Prosecution Under GST


    Goods and Services Tax (GST) is a tax system that has been implemented in India since July 2017. Under the GST regime, non-compliance with GST laws and regulations can lead to prosecution and imprisonment. Prosecution under GST refers to the legal action taken by the tax authorities against businesses for committing offences such as tax evasion, fraudulent activities, and non-compliance with GST laws. GST laws and regulations govern the prosecution process and may involve penalties, fines, and imprisonment in severe cases. Businesses need to understand the offences and penalties recognised under GST to avoid any potential legal consequences and ensure compliance with the GST laws and regulations.

    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 was enacted.

    In a legal sense, the 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 aforementioned offences are committed, they will result in the following penalties:

    Tax AmountBailable or Non-BailableJail Term
    100-200 Lakhs INRBailableUp to 1 year
    200-500 Lakhs INRBailableUp to 3 years
    Above 500 Lakhs INRBailableUp 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 appear 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 is 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

    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. 


    Prosecution under GST is a serious legal consequence for businesses that fail to comply with GST laws and regulations in India. The prosecution process may involve penalties, fines, and imprisonment, depending on the severity of the offence. Businesses need to understand the different offences and penalties recognised under GST to avoid any potential legal consequences and ensure compliance with the GST laws and regulations. By complying with the GST laws, businesses can contribute to the overall efficiency and transparency of the GST system in India.

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