, or Did the World Make It Impossible?

    By: Sidheswar Jena – PhD Scholar- LAW

    Introduction:
    When you boil it down, accounting is simple: track what comes in, what goes out, what you own, and what you owe. But the moment businesses, regulators, auditors, banks and investors get involved, that simplicity seems to vanish. This article explains — from every useful angle — why accounting feels impossible for many, why even governments struggle with it, and what realistic fixes look like.

    1. The Core — What Accounting Really Is

    At its essence accounting is a language for money and resources:

    • Record flows (income/expenses).
    • Report positions (assets/liabilities/equity).
    • Translate financial reality into reliable information for decisions.

    Two basic equations anchor the whole thing:

    • Assets = Liabilities + Equity
    • Income – Expenses = Profit/Loss

    That’s the foundation. The rest is structure built on top of it.

    2. How Complexity Was Layered On (A Short Evolution)

    • From ledgers to regulation: Simple double-entry expanded as commerce grew and governments sought revenue and control.
    • Financial innovation: Corporates created complex instruments (derivatives, stock options, structured finance) that needed special accounting.
    • Globalization: Multi-jurisdiction business required multiple standards and tax regimes.
    • Technology & scale: Real-time transactions, e-payments and large datasets created new reconciliation and control demands.
    • Risk & fraud prevention: Controls, audits, and reporting increased to stop misuse — adding further process and proof requirements.

    3. Root Drivers of the “Impossible” Feeling (Detailed)

    1. Regulatory fragmentation — Different standards (national GAAPs, IFRS/Ind AS) and tax regimes lead to conflicts and added work.
    2. Divergent stakeholder objectives — Same numbers serve owners, tax authorities, lenders and investors — each wants a different story.
    3. Perverse incentives & politics — Governments need revenue; businesses want to minimize tax. Rules are written, amended, and contested, increasing complexity.
    4. Business structure & innovation — Holding companies, transfer pricing, cross-border flows, and financial engineering demand nuanced accounting.
    5. Data scale and speed — Volume of transactions and expectations for near real-time reporting stretch people & systems.
    6. Human factors — Skill gaps, communication failures, and cultural resistance to transparency.
    7. Enforcement vs. facilitation trade-off — Strong regulation reduces fraud but increases compliance burden.

    4. Why Even Governments & Institutions Struggle

    • Competing policy objectives: Raise revenue, encourage growth, control evasion, and protect consumers — often contradictory.
    • Fragmented law-making: Tax, company law, and sector regulations are created by different bodies without perfect alignment.
    • Legacy systems & admin capacity: Many tax/registry systems are old, poorly integrated, and not built for real-time simplicity.
    • Lobbying and exemptions: Complexity grows through carve-outs and special rules.
      Result: policies meant to improve fairness can make accounting harder in practice.

    5. Real-World Consequences

    • SMEs: Overburdened by compliance costs; diversion of time from running the business to paperwork.
    • Large firms: High advisory and audit costs; complexity used (legitimately and not) for tax planning.
    • Auditors & accountants: Elevated responsibility and stress; need for continual upskilling.
    • Economy: Compliance cost becomes economic drag; opacity undermines trust.

    6. Trade-Offs & Limitations (Be Realistic)

    • Simplification increases risk — remove too many checkpoints and you increase fraud/tax leakage.
    • Uniformity costs sovereignty — global standards ease comparability but reduce local policy flexibility.
    • Automation needs governance — AI/automation can save effort but requires good data and strong controls.

    7. What Works and Who Must Do It

    For Policymakers & Regulators

    • Conduct regulatory impact assessments and sunset clauses for complex rules.
    • Promote threshold-based compliance (lighter rules for small businesses).
    • Invest in digital, API-based filings and interoperable registries.
    • Encourage harmonization where practical (adopt core common principles, allow local add-ons).

    For Businesses (Owners / CFOs)

    • Simplify the chart of accounts to align with decision needs.
    • Automate transactional capture (bank feeds, e-invoicing) to reduce manual errors.
    • Invest in internal controls and periodic reconciliations.
    • Treat accounting as strategic — use it for insight, not just compliance.

    For Accountants & Finance Teams

    • Shift from transactional bookkeepers to strategic advisors — learn data analytics, communication, and domain law (tax/company law basics).
    • Prioritize clarity in reporting: narrative + numbers.
    • Build cross-functional relationships (legal, ops, tax).

