GST – Offences and Penalty Provisions

Indian government decided to launch GST with many objectives like simplification and bringing order in Indirect tax regime of the country. Elimination of double taxation issue and summing up the myriad of indirect taxes in one Goods and Service Tax. Along with all these reasons, one of the main reasons for the introduction of GST is to bring clarity in the tax collection system and elimination of tax evaders and offenders. However, there is no end to people to seek ways to avoid taxes and manipulation of laws.

In order to identify and discourage such offenders, provisions relating to such offenses and penalties for such offenses are mentioned in Chapter XIX of Central Goods and Service Tax Act, 2017.

Types of Offences

Section 122 of the CGST Act, 2017 specified 21 situations as offenses under the law. They are:

  1. Taxpayer supplying goods or services or both fails to issue an invoice for the same or if the invoice is issued it is false or incorrect.
  2. The taxpayer has issued an invoice or bill but no goods or services are supplied in respect of the same, thus violating the provisions of the law and rules made thereunder.
  3. Taxpayer provides the goods or services or both and collects the tax imposed on the same, but does not remit it to the authorities beyond a period of 3 months from the date he becomes liable to pay such taxes.
  4. Taxpayer collects any tax in contravention of the provisions of law and does not remit it to the authorities beyond a period of 3 months from the date he becomes liable to pay such taxes.
  5. The taxpayer takes ITC or utilizes ITC but has not received such input goods or services either fully or partially in respect of which he has received such ITC.
  6. Taxpayer obtains a refund of taxes fraudulently under this Act.
  7. Input tax credit is taken or distributed in contravention of Section 20 of the Act which specifies a manner of distribution of credit by Input Service Distributor.
  8. Falsification of financial records or filing of a false information in records with an intention to evade tax.
  9. A supplier is liable to be registered but fails to do so.
  10. Taxpayer provides any wrong information at the time of registration, or at the time of any later submission.
  11. A taxpayer is obstructing any officer from discharging his duties under the Act.
  12. The taxpayer is involved in the transportation of goods, but documents required for the same are not present.
  13. The taxpayer is showing his turnover at a lower amount than it actually is, with an objective to avoid tax payment.
  14. The taxpayer is not keeping, maintaining or retaining the required books of accounts and other documents as per the provisions of the law.
  15. If any officer call for any information or documents under the provisions of law, and the taxpayer fails to do so or furnishes false information.
  16. The taxpayer is involved in supply, transportation or storage of any goods that he has a reason to believe can be confiscated under the law.
  17. Taxpayer issued an invoice to his customer, but GSTIN no quoted on the same is incorrect or belongs to any other taxpayer.
  18. Taxpayer tampers or altogether destroys any piece of evidence or document required under the law.
  19. Taxpayer tampers or all together disposes of any goods that have been detained, seized or attached by the authorities under the Act.

Where any taxpayer is required to deduct tax at source under section 51, but he

  • fails to do so,
  • Collects an amount less than the actual amount to be deducted, or
  • Fails to remit the tax collected to the authorities under subsection (2) of section 51.

Where any taxpayer is required to collect tax at source under section 52, but he

  • fails to do so,
  • Collects an amount less than the actual amount to be deducted, or
  • Fails to remit the tax collected to the authorities under subsection (3) of section 52.

Penalties

We have discussed the list of offenses, now let’s try and understand the penalties imposed for such offenses by the authorities.

Penalties For Registered Taxpayers

The Registered taxpayer will be liable to pay penalty if he supplied any goods or services or both, but:

  • Failed to pay the tax on the same, or
  • Short paid such tax, or
  • Was erroneously refunded the tax amount, or
  • Has wrongfully availed input tax credit.

Amount of penalty

In order to decide how much penalty is to be charged, the intention behind such offense is to be considered. On this basis, two situations are to be considered:

If such offenses are a result of intention of fraud or any willful misstatement or suppression of facts is done with an intention to evade tax, then he will be liable to pay higher of the two amounts stated below:

  • Ten thousand rupees or
  • Tax due from such person.

If such offenses are a result of any reason other than the intention of fraud or any willful misstatement or suppression of facts, then he will be liable to pay higher of the two amounts stated below:

  • Ten thousand rupees or
  • 10% of the tax due from such person.

Penalties For Unregistered Taxpayers

Any person who is not registered under GST, will also be covered under the ambit of penalties if they commit any of the following offenses:

  • Aids or abets in any of the 21 offenses mentioned above.
  • Acquire possession of or is dealing in any way with any disputed goods, irrespective of the fact that he has a knowledge about the same or has a reason to believe so. Here, disputed goods mean goods that are liable to be confiscated by the authorities under the Act.
  • Receives, dealing in any other way or is involved in the supply of such services which are in contravention with the provisions of the law. And such person has a knowledge or has a reason to believe such contravention.
  • Such person is summoned by the authorities to give evidence or produce any document in the process of any inquiry, but he fails to do so.
  • Such person fails to issue the invoice, or make an account of any invoice in his books of accounts as per the provisions of the law.

Penalty amount

Such a person will be liable to pay a penalty which can extend up to 25000 rupees.