GST Offences And Penalties

GST Offences and Penalties

Every business or taxpayer wishes to be tax compliant. Efficient tax administration helps and encourages businesses to become compliant. Filing tax returns correctly and timely is not the only compliance. There are several other factors that decide whether a taxpayer is compliant such as maintaining nooks of accounts, filings forms, and fulfilling procedures, etc. However, there are various instances where intentionally or inadvertently the laws are not followed as they are supposed to be.

An offense is an event when the law and the rules are defined, whether intentionally or otherwise. Every law has a defined set of offenses prescribed and penalties levied when such offenses are committed.

LIST OF TOPICS COVERED:

Offences Under GST

Section 122 lays down 21 offences under the GST. These offences can be grouped into the following
Sr. No. Offences In Relation To Fake Invoices And Documents

1

A taxable person supplies goods and/or services without an invoice or with a fake invoice

2

Issuance of invoice without any supply

3

Submits fake/ falsified accounts or financial records or information or return with an intention to evade tax

4

Fails to keep and maintain books and records in accordance with the requirements of the law

5

Transports taxable goods without prescribed documents

6

Failure to furnish or furnishing false information when called by an officer

7

Issuing invoice with the registration number of someone else

8

Fails to obtain registration, even if liable to do so

9

Furnishes false information to obtain registration or thereafter

Sr. No.

Offences With Fraudulent Intent

10

Fraudulently obtains refund of tax

11

Alters or destroys any evidence or document

12

Disposes off or tampers with detained/ seized/ attached goods

13

Suppresses his turnover which leads to evasion of taxes

14

Supplies, transports, or stores goods that are liable for confiscation

15

Obstructs or prevents an officer from performing his duty
Sr. No. Offences Related To Evasion Of Tax
16 Failure to deposit tax collected within 3 months from the due date
17 Failure to deposit tax collected (in contravention to the provisions of the CGST Act 2017), within 3 months from the due date
18 Failure to deduct tax, or short deduction of tax, or non-deposition of deducted tax, as prescribed u/s 51
19 Failure to collect tax, or short collect tax, or non-deposition of collected tax prescribed u/s 52
20 Avails input tax credit without actual receipt of goods and/ or services
21 An input service distributor, if he does not takes or distributes credit as prescribed

Penalties Under GST​

Offences Penalties
A person who benefits from the following offences:
  • Supply without or with fake invoice
  • Invoice without underlying supply
  • ITC availment without actual receipt of supply
  • Avails or distributes ITC in violation of law
Amount equal to the tax evaded or input tax credit availed of or passed on
Tax not paid/ short paid/ erroneously refunded or wrong availment of ITC due to reasons other than fraud/ willful misstatement/ suppression of facts etc Rs. 10,000 or 10% of the tax due whichever is higher
Tax not paid/ short paid/ erroneously refunded or wrong availment of ITC due fraud/ willful misstatement/ suppression of facts etc. Rs. 10,000 or tax due whichever is higher [high-value cases also have jail term prescribed]
Person who commits any of the 21 offences listed above Rs. 10,000 or tax evaded whichever is higher
A person to assists in any of the 21 offences listed above Penalty may extend to Rs. 25,000
Possesses, removes, conceals, deposits, supplies, purchases goods that he is aware are liable for confiscation
Receives or supplies services that are in contravention of the Act
Fails to appear before officer when any summons is issued
Fails to issue an invoice or fails to account for an invoice in his books of accounts
Fails to furnish information demanded u/s 150 (information returns) Rs. 100 per day of delay to a maximum of Rs. 5000
Fails to furnish information demanded u/s 151 (for collection of statistics) or furnishes false information knowingly Rs. 10,000 and a further fine of Rs. 100 for each day to a maximum of Rs. 25,000
Transports or stores goods that are in transit in violation of the act resulting in the detention of such goods and conveyance Release of such goods and conveyance on payment of:
  • Penalty @ 100% of tax payable. In the case of exempted goods, 2% of the goods value or Rs. 25,000 whichever is less (if the owner of goods comes forward for such payment)
  • Penalty @ 50% of goods value less tax paid. In the case of exempted goods, 5% of the goods value or Rs. 25,000 whichever is less (if the owner of goods does not come forward for such payment)
  • Furnishing a security equivalent to the above amount
General Penalty Rs. 25,000
Delayed filing of GST returns Rs. 200 per day (Rs. 100 per day under CGST and an additional Rs. 100 per day under SGST) up to a maximum of Rs. 5000. No Late fee for IGST
Non-filing of GST returns Higher of Rs. 10,000 or 10% of the tax due under GST
Tax Amount (In Rs.) Imprisonment

100-200 lakhs

Up to 1 year

200-500 lakhs

Up to 3 years

Above 500 lakhs

Up to 5 years

Aids in any offence

Up to 6 months

Other Important Points:

  1. No penalty is applicable in the following cases:
  • Incorrect type of GST charged (i.e CGST+SGST charged instead of IGST)
  • Incorrect filing of GST returns (interest may be levied in case of tax amount shortfall)
  • Lower GST rate charged (interest may be levied on tax amount shortfall)
  • Delayed payment of invoice (input tax credit is reversed, if invoice not paid within 6 months)
  1. Furthermore, no penalty is levied in case of minor breaches especially when the mistake is made without any fraudulent intention and is rectifiable. Minor breach includes:
  • Tax amount is less than Rs. 5000
  • The error is apparent on record and is rectifiable
  1. No penalty is to be levied without giving an opportunity of being heard and without issuance of show cause notice.
  1. The tax authority shall have to provide the nature of offence and reasons of penalty.
  1. Penalty could be reduced if a taxpayer voluntarily discloses breach of law.