    For Educators & Training Institutes

    • Teach practical, scenario-based accounting (not only theory).
    • Include ethics, data literacy and regulatory navigation.
    • Partner with industry for internships and real case studies.

    For Technology Providers

    • Build interoperable solutions (APIs, standardized exports).
    • Provide guardrails for common scenarios (prebuilt reconciliations, tax rule engines).
    • Use AI for anomaly detection, not black-box reporting — keep explainability.

    For Auditors & Oversight Bodies

    • Focus on materiality and risk-based audits.
    • Embrace continuous auditing capabilities supported by automated feeds.
    • Communicate findings in plain language tying to business impact.

    8. Practical Checklist (10 Immediate Actions)

    1. Map your stakeholders and what they really need.
    2. Simplify your chart of accounts and align it with reporting goals.
    3. Automate transaction capture (bank/point-of-sale/API).
    4. Reconcile daily/weekly, not monthly.
    5. Apply threshold-based compliance in policy proposals (regulators).
    6. Invest in training: tax + tech + communication.
    7. Adopt standard data formats for invoices and filings.
    8. Run periodic “regulatory simplification” reviews.
    9. Use dashboards that pair numbers with plain-English commentary.
    10. Pilot any big change in a sandbox before scaling.

    9. Short Case Snapshot (Illustrative)

    • Small retailer: Manual invoicing, monthly bank reconciliations, high late-filing fines. Solution: e-invoicing, point-of-sale bank feed, simplified compliance threshold.
    • Mid-sized exporter: Multi-currency, input tax credits, cross-border rules. Solution: standard chart across entities, FX automation, tax advisory for claims.

    10. My Thought — A Route Back to Clarity

    Accounting doesn’t have to be a mystery. But getting back to clarity requires coordination — policy reform, smart automation, education, and a cultural shift from concealment to transparency. The trade-offs are real: simplification must be balanced with fraud prevention and revenue needs. Yet with targeted steps, we can make accounting serve its original purpose again — a universal, understandable language for money.

  • The Hidden Realities of India’s Economic Growth: Unmasking the Impact of GST Reforms on the Unorganized Sector

    By Sidheswar Jena-PhD Scholar -Law

    Abstract

    India’s economy is often celebrated as one of the world’s fastestgrowing, with official GDP figures placing it as the fifthlargest globally at approximately $3.57 trillion in 2024. Yet, beneath this narrative lies a stark divide: the unorganized sector, which employs over 90% of the workforce, continues to grapple with structural challenges exacerbated by policies like the Goods and Services Tax (GST). This article examines whether recent GST rate restructurings—effective from September 22, 2025—represent true reform or merely a superficial adjustment. Drawing on empirical data, industry examples, and economic reports, we argue that while these changes may ease burdens for the organized sector, they risk further marginalizing the unorganized economy, potentially stifling inclusive growth. My analysis reveals a “real” growth rate closer to 12% when accounting for informal contributions, highlighting the need for targeted revival strategies.

    Keywords: GST Reforms, Unorganized Sector, Economic Inequality, Informal Employment, India GDP

     Introduction: Growth Narratives vs. Ground Realities

    India’s official economic story is one of triumph: a 6.5% GDP growth projection for 2024-25, positioning the nation as a global powerhouse. However, this metric predominantly tracks the organized sector, which accounts for just 610% of employment. In contrast, the unorganized sector—encompassing daily wage laborers, construction workers, house helps, and smallscale enterprises—drives 94% of jobs, with over 30 crore workers registered on the eShram portal as of March 2025.

    Demonetization (2016) and GST implementation (2017) were touted as modernization tools, but they have disproportionately burdened this sector. Cumulative shocks from these policies, plus COVID19, have erased ₹11.3 lakh crore in informal sector value and 1.6 crore jobs. Far from the claimed 100 lakh crore net loss over seven years, these figures underscore a systemic bias toward formalization at the expense of the informal majority. As the 56th GST Council announces rate cuts and slab simplifications effective tomorrow (September 22, 2025)—reducing rates on essentials like pressure cookers and leather goods to 5%—the question remains: Who truly benefits?

