Offences and Penalties under GST: A Detailed Overview
Updated: Dec 2
The GST Act, 2017 established a uniform tax system for the entirety of India and established the legal foundation to guarantee that companies of all sizes adhere to the Act's provisions. 21 distinct offences have been enumerated, together with the associated punishments under the GST Act, as part of the legislative framework for the Act's implementation. The main GST fines and crimes listed in the GST Act, together with the procedure for appealing decisions made by an appellate body, will be covered in the parts that follow.
Table of Contents:
Offences under GST
A violation of a law or regulation, or an illegal act, is called an offence. Similar to this, breaking the terms of the GST Act and Rules becomes an offence under the GST. Here is a list of offences under GST, along with illustrations to explain them.
Offences Related to Documentation and Invoices
Submitting a fake, inaccurate, or nonexistent invoice for any kind of given goods or services. For example, XYZ Limited purchased products from ABC Ltd. for Rs. 50,000. But, they merely created an invoice for INR 40,000. Similarly, ABC Ltd. did not sell any products to XYZ Ltd.; instead, they issued an invoice of Rs. 50,000.
Issuing the GST invoice instead of providing the relevant products and services. In July 2019, ABC Ltd. generated a GST invoice amounting to Rs. 10,000, despite not providing any products or services during that month.
Failure to keep up with the records or paperwork needed by the GST Act. ABC Ltd. did not keep track of all the invoices for the products they sold throughout a fiscal year.
Releasing a document or invoice that has another person or entity's GSTIN (Goods and Services Tax Identification Number) on it. The GSTIN that ABC Ltd. quotes on their bills is the GSTIN of XYZ Ltd., and they supply items valued at INR 50,000.
Transportation of goods for which the commodities would be subject to GST without the necessary documentation or with incorrect documentation. ABC Ltd. moved its inventory to a different warehouse without the required documentation. ABC Ltd. moved its cargo to a different location with minimal documentation.
Offences Related to Fraudulent Intentions
Not filing a GST registration. ABC Ltd. should register for GST to conduct business, but they don't.
Providing false information at any point, including while registering for GST. When applying for GST, ABC Ltd. gave the incorrect address for their registered office.
Obtaining a GST reimbursement by providing false information. ABC Ltd. is requesting a GST refund for transactions that they did not complete.
Falsifying records or paperwork to provide false information to avoid paying taxes. To avoid paying GST, ABC Ltd. fabricates Profit and Loss Accounts to understate their turnover.
Tampering with commodities or getting rid of them after the GST Act's provisions have attached, detained, or seized them. ABC Ltd. is attempting to auction off the stock that is attached according to the GST Act.
Intentional supply, transportation, or storage of products that, in accordance with the terms of the GST regulations, would be seized. ABC Ltd. transports products that may be seized, being aware that this could happen.
Offences Related to Tax Evasion
Underreporting or concealing the true turnover figure for the year in order to avoid paying GST. ABC Ltd.'s revenue for the 2020-21 was Rs. 25 lakhs. But they reported a Rs 15 lakh as turnover for GST reasons.
Failure to pay the government's share of GST within three months of receiving it from the purchaser of goods and services. On May 1st, 2019, ABC Ltd. sold items and collected GST for those sales. However, as of July 31, 2019, the collected GST had not been deposited.
When GST is collected in violation of the GST Act, it is not paid to the government within three months of being collected from the buyer of goods and services. In violation of the GST Act, ABC Ltd. sold products on April 1st, 2019 and collected GST on those sales. Nevertheless, the collected GST was not deposited by June 30, 2019.
Claiming the input tax credits or using it in lieu of providing the necessary goods and services. ABC Ltd. received a Rs. 10,000 input tax credit; however, they did not sell any goods that met the requirements to receive the matching amount of credit.
Disregarding the tax responsibility requirements outlined in Section 52(2) of the GST Act. The tax amount to be withheld or the tax amount owed to the government for providing goods and services is specified in this section. According to Section 52(2) of the GST Act, ABC Ltd. was required to deduct tax at the rate of 10% from the products and services it provided. It did not, however, deduct the necessary tax.
Overlooking the tax responsibility requirements outlined in Section 52(3) of the GST Act. The tax amount to be withheld or the tax amount owed to the government for providing goods and services is specified in this section. According to Section 52(3) of the GST Act, ABC Ltd. was required to deduct tax at the rate of 10% from the products and services it provided. It did not, however, deduct the necessary tax.
Using the Input Tax Credit in Violation of Section 20 of the GST Act. ABC Ltd. utilised the Input Tax Credit in violation of the regulations outlined in Section 20 of the GST Act.
Offences Related to Obstruction
Preventing or impeding an official from carrying out their duties as outlined in the GST Act. ABC Ltd. refused to permit a government officer to examine their financial statements to identify any anomalies relating to GST.
Tampering with or destroying evidence-related documents. The original invoices proving that ABC Ltd. avoided the relevant GST by underreporting its turnover were destroyed.
Submitting false or incomplete documentation to the official designated to act under the GST Act. ABC Ltd. submits fake invoices to the GST officer to conceal their GST evasion
These are the 21 instances of offences related to adhering to the GST Act's regulations that businesses can be found guilty of. These violations may be slight or significant. Penalties would be imposed based on the kind of violation. The fine that applies in each of the 21 instances mentioned above is:
Rs.10,000 or
Tax evasion, tax not deducted, tax not collected, incorrectly entered tax credit obtained, or fraudulently claimed refund, whichever is higher.