Key Rulings

Some key rulings:

Sr. No.NameHighlights

1

Tejas Pravin Dugad vs UOI [2021 (1) TMI 796 – Bombay High Court]The Court limited the scope of discussion only to the extent of the offences committed under the CGST Act and the observations were made only from that angle. HC held that if offences under the Indian Penal Code also are committed then the different and more serious views can be taken. It needs to be kept in mind that the allegations make out the case of forgery. The aforesaid circumstances and position of law are sufficient for dismissal of all the proceedings. Department was virtually prevented from exercising its powers even like issuing summons. By Interim order, the Petitioners indirectly got relief of anticipatory bail, which is also not ordinarily permissible in proceeding of present nature. White-collar offences are more serious than offences like murder, dacoity, etc. Such offences are committed after hatching a conspiracy. This circumstance needs to be kept in mind by Court as the granting of relief of anticipatory bail hampers investigation and such approach causes damage to the image of the judiciary. All petitions were dismissed. In each petition, the Petitioner was asked to deposit Rs. 25,000 as costs of the petition.

2

Dhruv Krishan Maggu vs UOI [2021-VIL-24-Del]The HC held that Section 69 of the CGST Act on arrest and Section 132 on prosecution are not unconstitutional. When a person is arrested under CGST Act, he must be informed of the grounds and produced before a Magistrate within 24 hours and this ensures judicial scrutiny and therefore, it cannot be unreasonable or excessive. It further said – “Also just because CGST Act provides for both adjudication of civil liability and criminal prosecution doesn’t mean that the said Act is unfair or unreasonable.”

3

Nitin Verma vs State of UP [2021-VIL-14-ALH]The Allahabad HC granted anticipatory bail to the applicant. The High Court noted that no criminal antecedents of the applicant have been brought on record and, an arrest is not necessary in every case as personal liberty granted under Article 21 of the Constitution is a fundamental right. It also observed that the applicant has his own address of business and residence and he can give surety to ensure his appearance. According to the Court, the applicant did not appear to be a habitual offender, prosecuted or convicted earlier. The judgments considered by the High Court were mostly on the principle of arrest not to be made straight away without completing adjudication/assessment when the person concerned is not a habitual offender.

Some key rulings:

Name Highlights
Tejas Pravin Dugad vs UOI [2021 (1) TMI 796 – Bombay High Court] The Court limited the scope of discussion only to the extent of the offences committed under the CGST Act and the observations were made only from that angle. HC held that if offences under the Indian Penal Code also are committed then different and more serious views can be taken. It needs to be kept in mind that the allegations make out the case of forgery. The aforesaid circumstances and position of law are sufficient for dismissal of all the proceedings. Department was virtually prevented from exercising its powers even like issuing summons. By Interim order, the Petitioners indirectly got relief of anticipatory bail, which is also not ordinarily permissible in proceeding of present nature. White-collar offences are more serious than offences like murder, dacoity, etc. Such offences are committed after hatching a conspiracy. This circumstance needs to be kept in mind by Court as the granting of relief of anticipatory bail hampers investigation and such approach causes damage to the image of the judiciary. All petitions were dismissed. In each petition, the Petitioner was asked to deposit Rs. 25,000 as costs of the petition.
Dhruv Krishan Maggu vs UOI [2021-VIL-24-Del] The HC held that Section 69 of the CGST Act on arrest and Section 132 on prosecution are not unconstitutional. When a person is arrested under CGST Act, he must be informed of the grounds and produced before a Magistrate within 24 hours and this ensures judicial scrutiny and therefore, it cannot be unreasonable or excessive. It further said – “Also just because CGST Act provides for both adjudication of civil liability and criminal prosecution doesn’t mean that the said Act is unfair or unreasonable.”
Nitin Verma vs State of UP [2021-VIL-14-ALH] The Allahabad HC granted anticipatory bail to the applicant. The High Court noted that no criminal antecedents of the applicant have been brought on record and, an arrest is not necessary in every case as personal liberty granted under Article 21 of the Constitution is a fundamental right. It also observed that the applicant has own address of business and residence and he can give surety to ensure his appearance. According to the Court, the applicant did not appear to be a habitual offender, prosecuted or convicted earlier. The judgments considered by the High Court were mostly on the principle of arrest not to be made straight away without completing adjudication/assessment when the person concerned is not a habitual offender.

Conclusion

The recent drive of the GST department to plug the fake invoicing and fraudulent ITC spree has been quite successful. The same is also evident from the GST collections made in the last two quarters. Heavy penalties and jail terms have been imposed on the defaulters which give out a clear message that no fiddling around with the law would be pardoned. Further, the advent of E-invoicing has ensured that the fake invoicing issue is corked to a great extent. Having said so, the psyche of fraudsters is such that they try to keep two steps ahead of the regulator. Moreover, new and innovative measures are invented to evade tax.

The Government is trying its best by way of stringent punishments, amendments to the law, use of technology to identify anomalies in trend analysis etc. to curb the issue of fake ITC and fake invoicing. The results also look promising. It remains to be seen as to how far the fraudsters would go despite such rigorous punishments.

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