Offences, Penalties, And Appeals Under GST Explained
Offences, Penalties, And Appeals Under GST Explained

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Date: 22 Sep 2022


What Are The Different Offences And Penalties Recognized Under GST?

The CGST Act lists the GST-related offences and the penalties that may be imposed. Sections 122 to 128 of the CGST Act deal with the laws governing offences and penalties.

Offences Under GST

What is an offence under GST?

An offence is an illegal conduct that violates a law or rule. Similarly, a violation of the GST Act and Rules becomes an offence under the law.

What are the offences under GST?

There are 21 offences for which a taxable person may be held responsible for penalties, according to the provisions of sub-section (1) of section 122. The offences that can result in punishment are listed below: 

False or incorrect invoices:

  1. Any goods or services a taxable person provides without an invoice or a fraudulent invoice.

  2. He violates the regulations of the GST by issuing any invoice or bill without the supply of goods or services.

  3. He generates invoices with another legitimate taxable person's identification number.

Fraud:

  1. He registers for GST but gives incorrect details.

  2. He files false tax returns or provides fake financial records or documentation.

  3. Offers incorrect information or withholds information during proceedings

Tax evasion

  1. Even though he collects GST, he fails to submit it to the government within three months.

  2. Even if he collects any GST in contravention of the provisions, he still has three months to deposit it with the government. Under GST, it will be illegal to do otherwise.

  3. He commits fraud to receive any CGST/SGST refunds.

  4. He takes and uses the input tax credit without receiving the products or services.

  5. To avoid paying taxes, he purposefully reduces his sales.

Goods supply and transportation:

  1. He moves products without the necessary documentation.

  2. Delivers or transports commodities that he knows will be seized.

  3. Destroys or tampers with seized goods

Others:

  1. Despite being required by law, he has not registered for GST.

  2. When appropriate, he either doesn't deduct TDS or deducts less money.

  3. In some instances, he does not collect TCS or only collects a small amount.

  4. He violates the rules since he is an Input Service Distributor and takes or distributes input tax credits.

  5. He prevents the proper officer while performing his function (for example, he hinders the officer during the audit by tax authorities)

  6. He does not keep all the books he is required by law.

  7. He gets rid of any proof.

As a result, we can observe that the points mentioned above have extensively detailed the GST-covered offences. According to GST regulations, the officer-in-charge would be liable for the offence if the authorities discovered any of the offences mentioned above on the part of a corporation. People who use composition schemes but are not authorised to do so risk drawing the attention of the authorities. According to GST regulations, the Karta, partners, and the managing trustee will be held accountable if a HUF, LLP, or Trust commits financial fraud.

Penalties under GST

What does a penalty mean?

Since the term "penalty" isn't defined explicitly in GST, it derives meaning from several jurisprudential concepts and judicial decisions. A penalty is a consequence imposed by the law for breaking or failing to perform a legal obligation. A punishment may be physical or financial, civil or criminal. Under GST, pecuniary (monetary) and corporal (jail) punishments are permissible.

Common Offences Under GST And Their Penalties

Under GST, there are some common offences with corresponding penalties. These are discussed below:

  1. The penalty for delaying in filing GSTR late is Rs. 100 per day according to the Act.  Therefore, Rs.100 is charged by CGST and Rs.100 by SGST. The daily total will be Rs. 200. The maximum amount is Rs. 5,000. On IGST, there are no late fees. 

  2. The penalty for not filing GSTR is 10% of the tax due or Rs.10,000- whichever is higher. 

  3. The penalty for fraud is 100% of the tax due or Rs. 10,000- whichever is higher.

  4. The penalty for helping a person commit fraud is the amount extending up to Rs. 25,000.

  5. The penalty for opting for a composition scheme when ineligible is demand and recovery provisions of sections 73 and 74, which include- 

  1. Fraud Case: 100% of the tax due or Rs. 10,000- whichever is higher.

  2. Non-Fraud Case: 10% of the tax due or Rs. 10,000- whichever is higher.

  1. The penalty for wrongfully charging a higher GST rate is 100% of the tax due or Rs. 10,000- whichever is higher. 

  2. The penalty for not issuing an invoice is 100% of the tax due or Rs. 10,000- whichever is higher.

  3. The penalty for not registering under GST is 100% of the tax due or Rs. 10,000- whichever is higher.

  4. The penalty for incorrect invoicing is Rs. 25,000.

Offences on which no penalty is charged

The offences under which no penalty will be applied are

  1. The offence of applying an incorrect type of GST carries no penalty.

  2. The offence of filing an incorrect GST return carries no penalty, but an interest of 18% will be applicable on the shortfall amount.

  3. The offence of delaying paying the invoice carries no penalty. The ITC will be reversed if not paid within six months. 

  4. The offence of charging a lower GST rate carries no penalty, but an interest of 18% will be applicable on the shortfall amount.

Are there any prison sentences?

For severe fraud instances, the GST does indeed provide jail time as a form of corporal punishment:

Tax amount involved 100-200 lakhs 200-500 lakhs Above 500 lakhs
Jail term Up to 1 year Up to 3 years Up to 5 years
Penalty In all three cases

Minor Law violations under GST

Minor infractions (when the tax amount is less than Rs. 5000) or errors can be corrected with ease and are done without the intent to commit fraud.

There won't be any severe repercussions for minor infractions. In such circumstances, the tax office may issue a warning.

Businesses, especially SMEs, who might make mistakes during the initial months of the introduction of the GST, will benefit from this. Being fined for genuine mistakes will be a harsh blow to the SMEs that do not have as many resources as the larger firms to adapt to GST.

General Guidelines for Penalties

These penalty guidelines apply to all laws, including tax laws, contract laws, and other laws.

Every taxable person subject to the penalty will receive a show-cause notice and have a reasonable opportunity to be heard. The tax authorities will justify the fine and the nature of the offence. The tax authority may use the fact that someone voluntarily exposes a violation of the law to lower the penalty.