Offence and Penalties under GST
Offence and Penalties under GST in India
What does penalty mean?
The word “penalty” is not specifically defined in GST and so it takes the meaning from various judicial pronouncements and principles of jurisprudence. A penalty is a punishment imposed by law for committing an offence or failing to do something that was the duty of a party to do. The effective implementation of any tax law requires strict action against tax offenders. A penalty can be both corporal or pecuniary, civil or criminal.
Both corporal (jail) and pecuniary (monetary) penalties are applicable under GST. To encourage compliance with India’s new GST tax regime, the government has come up with a three-pronged approach: interest, monetary penalties, and prosecution.
There are 21 offences under GST. Here, we examines some of the monetary penalties and prosecution provided under the Central Goods & Services Tax Act, as of April 12, 2017. We have grouped them for easy understanding:
Issuing Fake or wrong invoices
- A taxable person supplies any goods/services without any proper invoice or issues a false invoice.
- He issues any invoice or bill without supply of goods/services in violation of the provisions of GST
- He issues invoices using the identification number (GSTIN) of another taxable person
Consequence
The offender will get a fine of Rs. 10,000 or the equivalent tax amount evaded.
Delayed filing of returns
- GSTR1 monthly returns for outward supplies (sales), which all registered suppliers must file before the 10th of the following month.
- GSTR2 monthly returns for inward supplies (purchases), which all registered suppliers must file before the 15th of the following month.
- GSTR9 annual returns, which every registered person must file before 31st December of the following year.
Consequence:
Late fee is Rs. 100 per day per Act. So it is 100 under CGST & 100 under SGST. Total will be Rs. 200/day. Maximum is Rs. 5,000. There is no late fee on IGST. 10% of tax due or Rs. 10,000 whichever is higher will be the fine for not filing GSTR.
Fraudulent activities
- Submits fake financial records/documents or files fake returns
- Gives false information or documents to the CGST/SGST tax officials during assessment proceedings.
- Does not register himself under GST even though he is liable to do so.
- Being an Input Service Distributor, he takes or distributes input tax credit in violation of the rules
Consequence:
The offender will get fine of Rs. 10,000 or the equivalent tax amount evaded. Furnishing false information will lead to a fine of Rs. 10,000 for the first offense, and continued offense will lead to fines of Rs. 100 per day, up to a maximum of Rs. 25,000. Any person who helps the offender will get fine of Rs. 25,000.
Tax evasion
- Fails to submit GST with the Government that he deducted , within a period of 3 months from the date of such deduction.
- 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.
- Claims and obtains refund of any CGST/SGST by fraud.
- Takes and/or utilizes input tax credit without actual receipt of goods and/or services
- Deliberately suppresses or understates his sales to evade tax
Consequence:
The offender will pay a fine of Rs. 10,000 or the equivalent tax amount evaded.
Supply/transport of goods
- He transports goods without proper documents
- Supplying or storing goods that are liable to confiscation, such as goods that would breach taxation rules or result in tax evasion.
Consequence:
If the offender chooses to come forward voluntarily, they will get a fine amount equivalent to the tax evaded. Otherwise, they will get fine, 50% of the value of the supply.
Participating in activities that involve tampering/obstruction
- Destroys or tampers goods which have been confiscated
- Obstructs the proper officer during his duty (for example, he hinders the officer during the audit by tax authorities)
- Destroys any legal documents or material evidence
Consequence:
These activities are very serious offence. Offenders will get 6 months of imprisonment, plus a fine of an undisclosed amount.
Any other breach of law
- Not maintains all the books that he required to maintain by law
- He does not deduct TDS (Tax Deducted at Source) or deducts less amount where applicable.
- Not collects TCS (Tax Collected at Source) or collects less amount where applicable
Common penalty
Any offense under GST for which a penalty is not specified, will get a fine up to Rs. 25,000. In case, the taxpayer is convicted for fraudulent activities, then apart from the above penalties, the following will apply:
- When the tax amount involved is up to 50 lakhs, the person will have to serve a jail term of 1 year and will be fined an amount equivalent to the tax evaded.
- If the tax amount ranges between 50 lakhs to 100 lakhs, then the person will have to serve a jail term of three years and pay the penalty.
- When the tax amount exceeds 100 lakhs, then jail term will be extended 5 years, along with the penalty.
Repeated Short Payments
When the payment made is lesser than the legal requirement, it’s called short payment. A taxpayer is said to have made ‘repeated short payments’ if they were involved in 3 short payments in 3 returns during 6 consecutive tax periods.
Consequence:
If a taxpayer is involved in this offense, he will get fine amount of Rs. 10,000 or 10% of the short tax paid (whichever amount is higher).
Situations where there is no penalty
In the following minor offences, taxpayers shall not be penalized:
- The amount involved in the offense is less than Rs. 5000.
- Offense commits unknowingly and is not backed up with any sort of malicious intent to evade taxes.
- The offense was committed due to lack of proper understanding of GST laws.
- The offense is easily rectifiable, like an omission or an erroneous record in a document.
As seen from the above, the Government has clearly spelled out the offenses that are covered under GST. When a company commits any of the above offense, the officer-in-charge, as well as the company will be held liable for such an offense. When an HUF, LLP or a Trust, then the Karta, partners and managing trustee commits an offense, they by will be held responsible for such offense. HAAB Accounting Consultancy has well experienced Tax professionals. They can advise you on all Tax related matters. Which enable you to take better decision and tax planning.
HAAB Accounting Consultancy as one of the top GST Consultancy firm in Trivandrum have well experienced Tax professionals also. Surely they can advise you on all Tax related matters as well. Which enable you to take better decision also. Contact our GST consultants in Trivandrum, India
Mr Shabeer S (Senior Consultant -GST)
0091 9037334498
Our Trivandrum Office Address
Office No. 02, TC 31/260, Viswa Lekshmi Tower, Pipe Line Road
Bappuji Junction, Peroorkada, Thiruvananthapuram.
Kerala, India, PIN 695005