     Defining the Sectors: Organized vs. Unorganized

    The organized sector operates under regulatory frameworks, enabling Input Tax Credit (ITC) claims under GST, which lowers effective costs. In contrast, the unorganized sector—exempt if turnover is below ₹20 lakh (services) or ₹40 lakh (goods)—lacks such benefits. Even composition scheme users (for turnovers under ₹1.5 crore) cannot claim ITC, making their outputs 15% more expensive due to unrecoverable taxes.

    | Sector | Employment Share | Key Features | GST Impact |

    | Organized | 10% | Formal registration, ITC eligibility | Cost advantages, demand shift |

    | Unorganized | 94% | Informal, low turnover, cashbased | Compliance burden, no ITC, higher prices |

    This asymmetry has driven demand toward organized players, formalizing the economy but at the cost of informal livelihoods.

     The GST Regime: Boon for Organized, Bane for Unorganized?

    Since 2017, GST has increased compliance costs for unorganized entities, with limited digital literacy amplifying the pain. Research shows it has spurred formalization—government revenue rose 12% annually postGST—but at a steep informal price: liquidity crunches and market exclusion. The new 2025 restructure simplifies slabs (e.g., 5% on essentials, 18% standard), aiming to curb inflation. Yet, without ITC access for the unorganized, these cuts may not trickle down, potentially depressing demand further as informal goods remain pricier.

     Practical Examples: Industry Shifts

     Pressure Cookers: PreGST, this was a unorganized stronghold (40% market share). ITC denial made informal products costlier, shifting 60% demand to organized giants like Hawkins. Recent 5% rate cuts may help, but entrenched monopolies persist.

    Leather and Luggage: Traditionally unorganized (75% output from small units), GST triggered a demand pivot to formal firms. The Council of Leather Exports noted shutdowns, with exports dipping 5% initially. The 2025, 5% slab on prepared leather offers relief, but recovery lags.

    These shifts exemplify “colonization” by the organized sector, as IMPRI research terms it, leading to unemployment and reduced consumption.

     Economic Repercussions: Losses, Unemployment, and Skewed GDP

    Demonetization and GST have inflicted ₹11.5 lakh crore in informal losses (4.3% of FY23 GDP), far below exaggerated 100 lakh crore claims but devastating nonetheless. Official growth averaged 67% post2016, but adjusted for informal contributions (e.g., via better base year estimates), it’s closer to 4.5% (201117) or 12% annually when factoring unorganized stagnation.

    India’s true rank? Fifth by nominal GDP ($3.57T), though per capita ($2,500) underscores inequality. World Bank data shows poverty at 5.3% ($3/day line, 2022-23), but critics argue this undercounts, with 817 million in multidimensional poverty globally under revised lines. eShram’s 30+ crore registrations reveal a workforce earning as low as ₹100/day for 90% in some segments—data briefly public before removal—highlighting the “neomiddle class” illusion.

    Recent indicators: Car inventories swell with discounts (3month waits turned to overstock), signaling demand slump, not just EV shifts. RBI notes 70-75% capacity utilization, deterring investment. The 2025 GST tweaks risk amplifying this, as lower rates without informal support could slash demand by 5-10%, per sector analyses.

     Policy Implications: Beyond Propaganda

    Government narratives—via biased media—overshadow these truths, with only 7- 8 cr of Indians filing income taxes (mostly nil returns). Free ration schemes now cover 80 crore, a tacit admission of distress. True reform demands:

    1. ITC Extensions: Allow limited credits for composition scheme users.

    2. Digital Inclusion: Subsidized training for unorganized compliance.

    3. Sector Revival: Incentives for informal clusters (e.g., leather hubs).

    4. Holistic GDP Metrics: Incorporate informal data via eShram for accurate growth tracking.

     Conclusion: Toward Conclusive Development

    India’s “growing nation” facade masks a bifurcated economy where GST reforms, while progressive on paper, perpetuate inequality. The unorganized sector’s revival isn’t optional—it’s essential for sustainable 78% growth. Policymakers must prioritize the 94% over the 6%, lest depression looms. As the new GST era dawns tomorrow, let’s demand transparency over manifestation.

     References

     Employment Situation in India, April 2024. Directorate General of Employment.

     India Employment Report 2024. ILO.

     Impact of GST on Unorganized Sector. TaxAmicus, 2025.

     Note Ban, GST, COVID Shocks Cost ₹11.3 Lakh Cr. The Hindu, 2024.

     India’s GDP Misestimation. Harvard Kennedy School, 2018 (updated).

     Over 30.68 Crore Unorganised Workers on eShram. PIB, 2025.

     New GST Rates Effective September 22, 2025. The Hindu, 2025.

