The GST law has clearly defined descriptions of offenses, and the penalties levied in each scenario. This is essential information for all business owners, CAs, and Tax Professionals, as a careless mistake can cause severe consequences.
Overview
GST has brought in strict provisions for offenders regarding penalties, prosecution, and arrest to prevent tax evasion and corruption.
Offenses & Penalties
Offenses
There are 21 offenses under GST. We have mentioned a few here. For the entire list of 21 crimes please go to our main article on offenses. The significant offenses under GST are:
- Not registering under GST, even though required by law. (Read our article for the list of those who have to register mandatorily under GST)
- Supply of any goods/services without any invoice or issuing a false invoice
- The issue of invoices by a taxable person using the GSTIN of another bonafide taxpayer
- Submission of incorrect information while registering under GST
- Submission of fake financial records/documents or files or fake returns to evade tax
- Obtaining refunds by fraud
- Deliberate suppression of sales to avoid tax
- Opting for a composition scheme even though a taxpayer is ineligible
Penalty
If any offenses are committed, then a penalty will have to be paid under GST. The principles on which these penalties are based are also mentioned by law.
For late filing
Late filing attracts a penalty called a late fee. The late fee is Rs. 100 per day per Act. So it is 100 under CGST & 100 under SGST. The total will be Rs. 200/day*. The maximum is Rs. 5,000. There is no late fee on IGST in case of delayed filing.
Along with the late fee, interest must be paid at 18% per annum. The period will be from the next day of filing to the payment date. It has to be calculated by the taxpayer on the tax to be paid.
For not filing
If you don’t file any GST returns, subsequent returns cannot be filed. For example, if the GSTR-2 return of August is not filed, then the next return GSTR-3 and following returns of September cannot be filed. Hence, late filing of GST returns will cascade, leading to heavy fines and penalties (see below).
For the 21 offenses with no intention of fraud or tax evasion
An offender not paying tax or making short payments must pay a penalty of 10% of the tax amount due subject to a minimum of Rs. 10,000.
Consider — if tax has not been paid or a short payment is made, a minimum penalty of Rs 10,000 has to be paid. The maximum penalty is 10% of the unpaid tax.
For the 21 offenses with the intention of fraud or tax evasion
An offender has to pay a penalty amount of tax evaded/short deducted, i.e., 100% penalty, subject to a minimum of Rs. 10,000. Additional penalties are as follows-
| Tax amount involved | 100-200 lakhs | 200-500 lakhs | Above 500 lakhs |
| Jail term | Up to 1 year | Up to 3 years | Up to 5 year |
| Fine | In all three cases |
Inspection Under GST
The Joint Commissioner of SGST/CGST (or a higher officer) may believe that to evade tax, a person has suppressed any transaction or claimed excess input tax credit, etc. Then the Joint Commissioner can authorize any other officer of CGST/SGST (in writing) to inspect the places of business of the suspected evader.
Search & Seizure Under GST
The Joint Commissioner of SGST/CGST can order a search. He will order a search based on results of inspection (or other reason) if he has reasons to believe –
- Some goods might be confiscated.
- Any documents or books or other things which are hidden somewhere. Such items can be helpful during proceedings.
Such incriminating goods and documents can be seized.
Goods in Transit
The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to bring the following documents:
- Invoice or bill of supply or delivery challan
- Copy of e-way bill (hard copy or via RFID)
The proper officer has the power to intercept goods in transit and inspect the goods and the documents.
If the goods are in contravention of the GST Act, then the goods, related documents, and the vehicle carrying them will be seized. The goods will be released only on payment of tax and penalty.
Before confiscating the goods, the tax officer shall give an option of paying a fine instead of confiscation.
Compounding of Offences Under GST
Compounding offenses is a shortcut method to avoid litigation. In case of prosecution for an offense in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. This becomes expensive and time-consuming.
In compounding, the accused is not required to appear personally and can be discharged on payment of the compounding fee, which cannot be more than the maximum fine as applicable under GST.
Compounding will save time and money. However, compounding under GST is not available for cases where the value involved exceeds 1 crore.
Prosecution Under GST
The prosecution is conducting legal proceedings against someone regarding a criminal charge.
A person committing an offense with the deliberate intention of fraud becomes liable to prosecution under GST, i.e., face criminal charges. A few examples of these offenses are-
- Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
- Obtaining a refund of any CGST/SGST by fraud
- Submitting fake financial records/documents or files and counterfeit returns to evade tax.
- Helping another person to commit fraud under GST
Arrest Under GST
Suppose the Commissioner of CGST/SGST believes a person has committed a particular offense. In that case, he can be arrested under GST by any authorized CGST/SGST officer (click here for the list of offenses for which one can be captured).
The arrested person will be informed of the grounds for his arrest. He will appear before the magistrate within 24 hours in case of a cognizable offense (Cognizable offenses are those where the police can arrest a person without an arrest warrant. They are serious crimes like murder, robbery, counterfeiting).
Created & Posted By Ravi Kumar
CA Article at TAXAJ
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