What Are The Different offences and Penalties Recognized Under GST?

Some common GST offences include tax evasion, failure to register for GST, issuance of incorrect invoices, and claiming excess Input Tax Credit (ITC). Depending on the severity of the violation, the penalties for these offences can range from monetary fines to imprisonment. Businesses need to understand the different offences and penalties recognised under GST to avoid legal consequences and ensure compliance with the GST laws and regulations.

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.

BOOK A FREE DEMO




    GST Penalties and Appeals

    Offences Under GST

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

    Get a Free Trial – Best Accounting Software For Small Business

    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 Goods and Services Tax (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 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 needs the necessary documentation to move products.
    2. Delivers or transports commodities that he knows will be seized.
    3. Destroys or tampers with seized goods
    Other:
    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 only keeps some of the books he is required to by law.
    7. He gets rid of any proof.

    Get a Free Trial – Best GST Accounting Software For Small Business

    As a result, the above points 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.

    Get here – BUSY Software 15 Days Free Trial

    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 the law imposes 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 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 is Rs. 200. The maximum 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.
    6. The penalty for wrongfully charging a higher GST rate is 100% of the tax due or Rs. 10,000- whichever is higher.
    7. The penalty for not issuing an invoice is 100% of the tax due or Rs. 10,000- whichever is higher.
    8. The penalty for not registering under GST is 100% of the tax due or Rs. 10,000- whichever is higher.
    9. 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 unless 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 easily corrected and 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 need to be corrected during the initial months of introducing the GST, will benefit from this. Being fined for genuine mistakes will be a harsh blow to SMEs with fewer resources than 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.

    Offences under GST by Companies, LLPs, HUFs, and Others

    Under GST, various entities like companies, LLPs, and HUFs can commit offences, either knowingly or unknowingly. Key offences include:

    Failure to Issue Invoice:
    Not issuing a proper tax invoice or not recording sales.

    Incorrect Input Tax Credit (ITC):
    Claiming ITC without actual receipt of goods or services.

    Non-Payment of GST:
    Failing to pay GST after collecting it from customers.

    Improper Filing:
    Not filing GST returns on time or filing incorrect information.

    Transport Violations:
    Moving goods without generating a valid e-way bill.

    Registration Misuse:
    Using GSTIN improperly or not obtaining mandatory GST registration.

    These offences attract penalties to ensure compliance. Even unintentional mistakes may lead to penalties, highlighting the need for careful filing and record-keeping.

    Explore a Free Demo of – Best Inventory Management Software For Small Business

    Penalty for Other Cases (No Intention of Fraud or Tax Evasion)

    When a taxpayer commits an offence under GST without fraudulent intent, penalties are imposed based on the nature of the mistake:

    General Offences:
    A penalty of ₹10,000 or 10% of the tax due, whichever is higher, applies for errors like delayed returns or incorrect ITC claims.

    Late Filing:
    Late filing of GST returns attracts a late fee of ₹50 per day (₹20 for nil returns), up to a maximum of ₹5,000.

    Interest on Late Payment:
    Interest at 18% per annum is charged on unpaid tax from the due date until payment.

    Rectifiable Errors:
    For genuine errors, authorities may allow corrections in returns without penalties if notified promptly.

    No Criminal Proceedings:
    Cases without fraudulent intent are considered non-cognizable, avoiding severe legal actions.

    Businesses should adopt robust compliance practices to avoid such penalties, even for minor mistakes.

    Conclusion

    The GST system in India has strict penalties and fines for businesses that various offences. Businesses must comply with GST laws and regulations to avoid legal consequences. Businesses need to understand and follow the GST laws and regulations to avoid potential violations and penaBusinesses nesses can contribute to the overall efficiency and transparency of the GST system in India.

    Frequently Asked Questions

    • What constitutes an offence under GST?
      Offences recognised under GST include issuing invoices without supplying goods or services, using fake invoices, not registering under GST when required, and failing to maintain proper accounts.
    • What is the general penalty under GST for non-compliance?
      The general penalty under GST for non-compliance, when no specific penalty is prescribed, is ₹25,000. It applies to various offences not covered by specific provisions.
    • What are the penalties recognised under GST for issuing fake invoices?
      Penalties recognised under GST for issuing fake invoices can include a fine up to ₹10,000 or the amount of tax evaded (whichever is higher), along with potential imprisonment.
    • How does GST address penalties for not registering?
      Failing to register under GST when required can result in penalties recognised under GST, including a fine of 10% of the tax due or ₹10,000, whichever is higher.
    • What are the GST penalties and offences related to incorrect invoicing?
      GST penalties and offences related to incorrect invoicing include a fine of ₹10,000 or the tax amount evaded. Offences recognised under GST also cover issuing invoices without actual supply.
    • What happens if GST returns are not filed on time?
      If GST returns are not filed on time, the taxpayer may face a general penalty under GST of ₹100 per day (for CGST and SGST each), up to a maximum of ₹5,000, along with interest on the tax due.
    • Can a business be penalised for incorrect tax computation under GST?
      Correct tax computation can lead to penalties recognised under GST. For tax evasion, the penalty is 10% of the tax amount due, subject to a minimum of ₹10,000.
    • What are the consequences of not maintaining proper records under GST?
      Not maintaining proper records under GST can result in a penalty of up to ₹25,000. I ensure that businesses keep accurate and comprehensive records.
    • Are there penalties under GST for late payment of taxes?
      Yes, penalties under GST for late payment of taxes include interest at 18% per annum on the outstanding tax amount. A general penalty under GST may apply if specific offences are committed.
    • How does GST address offences related to fraudulent claims of input tax credit?
      Offences recognised under GST related to fraudulent claims of input tax credit can result in severe penalties, including fines up to the amount of the tax evaded and imprisonment for severe cases.
    View all FAQs
    • Home
    • /
    • GST
    • /
    • what are the different offences and penalties recognized under GST

    BUSY is a simple, yet powerful GST / VAT compliant Business Accounting Software that has everything you need to grow your business.

    phone Sales & Support:

    +91 82 82 82 82 82
    +91 11 - 4096 4096
    Copyright © BUSY Infotech Pvt. Ltd. All Rights Reserved