GST Offences and Penalties

Table of Contents

Here is the comprehensive guide on GST and penalties. 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 in case 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 tax unpaid.

The Goods and Services Tax, GST, was launched in the year 2017 which eliminated almost all the forms of indirect taxation. Instead, a uniform tax, called GST, became applicable on all goods and services. Every type of business which is producing goods or services is required to follow the rules and regulations specified in the GST Act. If the business does not abide by the rules prescribed under the GST Act, it would be held responsible for a breach of law for which it would attract penalties.

Interest on Late Payment of GST

While, the GST penalty interest rates on the applicable offences are yet to be notified, the GST late payment penalty has been specified as follows:

  • A person liable to pay tax fails to pay the tax – Interest on the tax due will be calculated from the first day on which the tax was due to be paid @ 18%
  • A person makes an undue or excess claim of input tax credit or undue or excess reduction in output tax liability – Interest @ 24% on the undue excess claim or undue or excess reduction
  • A recipient of a service fails to pay to the supplier of the service the amount towards the value of the service, along with tax payable thereon, within 180 days from the date of issue of invoice by the supplier –Interest @ 18% on the amount due will be added to the recipient’s liability.

Rules and Regulations of GST Payment for Taxpayers

  • The electronic cash ledger will be credited if payment for tax, interest, penalty and fee has been made by internet banking, credit card, NEFT, RTGS. While the amount can be used for the payment of interest, tax, penalty which is remaining in the electronic cash ledger of the taxpayer
  • A payment for GST PMT-06 form is done through challan while the challan is only valid for the time period of 15 days. When the payment is done successfully, a Challan Identification Number (CIN) is generated. If in any case the CIN is not generated than the taxpayer can file Form GST PMT-07
  • Online payments even made after 8 pm will be credited on the same day to the taxpayer’s account. While there will be no physical challan accepted for the GST payment while the challans will be generated from the gst.gov.in only for all the payments of taxes, fees, penalty, interest
  • For the payment of challan under the 10000 rupees limit, it can be done over the counter with cash, cheques, demand draft through authorized banks while for the payments exceeding the amount of 10000 will be collected through digital mode only

Types of Offences under GST

Like the pre-existing indirect taxes, offences under GST system are divided into two categories:

A. Offences Attracting Fiscal Penalties

B. Offences Attracting Prosecution

GST Offences related to Invoicing and Documentation 

  • Issuing false/incorrect invoice or not issuing invoice for goods/services that have been supplied
  • 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

Penalty for Aiding and Abetting GST Fraud

If GST fraud is committed by a registered person/entity with the help from another person (whether registered or unregistered), penalty under GST is applicable to all parties considered. Currently this penalty under GST Act has been fixed at Rs. 25,000 irrespective of whether both parties are registered under GST or not. The following are some key actions that constitute as aiding and abetting GST fraud:

  • Helping any GST registered entity/person commit fraud
  • Acquisition/receipt of goods and/or service while knowing that it violates the GST Act
  • Failure to substantiate/account for any invoice that appears on the books of the business
  • Issuing invoices that are not in line with applicable GST rules
  • Not appearing before tax authorities after receiving summons to attend a GST hearing

Refer GST official site to know more about GST penalties and offences.

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