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Penalty Under GST Act – A Detailed Guide
There is no definition of penalty under GST Act. Therefore, in common man’s language, a penalty is a punishment imposed by law for committing an offence. Further, a penalty can also be imposed where a person fails to do something that was his duty to do so.
Types Of Penalty Under GST
The person has to face penalty under GST for committing an offence. This penalty can be in the form of fine. In addition to the imposition of fine, the person may also have to face the imprisonment. Therefore, under GST, penalty are of two types:
- Pecuniary i.e. monetary penalties in form of fines
- Corporal i.e. imprisonment in jail
What Is Offence?
Just like penalty, there is no definition of “offence” also under the GST Act. Further, an offence is said to be when there is a breach of a law or rule, i.e., an illegal act. Similarly, an offence under GST is a breach of the provisions of the GST Act and Rules.
Offences Under GST
There are 21 types of offences GST for which a person may have to face the penalties. These offences are as follows:
- Fake Or Wrong Invoices:
- Suppling of any goods/services without any invoice or issues a false invoice.
- Issuing any invoice or bill without supply of goods/services in violation of the provisions of GST
- Issuing invoices using the identification number of another bonafide taxable person
- Fraud
- Submitting false information while registering under GSTS
- Submitting fake financial records/documents or files fake returns to evade tax
- Not providing information/gives false information during proceedings
- Tax Evasion
- Collecting any GST but does not deposit it to the government within 3 months
- Collecting any GST in contravention of provisions and not depositing it to the government within 3 months. Failure to do so will be an offence under GST.
- Obtaining a refund of any CGST/SGST by fraud.
- Taking and/or utilizing input tax credit without actual receipt of goods and/or services
- Deliberately suppresses his sales to evade tax
- Supply/Transport Of Goods
- Transporting goods without proper documents
- Suppling/transporting goods that person knows will be confiscated
- Destroying/tampering goods that have been seized
- Other Offences
- Non registration under GST although he is required to by law
- No deducting of TDS or deducting less amount where applicable.
- Not collecting TCS or collects less amount where applicable.
- Being an Input Service Distributor, he takes or distributes input tax credit in violation of the rules
- Obstructing the proper officer during his duty (for example, hindering the officer during the audit by tax authorities)
- Not maintaining all the books required to be maintained by law
- Destroying any evidence
For the 21 offences above, for fraud cases, penalty will be 100% (minimum Rs. 10,000). For cases under 1, 2 (fake invoicing) and 4th under both tax evasion and others heads, the penalty is equal to the tax evaded or ITC availed or passed on.
On Whom Penalty Under GST Is Imposed For The Offences?
The persons are responsible for penalty under GST:
- Offence by registered person:
The registered taxable person himself will be responsible for penalty for committing offences under GST - Offence by company
In case of offence of company, both the officer in charge (such as director, manager, secretary) as well as the company is responsible for penalty under GST. - Offence by partnership firms
For the offences by partnership firms, the imposition of penalty is on the partners of the firm. - Offence by HUFs
When there is a commission of offence by HUF, the imposition of penalty under GST will be on Karta of the family. - Offence by trust
The imposition of penalty under GST for offence by trust is on the managing trustee.
Offences & Penalties Under GST
Type of GST offence | Amount of penalty |
Penalty for delay in filing GSTR | The late fee is Rs. 100 per day per Act. Total will be Rs. 200/day. |
Penalty for not filing GSTR | Penalty 10% of the tax due or Rs. 10,000 – whichever is higher |
Penalty for non registering under GST | Penalty 100% of the tax evaded or Rs. 10,000 – whichever is higher |
Penalty for not mentioning GSTIN on the name board | Penalty of upto Rs. 25,000 |
Penalty for not displaying GST Certificate at prominent place of business at all places of business | Penalty of upto Rs. 25,000 |
Penalty for not obtaining registration within 30 days of date on which he is liable to get registered | Penalty of Rs. 10,000 + ITC during the period of delay is lost |
Penalty for committing a fraud | Penalty 100% of the tax evaded or Rs. 10,000 – whichever is higher (High-value fraud cases also have jail term) |
Penalty for furnishing false information | Penalty 100% of the tax evaded or Rs. 10,000 – whichever is higher
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 |
Penalty for aiding a person to commit fraud | Penalty extending up to Rs. 25,000 |
Penalty for opting for composition scheme even though taxpayer is not eligible | Demand & recovery provisions of sections 73 & 74 will apply
|
Penalty for wrongfully charging GST rate— charging a higher rate | Penalty 100% of the tax due or Rs. 10,000 – whichever is higher (if the additional GST collected is not submitted with the government) |
Penalty for not issuing an invoice | Penalty 100% of the tax due or Rs. 10,000 – whichever is higher |
Penalty for not registering under GST | Penalty 100% of the tax due or Rs. 10,000 – whichever is higher |
Penalty for not issuing invoice | Penalty 100% of the tax due or Rs. 10,000 – whichever is higher |
Penalty for incorrect invoicing | Penalty for not issuing invoice |
General penalty (penalty is not mentioned anywhere else) | Penalty of up to Rs. 25,000 |
Cases Where There Is No Penalty But Interest May Apply
- Charging incorrect type of GST
There will be no imposition of penalty. The taxpayer will have to make correct payment of GST. Consequently, he can claim refund of the GST amount paid earlier.- For example: Arun is in business of selling cotton garments at Delhi. He has sold some garments to seller in Dehradun. Now instead of charging IGST @5%, he has charged SGST @2.5% and CGST @2.5%. In this case, there will be no penalty on Arun. He can make correct payment of GST and claim refund the earlier payment of GST under IGST.
- Incorrect filing of GST Return
Incorrect filing of GST does not attract any penalty. However, interest @18% on shortfall amount can be claimed. - Delay in payment of invoice
There is no penalty in delay in payment of invoice. However, the Input Tax Credit will be reversed if payment is not made within 6 months. - Wrongfully charging GST rate at a lower rate
As stated above, there is a penalty on GST on charging GST at higher rate. However, in case of wrongfully charging at a lower rate, there is no imposition of penalty. However, in such a case the person will have to pay 18% on the shortfall.- Illustration: Ram is in the business of selling electronic items. Now instead of charging 18% GST, he has charged 5% from its customers. In such a case, there will be no imposition of penalty on Ram but he will have to pay 18% on the shortfall amount.
Imprisonment On Penalty Under GST
In case of high amounts, there can be an imprisonment of penalty under GST, whicg is 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 years |
Please note that this imprisonment is in addition to fine.
Cases Where There Is No Penalty
In cases of minor breaches, there is no imposition of penalty. Minor breaches are those breaches where
- Amount is below Rs. 5,000 or
- Errors are easily rectifiable
- Breaches are without motive or fraud
Consult a C.A
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