  • Critical Analysis of Penalty Provisions in the Indian Tax System: Implications for Tax Collection and Constitutional Validity

    Sidheswar Jena
    PhD Scholar in Law

    Abstract

    The Indian tax system, characterized by its federal structure and evolving reforms, incorporates stringent penalty provisions to deter non-compliance and evasion. This paper examines the system’s key components, analyzes the penalty mechanisms under the Income Tax Act, 1961, and the Goods and Services Tax (GST) regime, and critiques their contradictions with effective tax collection strategies. It further evaluates the constitutional validity of these provisions, highlighting judicial challenges and their alignment with fundamental rights. Drawing on recent data and case law as of 2025, the study argues that while penalties enhance revenue mobilization, their disproportionate application undermines equity, fosters litigation, and raises questions of constitutional propriety. Recommendations for reform emphasize proportionality, intent-based assessments, and enhanced enforcement mechanisms to balance deterrence with taxpayer rights.

    Introduction

    India’s tax framework operates within a federal paradigm, mandating that taxes be levied only by authority of law. Direct taxes, primarily income tax, are governed by the Income Tax Act, 1961, under the Central Board of Direct Taxes (CBDT), while indirect taxes have been streamlined through the GST regime since 2017, administered by the Central Board of Indirect Taxes and Customs (CBIC). The system’s objectives include revenue generation, economic equity, and compliance promotion, with digital initiatives like faceless assessments marking recent advancements.

    Penalty provisions serve as critical tools for enforcement, imposing civil and criminal sanctions to curb evasion. However, their implementation reveals contradictions: while aimed at boosting collections, they often result in burdensome litigation and disproportionate impacts on small taxpayers. This paper critically examines these aspects, juxtaposing them against tax collection efficacy and constitutional benchmarks, using updated data as of 2025.

    Overview of the Indian Tax System

    The Indian tax system bifurcates into direct and indirect levies, with the central government empowered over income tax and GST. Direct taxes, including personal and corporate income tax, contributed significantly to fiscal revenues, with gross direct tax collections reaching ₹27.02 lakh crore in FY 2024-25 (provisional figures). The GST, a destination-based tax unifying erstwhile levies like VAT and excise, recorded gross collections of ₹22.08 lakh crore in the same period, reflecting a 9.4% year-on-year growth.

    Reforms such as the Vivad se Vishwas scheme and amnesty provisions under GST aim to reduce disputes and encourage voluntary compliance. Nonetheless, challenges persist, including complex compliance for micro, small, and medium enterprises (MSMEs) and regional disparities in enforcement.

    Penalty Provisions in the Indian Tax System

    Penalties in the Indian tax regime are multifaceted, encompassing monetary fines, interest, and prosecution, designed to deter violations while facilitating revenue recovery.

    Under the Income Tax Act, 1961

    • Under-reporting and Misreporting (Section 270A): Imposes 50% of evaded tax for under-reporting and 200% for misreporting, replacing older concealment penalties since 2017.
    • Concealment of Income (Section 271(1)(c)): Ranges from 100% to 300% of tax evaded for inaccurate particulars.
    • Late Filing (Section 234F): Fixed at ₹5,000 (or ₹1,000 for low-income earners).
    • TDS/TCS Failures (Sections 271C, 271CA): Equivalent to 100% of undeducted tax.
    • Prosecution (Section 276C): Up to 7 years imprisonment for evasion exceeding ₹25 lakh.

    Appeals lie with the Commissioner (Appeals) or Income Tax Appellate Tribunal (ITAT).

    Under the GST Regime

    • Late Filing (Section 47): ₹50 per day (capped at ₹5,000–₹10,000 based on turnover).
    • Non-Fraudulent Evasion (Section 122): 10% of tax due or ₹10,000, whichever is higher.
    • Fraudulent Evasion (Section 74): 100% penalty plus 18% interest.
    • General Penalty (Section 125): Up to ₹25,000.
    • Criminal Offenses (Section 132): 6 months to 5 years imprisonment for evasion over ₹5 crore.

    Amendments in 2024, effective from November 2024, introduced amnesty for waiving interest and penalties in non-fraud cases for FY 2017-18 to 2019-20 if taxes are paid by specified dates.

    These provisions underscore a shift toward intent-differentiated penalties, yet their stringency remains a point of contention.

