Rules For Prosecution Under GST - Offence And Punishment


Date: 22 Sep 2022

Prosecution Under GST


What is Prosecution under GST?

According to Sections 73 and 74 of the CGST Act, it is a severe criminal under GST legislation to not pay taxes on time, pay them in part, misuse input tax credits, or issue the wrong kind of refund. The GST Council established a list of violations that could result in criminal proceedings and prosecution as soon as the GST Act went into effect.

In a legal sense, prosecution is any action to hold someone accountable for committing a crime.


Offences liable under Prosecution

The following offences, if committed, will lead to prosecution:

  1. Supplying goods without an invoice to avoid paying taxes.

  2. Issuing an invoice intends to claim ITC despite no supply of goods or services falsely.

  3. Not reporting GST (Goods and Service Tax) to the government within three months after collecting it.

  4. Fraudulently claiming a CGST or SGST refund.

  5. Putting misleading financial information on fake returns to avoid paying taxes.

  6. Preventing the appropriate officer from doing his job while doing so.

  7. Acquiring items that are subject to confiscation on purpose.

  8. Manipulating the data

  9. Giving incorrect information when a case is being heard

  10. Encouraging someone else to commit fraud.


Punishment for the offences

If any of the offences mentioned above are committed, they will result in the following penalties:


Tax Amount Bailable or Non-Bailable Jail Term
100-200 Lakhs INR Bailable Up to 1 year
200-500 Lakhs INR Bailable Up to 3 years
Above 500 Lakhs INR Bailable Up to 5 years


The following offences are non-bailable if a person commits them and the cost exceeds Rs. 500 lakhs.

  1. To avoid paying taxes, provide goods or services without an invoice.

  2. Create an invoice without delivering products or services to illegally claim input credit or refund.

  3. Any GST is collected (even if it is against the law) but not submitted to the government within three months.

Enacting stricter regulations is compatible with the government's anti-tax evasion position.


What is the punishment for tampering with evidence?

A person may face up to six months in prison and a fine for fabricating information, destroying information, impeding the officer from doing his job, or helping someone else do it.


Punishment will be given to repeat offenders.

If a taxpayer commits the same offence again, the sentence for the crime can be up to 5 years in prison and a fine. A taxpayer cannot be sued without the Commissioner's prior consent.


Compounding of offences under GST

The taxpayer must show up in court for each hearing if they are being prosecuted for an offence. However, compounding offences aids in avoiding legal action. Compounding offenders under GST are not needed to appear in court and might have their charges dropped upon payment of a compounding fee. In this case, the compounding fee cannot exceed the maximum fine allowed under the relevant regulations.


Is compounding an option in every circumstance?

Most cases can have their fees compounded; however, there are several circumstances where this is not possible, including the following:

  1. Recurring offenders

  2. Anyone who has previously benefited from compounding for purchases of goods or services worth more than Rs. 1 crore.

  3. Anyone charged under the Narcotic Drugs Act, FEMA, or another law.

  4. Any taxpayer who is found guilty in a court of violating GST 

  5. Anyone who prevents the officer from performing their duty

  6. Anyone who knowingly submits misleading information in a court case


The amount payable for compounding

50% of the tax, a minimum of Rs. 10,000, will be paid as the sum due for compounded offenders. The maximum amount for compounding is greater than 50% of the tax OR Rs. 30,000.


Abatement of further proceedings

No further legal action will be taken against the accused for the same offence after payment of the compounding sum, and any existing criminal procedures will be dropped. The criminal may potentially be arrested in addition to being prosecuted.