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GST offences, penalties and appeals

GST Offences and Penalties1 1

Being a destination based, transaction wise tax, Goods and Services Tax (GST) ropes in strict compliance procedures for all the taxpayers or people falling under the gamut. Since every transaction is being recorded and tracked between the source and destination, it is obligatory for the taxpayers to maintain and declare information with utmost accuracy. 

To have a crystal clear movement of goods intra-state or inter-state, reduce corruption and efficient tax collection system, GST defines strict penalty rules and offenses guidelines which the taxpayers have to follow. Below listed are the offences and applicable penalties under GST Act:

  1. A supplier supplies goods or services without any proper invoice or has issued a false invoice.
  2. He affects the issuance of an invoice without supplying the goods or services as per provisions of GST.
  3. He uses the GSTIN of any other person instead of his own.
  4. He submits false information during registration.
  5. He gives wrong information while filing returns or files false returns.
  6. He gives wrong information or false information during assessment proceedings.
  7. He fails to submit GST with the Government that was deducted by him, within a period of 3 months from the date of such deduction.
  8. If TDS is deducted in contravention of provisions of GST, he is still liable to pay the same within three months from the date of such deduction. If such falsely deducted TDS is not submitted within the prescribed time, then it is an offense.
  9. He claims and obtains a refund of CGST or SGST by fraud.
  10. He claims input tax credit without the actual receipt of goods or services.
  11. He understates his sales during the period to evade tax.
  12. He transports or effects movement of goods without proper documentation.
  13. He supplies goods that will be confiscated by law.
  14. He destroys or tampers with the goods that have been confiscated.
  15. He does not register himself even though he is liable to do so.
  16. He does not deduct TDS wherever applicable or deducts lesser than prescribed amount.
  17. He does not collect TCS wherever applicable or collects lesser than prescribed amount.
  18. He does not distribute credit properly or distribute against the provisions of law being an Input Service Distributor.
  19. He obstructs the officer in the performance of his duties.
  20. He does not maintain proper books of accounts as required mandatorily by law
  21. He intentionally destroys any evidence.

If any of the offenses are committed, a penalty will have to be paid under GST. The principles on which these penalties are based are mentioned by the law.
An offender who has committed any of the above 21 offences by not paying tax or making short payments with no intention of fraud or tax evasion must pay a penalty of 10% of the tax amount due subject to a minimum of INR 10,000. Consider – in case tax has not been paid or a short payment is made, a minimum penalty of INR 10,000 has to be paid. The maximum penalty is 10% of the tax unpaid. However, an offender has to pay a penalty amount of tax evaded/short deducted etc., i.e. 100% penalty, subject to a minimum of INR 10,000, if it had an intention of fraud or tax evasion.

Penalties for late filing and non-filing: Late filing attracts penalty called late fee. The late fee is INR 100 per day per Act. So it is INR 100 under CGST & INR 100 under SGST. Total will be INR 200/day (subject to changes announced via Notifications). The maximum is INR 5,000. There is no late fee on IGST in case of delayed filing. Along with late fee, interest has to be paid at 18% per annum. It has to be calculated by the taxpayer on the tax to be paid. The time period will be from the next day of filing to the date of payment.
Further, if you don’t file any GST return then subsequent returns cannot be filed. For example, if GSTR-2 return of August is not filed then the next return GSTR-3 and subsequent returns of September cannot be filed.  Hence, late filing of GST return will have a cascading effect leading to heavy fines and penalty.

Additional penalties are as follows :

Tax amount involved (INR) 100-200 lakhs 200-500 lakhs Above 500 lakhs
Jail term Upto 1 year Upto 3 years Upto 5 year
Fine In all three cases

Cases of fraud also face penalties, prosecution, and arrest.

Inspection, search / seizure under GST: Where the Joint Commissioner CGST / SGST has sufficient reason to believe that a taxable person is deliberately suppressing transaction to evade taxes or has claimed excessive Input Tax Credit, then he can order an officer of GST to inspect the locations of such person. Similarly, the Joint Commissioner can order for search and seizure within the premises of a taxable person when he has sufficient reason to believe that there are goods, which should be confiscated or some important documents are being hidden somewhere.

Prosecution under GST: The prosecution is conducting legal proceedings against someone in respect of a criminal charge. A person committing an offense with the deliberate intention of fraud becomes liable to prosecution under GST, i.e., face criminal charges. A few examples of these offenses are-

  1. Issue of an invoice without supplying any goods / services- thus taking input credit or refund by fraud
  2. Obtaining refund of any CGST / SGST by fraud
  3. Submitting fake financial records/documents or files, and fake returns to evade tax
  4. Helping another person to commit fraud under GST

Arrest under GST: If the Commissioner of CGST / SGST believes a person has committed a certain offense he can be arrested under GST by any authorized CGST / SGST officer. The arrested person will be informed of the grounds for his arrest. He will appear before the magistrate within 24 hours in case of a cognizable offense (Cognizable offenses are those where the police can arrest a person without an arrest warrant. They are serious crimes like murder, robbery, counterfeiting).

A person unhappy with any decision or order passed against him under GST can appeal against such decision. The first appeal against an order by an adjudicating authority goes to the First Appellate AuthorityIf the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court. To avoid the long process of appeal and litigation, a taxpayer may request for the advance ruling under GST. The taxpayer asks for clarification from GST authorities on GST treatment before starting the proposed activity. The tax authority gives a written decision (called advance ruling) to the applicant on the query.
The GST regime has brought in a tougher and stricter compliance diaphragm, which every person has to follow religiously. Any sort of non-compliance can have a severe effect on the daily business of the taxpayer and can attract huge amounts of interest and penalties. If the offenses are grievous in nature, it can lead to holding criminal proceedings against the offenders. Under the GST Act, no reservation has been given for first-time offenders. Therefore, even if you are unintentionally avoiding to pay taxes or short deducting taxes wherever applicable, you will still be served a notice from the relevant authority. Moreover, the right to appeal is only invoked when a specific sum of money is deposited beforehand with the repository, which will block your working capital until the appeal is completed.
Thus, it is always advisable to have a proper accounting system that can enable you to reconcile and file returns within due dates and also make payments of taxes, wherever applicable. Any slippage in the above process might lead to inspection from the relevant authorities.

If you are looking to keep yourself updated about the recent compliances or requires assistance in filing of GST returns, GST assessments and GST audits, our team of experts can assist you in complying with the GST regime. We can also assist you in setting up your business in India, accounting, bookkeeping, payroll, auditing, taxation, secretarial compliances, and trademark registration, business structuring and advisory services. If you require any assistance in this regard, kindly click here.


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