    Contradictions and Arguments Regarding Tax Collection

    Penalty provisions enhance tax collection by deterring evasion, contributing to robust revenue growth. However, contradictions abound:

    • Disproportionate Harshness vs. Compliance: High penalties for minor errors, such as 300% under Section 271, treat bona fide mistakes as willful evasion, leading to high litigation rates (e.g., 40% GST appeals). This erodes trust and contradicts simplification goals, as evidenced by amnesty schemes waiving penalties to recover dues.
    • Enforcement Gaps: Low audit coverage (1-2% of returns) undermines deterrence, with evasion persisting due to low detection probabilities. Studies highlight how complex structures exacerbate this for MSMEs.
    • Revenue Focus Over Equity: Penalties often exceed dues, functioning as additional revenue streams, disproportionately affecting small entities while corporates leverage rulings.
    • TDS Mechanism Flaws: Collecting 40% of direct taxes, TDS causes cash-flow issues and refund backlogs, contradicting efficient collection.

    These paradoxes suggest penalties inflate short-term revenues but hinder long-term compliance, advocating for AI-driven audits and graduated sanctions.

    Constitutional Validity and Challenges

    Penalty provisions derive legitimacy from constitutional entries enabling revenue protection, but challenges invoke Articles 14 (equality), 19(1)(g) (trade freedom), 21 (life and liberty), and 300A (property rights).

    Judicial Validations

    • In Sivagaminatha Moopanar v. ITO (1955), penalties were upheld as non-arbitrary under Article 14.
    • Mak Data Pvt. Ltd. v. CIT (2013) affirmed proportionality under Section 271.

    Key Challenges

    • Retrospective Taxation: The Vodafone case, involving retrospective amendments, violated predictability and Article 14, leading to arbitration losses and the 2021 repeal. Penalties amplified these issues, contradicting ex post facto prohibitions under Article 20(1).
    • TDS Provisions: A 2024 PIL by Ashwini Upadhyay challenged TDS as violative of Articles 14, 19, and 21, but was dismissed by the Supreme Court in January 2025 as “very badly drafted.”
    • GST Penalties: State of Kerala v. Builder’s Association (2024) mandated mens rea for fraud penalties, invalidating automatic impositions.
    • Broader Issues: Reverse burden in Black Money Act challenges Article 21, with low conviction rates questioning proportionality.

    Judicial scrutiny underscores the need for intent-proof and equitable application, recognizing tax planning as a potential right under Articles 21 and 300A.

    Conclusion

    Penalty provisions in India’s tax system are indispensable for revenue integrity but exhibit contradictions that impede efficient collection and constitutional adherence. Reforms should prioritize proportionality, technology integration, and stakeholder equity to foster a compliant ecosystem. Future research could explore empirical impacts of 2024 amendments on evasion rates.

  • GST Reform or Political Agenda? A Critical Analysis.

    By Sidheswar Jena, PhD-Scholar in Law

    Introduction

    When the Goods and Services Tax (GST) was introduced on 1st July 2017, it was hailed as the most transformative reform in India’s tax history. It carried the grand promise of “One Nation, One Tax, One Market” — unifying a fragmented VAT–Excise–Service Tax system into a seamless framework.

    Eight years later, however, GST stands at a crossroads. While its intent was noble, its implementation has been marred by loopholes, systemic misuse, and repeated amendments that have done little more than apply a band-aid to structural fractures. From fake invoicing to officer discretion, from fragile legal measures to political tinkering, GST today raises a crucial question: Is it truly a reform, or has it become another political agenda?

    This article examines the legal, administrative, and constitutional cracks within the GST framework and argues for structural corrections rather than cosmetic fixes.

    1. Registration Loopholes: A Weak Entry Gate

    GST registration, governed under Section 25 of the CGST Act, is PAN-linked and state-specific. But here lies the flaw: cancellation of a GSTIN under Section 29 in one state does not automatically bar the same PAN from registering in another state.

    Fraudulent taxpayers exploit this gap ruthlessly. A defaulter in one state resurfaces as a “new taxpayer” in another. Officers, armed with discretion but lacking accountability, often approve such registrations.

    Finding: By failing to impose a nationwide bar on fraudulent PANs, the Act leaves the door wide open for misuse, while honest taxpayers get entangled in red tape.

    2. Fake Billing & ITC Fraud: The Unaddressed Core

    GST is fundamentally a self-declaration tax. Taxpayers claim Input Tax Credit (ITC) based on invoices. The law originally envisioned invoice-matching provisions (Sections 42 & 43 of the CGST Act), but they were never fully operationalized.

    The result? Fake billing has become a cottage industry. Self-declaration without automated verification effectively means self-certification. Revenue integrity is left to the mercy of fraudsters.

