GST Penalties and Appeals in India

Table of Contents

All Under GST, the return can be filed both online and offline. Under this new tax reform, there is common e-return for Central Goods & Service Tax (CGST), State Goods & Service Tax (SGST), Integrated Goods & service Tax (IGST) and Additional tax. Under GST, a registered taxpayer shall file GST return at the GST common Portal either by himself/herself or through a representative. Every individual registered under GST is required to file a return, irrespective of whether a sale or purchase has been carried out during the return period.

Being a destination based, transaction wise tax, Goods and Services Tax or GST, ropes in strict compliance procedures for all the taxpayers or people falling under the gamut of the same. Since every transaction is being recorded and tracked between the source and destination, it is obligatory for the taxpayers to maintain and declare information with utmost accuracy.

Prosecution under GST

Prosecution under GST is a legal proceeding conducted against someone for a criminal charge. When the following offenses are committed with the deliberate action to cause fraud it becomes liable for prosecution

  • Claiming a refund on CGST or SGST by fraudulent means.
  • Providing fake documents or financial records and fake returns for tax evasion.
  • Acting as an accomplice by helping another person commit fraud.
  • Selling or supplying goods or service without any invoice or by issuing a false invoice.

Offences

There are 21 offenses under GST. We have mentioned a few here. For the entire list of 21 offenses please go to our main article on offenses.

Penalty

If any of the 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.

Rules Regarding Penalty

There are some general rules regarding penalty which remain the same in all laws whether in tax laws or contract law. These rules are as follows

  • The tax authority will give an explanation regarding the reason for penalty and nature of the offense.
  • Every taxable person on whom the penalty is imposed will be given a show cause notice and will be given a reasonable opportunity of being heard.
  • When any person voluntarily discloses a breach of the law, in such case the tax authority may issue a warning.
  • This law is beneficial for businesses, SMEs (Small and Medium Sized Enterprises) who may make genuine mistakes after the implementation of GST.

What is an appeal?

An appeal under any law is defined as an application to a higher court for reversing the decision of the lower court. An appeal is done only in cases of legal disputes. Appeals are made to dissolve disputes.

GST Appeals 

A person who is not satisfied with any order or decision passed under GST which is against him can appeal against the same. The first appeal goes to the First Appellate Authority against the order passed by the adjudicating body. 

If a taxpayer is not satisfied with the First Appellate Authority’s decision, they can go to National Appellate Tribunal, and then appeal to the High Court and Supreme Court at the end. 

To avoid stressful appeal and litigation process, a taxpayer may claim advance ruling. The authority gives advance ruling in writing to the applicant. 

Cases in which Appeal cannot be Filed

On the recommendation of the council, the board or state government may fix monetary limits for appeal by GST officer to avoid unnecessary litigation expenses and to regulate the filing of the appeal.

Appeals cannot be made against the following decisions

  • An order to seize books of accounts and other documents.
  • An order which allows the payment of tax and another amount in installments.
  • Order for transferring the proceedings from one officer to another officer.
  • Under the act, ordering sanction for prosecution.
  • Individuals who are dissatisfied with the decision placed against them under the GST law can appeal to the first appellate authority.

Offences under GST Act

The GST Act specifies 21 separate offences that can attract penalties under GST regime. There are of course offences that, though not part of the list, carry GST penalties that are decided on a case by case basis.

The following is the list along with key details of these 21 GST offences:

GST Offences related to Invoicing and Documentation 

  • Issuing false/incorrect invoice or not issuing invoice for goods/services that have beensupplied
  • Issue of GST invoice without actual supply of goods/services
  • Issue of invoice/document using GSTIN of a different GST registered person/entity
  • Transport of taxable goods without adequate/correct documentation
  • Failure to maintain relevant documents/records in line with requirements of the GST Act 

GST Offences related to Fraudulent Intent 

  • Submission of false information at the time of GST registration or at a later date
  • Obtaining GST refund  by supplying fraudulent information
  • Falsification of documents/records or providing false information with the intent of tax evasion
  • Not registering under GST even though required to do so under GST Act
  • Tampering with/disposing off goods that have been attached, seized or detained under GST Act.
  • Knowingly supplying, transporting or storing any goods that are liable to be confiscated as per GST rules.

GST Offences related to Tax Evasion 

  • Under reporting/suppressing turnover resulting in tax evasion
  • Failure to pay tax to the government within three months of due date after collecting the tax from receiver of goods/services
  • Failure to pay tax to the government within three months of due date even though such tax has been collected in contravention of provisions specified by the GST Act
  • Taking or utilizing Input Tax Credit (ITC) without actual receipt/supply of goods or services
  • Failure to deduct tax, deducting tax amount less than the actual amount deducted or not paying the tax owed to the government (Tax liability under subsection 2 of Section 52 of GST Act)
  • Failure to deduct tax, deducting tax amount less than the actual amount deducted or not paying the tax owed to the government (Tax liability under subsection 3 of Section 52 of GST Act)
  • Taking/utilizing input tax credit in breach of Section 20 and its sub-sections under the GST Act

GST Offences related to Obstruction 

  • Obstructing/preventing any officer from discharging his/her duties as per the GST Act
  • Destroying/tampering with documents or material evidence
  • Providing false documents or failure to furnish documents/information demanded by an officer acting with authority provided by the GST Act

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