Minor and Major Breach under GST
As per the present regulations about Goods and Services Tax Penalties, a small violation occurs when the tax liability is less than Rs. 5,000. A minor breach also comprises easily corrected documentation errors or omissions. Minor infractions are not subject to significant GST penalties under current regulations, and tax officials may choose to give a warning in lieu of levying a fine. If the amount of tax involved is more than Rs. 5,000, the GST Act considers this to be a severe breach. Depending on the tax amount consideration, jail sentences or other penalties may be imposed under the GST. The purpose of the minor vs. significant breach provision is to protect small and medium-sized enterprises (SMEs) from penalties for inadvertent mistakes.
Penalties under GST
The meaning of the word "penalty," which lacks a precise definition in the GST, is derived from a number of court rulings and jurisprudential concepts. A penalty is a legal sanction imposed for breaking the law or neglecting to take an action that was required of a party. Penalties might be either financial or physical, civil or criminal. Under GST, there are both monetary and corporeal punishments (i.e., jail time). The following table illustrates GST penalties for different offences:
Offences without GST Penalties
Certain infractions are not subject to GST penalties; nonetheless, they may result in interest being charged on the amount of tax under consideration at a stipulated rate (18% yearly). Some significant situations where there is no GST penalty include the following:
Incorrect GST charges, such as charging CGST or SGST instead of IGST, are not subject to a GST penalty. In order to receive a refund for incorrectly paid GST, the registered business or entity must pay the right GST.
Under the GST Act, there is no penalty for filing GST returns incorrectly; nevertheless, interest on the tax amount deficit is payable at the rate of 18% per year.
There is no late payment penalty for invoices. However, if payment for an invoice is not received within six months, any input tax credit that was claimed in place of such invoices may be reverted.
Under the GST Act, there is no penalty for charging a GST rate that is incorrect (lower than the actual rate); nonetheless, the registered firm or individual must pay interest on the deficit in tax at the rate of 18% per year.
Corporal Penalties under GST
In high-value tax situations, incarceration is a possible penalty. The severity of the case would determine the length of the sentence, which would also come with fines. These are the terms of imprisonment:
Between Rs. 100 and Rs. 200 lakhs: For a maximum of a year
Between Rs. 200 and Rs. 500 lakhs: For a maximum of three years
Over Rs. 500 lakh Indian rupees: For a maximum of five years
Helping or encouraging the commission of any crime: For a maximum of six months
Appeals Against Penalties under GST
The GST Act provides appeals process for GST registered persons and entities who are dissatisfied with any order or judgement related to GST penalties made by a tax authority or official serving as an adjudicating authority. No matter the type of offence or the related GST penalties (financial or otherwise) for that particular offence, the appeals process under the GST Act functions in the same way. The various degrees of appeal that are accessible are as follows:
When someone wants to appeal an order made by the adjudicating authority, they can go to the first appellate authority.
The GST appellate tribunal was established as a quasi-judicial body to resolve conflicts and consider appeals of decisions made by the first appellate authority.
The next court of appeal for anyone challenging a decision rendered by the appellate tribunal is the high court at the state level.
The Supreme Court of India, the highest court in the country, is the last court of appeal for cases involving GST fines or other tax orders. Under the current GST regulations, the Supreme Court's decision regarding any fines, jail terms, or penalties related to GST is final.
Conclusion
Because the GST system is always changing, it's critical to stay current. The secret to staying out of difficulty is to comply on time; even if problems do occur, they may be quickly fixed with quick adjustments. But it's best to be safe than sorry when it comes to GST fines. Therefore, using GST billing software can be quite beneficial for timely compliance and precise invoicing. Reducing errors will not only make your work easier but also help prevent offences. Thus, utilise technology to your advantage and maintain a competitive edge at all times.
FAQ
Q1. What is a GST offence?
When someone commits an offence with the specific aim of conducting fraud, they may be prosecuted under GST and may even face criminal penalties. Among these offences are, for instance, sending out an invoice for products or services without providing any, and then fraudulently claiming credit or reimbursement.
Q2. What is the penalty for late amendment in GST registration?
The GST law stipulates a general penalty for failing to file GST returns or missing the GST due dates. There is a Rs. 5,000 maximum penalty that can be applied. In addition to the late payment penalty, the taxpayer will also have to pay interest on the overdue GST amount at the rate of 18% per year.
Q3. What is the penalty for not registering an additional place of business under GST?
While there isn't a specific penalty for failing to register a second place of business under the GST Act, the general penalty of INR 25,000 will apply in this instance as well.
Q4. What is the penalty for a fake invoice?
If found guilty of issuing a fake invoice, a penalty equal to the amount of tax evaded or ₹10,000, whichever is higher, may be imposed.
Q5. Can you go to jail for not paying GST?
In the case of GST, the penalty for delinquent taxes is 10% of the total amount owed, and it kicks in when the sum exceeds Rs. 10,000. Big fraudulent conduct involving big sums may also result in a prison sentence.
Q6. Are GST offences bailable?
The particular offence and the amount involved determine whether or not a GST offence is bailable.
Q7. How do I check my GST penalty online?
Access the GST portal to check your online GST penalty. Next, click the "Services" button, navigate to the "Payments" section, and choose "Challan History." There will be a list of challans with their payment status shown.
Q8. What would be the penalty for an offence not particularly mentioned in the GST Act?
The maximum penalty for any crime that is not specifically listed is INR 25,000.
Q9. How are minor breaches treated under GST?
When they first launch their businesses, SMEs and small-scale industries may make a few little errors. Since infractions of this nature do not carry financial consequences, it would be advantageous for these emerging companies.
Q10. Can a penalty be imposed for aiding and abetting a GST offender?
Yes, there would be penalties for everyone who helps and supports fraud involving GST.
Q11. What is Section 122 of the GST Act?
Penalties for acts of "non-payment, short-payment of tax, tax erroneously refunded, or tax wrongly availed or utilised" can be imposed under section 122 of the Act, which establishes criminal liability. Penalty provisions comparable to this are found in Sections 73 and 74.
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