    Finding: Without technological enforcement through real-time invoice matching, ITC remains the Achilles’ heel of GST.

    3. PAN & Aadhaar Blocking: A Legally Fragile Measure

    Recent policy debates suggest “blocking” PAN or Aadhaar of suspected evaders. But here is the constitutional problem:

    The CGST Act does not authorize such blocking; it only allows registration cancellation.

    Blocking without judicial sanction violates Article 19(1)(g) (right to trade) and Article 21 (right to livelihood and due process).

    Worse still, fraudsters can simply float LLPs or private companies with fresh PANs, rendering the measure futile.

    Finding: This is not only unconstitutional but also practically ineffective. What looks tough on paper is hollow in practice.

    4. Officer Discretion Without Accountability

    GST officers wield enormous discretion over registration approvals, cancellations, and revocations. Yet, the law imposes no direct accountability on them for wrongful or negligent orders.

    This lack of checks fuels corruption and harassment of genuine taxpayers. Dishonest practitioners even market their ability to secure instant approvals, often in a single day — bypassing mandatory field visits and geo-tagged verifications.

    Finding: A system without accountability allows both taxpayers and officers to game the process. Self-declaration is a noble principle, but it must be supported by automated checks and officer responsibility.

    5. Mid-Year Reforms: Cosmetic, Not Structural

    The GST Council frequently tweaks rates and slabs mid-year. While these decisions grab headlines, they add to business uncertainty. ERP systems, contracts, and compliance frameworks are constantly disrupted, while the larger issues of enforcement and fraud remain ignored.

    Finding: Cosmetic reforms may serve political optics, but they distract from systemic failures.

    6. Enforcement Without Deterrence

    Fraud cases make the news, but very few culminate in convictions. Penalties, when imposed, arrive late and inconsistently. Even complaints of PAN/Aadhaar misuse stagnate at the officer’s desk.

    Finding: Without swift adjudication and visible punishment, enforcement is reduced to theatre. A law without deterrence is a law without teeth.

    7. Refunds: A Breeding Ground for Corruption

    GST refunds, particularly for exporters and high-credit taxpayers, have become a fertile ground for delays, interference, and corruption. Honest taxpayers are left frustrated, while dishonest ones exploit the system through collusion.

    An automated, timeline-bound refund mechanism is the only cure.

    8. Account Freezing & Compliance Gaps

    Account freezing, return mismatches, and auto-restrictions like blocking GSTR-2B/3B data are being used as ad-hoc measures. Courts have repeatedly reminded the department not to indulge in arbitrary practices.

    But a half-baked MIS system cannot replace a robust, data-driven compliance structure.

    9. ITC Misuse at Scale: The Multiplier Effect

    Consider a taxpayer with a turnover of ₹100 crore. By fabricating ₹50 crore worth of invoices, they can siphon off ₹9 crore in fake ITC (at 18%). Multiply this by just 100 taxpayers and the loss escalates to ₹900 crore. With 1.5 crore registered taxpayers, the scale of potential fraud is staggering.

    Finding: Even “small” fraud percentages translate into mammoth losses at the macro level. Prevention is not optional; it is imperative.

    Recommendations

    For GST to evolve from a political slogan into a real reform, the following structural corrections are essential:

    Nationwide PAN Bar: Fraudulent PANs must be debarred across all states, subject only to tribunal clearance.

    Automated ITC Verification: Real-time AI-driven invoice matching must be operationalized.

    Judicial Safeguards for Identity Blocking: PAN/Aadhaar restrictions, if any, must be sanctioned by fast-track courts, not imposed administratively.

    Officer Accountability: Wrongful or negligent orders by officers should invite disciplinary action.

    Visible Deterrence: Habitual offenders should face permanent blacklisting and expedited trials.

    Predictable Tax Calendar: Reforms must align with the financial year to reduce business disruption.

    Refund Automation: Eliminate human discretion to curb corruption in refunds.

    Conclusion

    GST was meant to unify India’s market and simplify taxation. But eight years later, it finds itself entangled in its own contradictions. Rate rationalisation continues to dominate political debate, while the real issues of enforcement, accountability, and constitutional balance remain neglected.

    If reforms remain cosmetic, GST will remain a law of ambition rather than a law of integrity.

    ⚖ True reform is not about cutting rates or tinkering with slabs. It is about building a system that is legally robust, technologically sound, and corruption-resistant.

    Only then can GST live up to its promise of “One Nation, One Tax, One Market.”