The central government introduced the Goods and Service Act in 2017. The reason behind introducing this act was to curb all the various taxes under different goods and services and follow a single act provision known as the ‘One Nation, One Tax’ regime. This gave rise to the GST act and the various tax slabs under it.
Along with the different tax slabs introduced, the GST law, 2017 has also mentioned some clearly define offences and penalties levied in each scenario. These scenarios can range from anywhere between late payment of taxes, not registering on the GST Portal, incorrect invoicing and much more. We’re going to talk about these offences and penalties in detail in the blog to follow.
Suppose you’re a business owner registered on the GST Portal, a Chartered Accountant, Tax Professional, whatever may be the job title. In that case, it is imperative to know about these offences and penalties in details as lack of information could cost the firm high charges and lead to heavy consequences.
Offences Under GST
- Offences Under Registration
|Not registering the business even though it fulfills all requirements for registration or it is required by law||XYZ Business Enterprise is conducting business over INR 20 lakhs annually. Yet they haven’t registered their business on the GST Portal. This is a clear sign of offence under the GST Act.|
|Misinformation provided while registering the business on the portal||Mr Ram conducts business under the name of Ram and Sons, but while registering his business on the GST Portal he provides the PAN Number of his wife, as against his. Misinformation provided on the GST Portal is an offence.|
- Offences Under Invoicing and Documentation
|Not providing an invoice or failing to issue an invoice||A2Z store conducts business with a businesswoman on raw materials worth INR 10,000. However, they do not issue any invoice in regards to this transaction.|
|Providing misinformation or false invoice details||Mazumdar and Sons needs to issue an invoice worth INR 70,000. However, while issuing the invoice, the amount mentioned on the invoice is only INR 50,000.|
|Issuing invoice without actually supplying the goods and services||Bharat Medical and General Stores issued an invoice worth INR 5000 to Dr. Kashypay without actually delivering the goods mentioned.|
- Offences related to the intention of fraudulent activities
|Furnishing fraudulent information to avail GST Refund||Jayesh and Co. applied for GST Refund on transactions of goods and services which have actually not been done by them.|
|Not maintaining a proper stock record||Star supermarkets do not maintain a proper record of stocks and misinform this information on the GST Portal.|
|Tampering with goods that have been detained under the GST Act||M/S Ajmera is trying to sell off goods that have been detained by the government authorities under the GST Act.|
- Offenses with regards to Tax Evasion
|Furnishing misinformation about the turnover of the company to pay lower taxes||Tikyani Companies has an annual turnover of over INR 12 lakhs in the year 2020, however, they report an annual turnover of INR 9 lakhs to pay lower taxes.|
|Availing Input Tax Credit without actually supplying the goods or services||Shah stationery availed for an Input Tax Credit of INR 5000 without having any relevant transaction under Input Tax Credit.|
|Non-payment of GST to the government within 3 months of after collecting the same from the buyer||Deghani Enterprises did not pay GST for 3 months after collecting the goods on 1st June 2020 and didn’t pay any GST till 31st August 2020.|
- Offences with regards to obstruction
|Tampering and destroying documents in regards to documents that can be used as evidence||Orbit Stores destroyed the invoices which would be used as additional proof for documentation of GST Taxes.|
|Obstructing and not allowing an officer from the governing body from doing his duty||Moya Enterprises obstructed officers from a governing body from checking GST invoices and documentation which could possibly be manipulated.|
Penalties Under GST
While the above-mentioned offences are just an overview of the different types of offences, there are overall 21 cases of offences which businesses can be found guilty of. In regards to how big the offences are, they could be categorised as either minor offences or major offences. Based on the level of the offence, the penalties and fines charged on the same can be different.
Minor Offense: An offence is considered to be a minor offence or breach when there is some documentation error, misinformation mentioned on the website, a change in invoice amount etc. These are minor offences that can be corrected easily with just a few changes. Since they’re minor changes the GST governing body does not impose very heavy penalties. The penalty in such situations is usually below INR 5000. Sometimes, if the case is an extremely minor case, a warning is issued without evening charging a monetary fine.
Major Offense: Offenses that are larger in the category and that heavier implications are included in Major Offenses. Examples here include such as evasion of taxes, obstruction of an officer, non-compliance with rules and regulations. These offences can lead to heavier penalties and fines and sometimes even imprisonment. The penalty applied here is usually more than INR 5000 and is in regards to the tax amount that may be involved in the situation of the offence.
List of penalties under GST
|Nature of Penalty||Amount of Fine or Penalty Imposed|
|Incorrect misinformation provided on the Invoice that is issued||INR 25,000|
|Delayed in filing GST Returns||INR 200 per day divided as INR 100 to CGST and INR 100 to IGST with a total penalty amount not exceeding INR 5000. In case of delayed filing of returns in IGST, no penalty is charged.|
|Not filing for GST Return||INR 10,000 or 10% of the taxable amount, whichever is higher.|
|Not maintaining a proper stock record||INR 25,000|
|Not issuing an Invoice||INR 10,000 or 10% of the taxable amount, whichever is higher.|
|Charging an incorrect GST rate, usually what is higher than the mentioned tax slab||INR 10,000 or 100% of the taxable amount, whichever is higher. This is applicable only if the excess amount of the tax that is charged is not submitted to the government.|
|Helping an individual or a business entity in committing fraudulent activities related to the GST Act||Up to INR 25,000|
Additional Penalties and Imprisonment for GST
Along with the penalties and the amount mentioned, some fraudulent activities come under major charges which could also attract some jail time for the registered business entity or individual. These charges could lead to penalty, prosecution and arrest.
Activities such as evasion of taxes, not filing for annual returns could lead to jail time.
- Jail time of upto 1 year if the tax amount involved is between INR 100 lakhs to INR 200 lakhs.
- Jail time of upto 3 years if the tax amount involved is between INR 200 lakhs to INR 500 lakhs.
- Jail time of upto 5 years if the tax amount involved is upto INR 500 lakhs or higher.
Situations when GST penalty is not charged
As mentioned above, there are some cases when the offence involved is a minor offence that can be corrected immediately and does not have major consequences. These situations aren’t charged with a penalty or fine and are just let off with a warning. Some of the situations are:
- Incorrect use of GST charge in cases where SGST, CGST are used in place of IGST and vice versa. In such cases, the registered user has to pay the GST to the first governing body and take the refund from the other governing body.
- Incorrect filing of GST Return in case of some accounting mistakes or error. However, 18% interest p.a. needs to be paid on the amount that is higher than the paid amount.
- In case of delayed invoice payments, no penalty is charged. But in case of any Input Tax Credit that is to be claimed in case of such invoices is liable to be reversed within 6 months.
- In case a lower GST rate is applied, no penalty is issued in such situations. However, yet again an 18% interest p.a. is charged on the different of the taxable amount.
Frequently Asked Questions (FAQs) about Penalties and Offenses
- Can a registered individual or business entity appeal for a penalty or offence if they’re not happy with the order passed?
Yes. In case a person or business is unhappy with the decision or order passed by the governing body regarding penalties or offences, they can appeal the same. The order for the appeal is
First Apellete Authority > Appellate Tribunal > High Court > Supreme Court
- In case an offence is a minor offence, can it be done away with a warning?
Yes. There are some situations such as filing for IGST instead of SGST and CGST, there is no penalty or fine and it can be done away with just a warning.
- Are there arrest under GST penalties and offences?
Yes. In case of certain situations where the offences have major consequences and the amounts involved are in a few hundred lakhs, some of them could lead to imprisonment for a period of a few months till 5 years.