12 Feb 2020, 10:27 — 16 min read
Background: To prevent tax evasion and corruption under the Goods and Services Tax (GST), there are certain provisions for offenders to pay late fee, penalties and interest. Sanjeev Singhal, shares an overview of these.
Offence in general means a breach of Law or Act or any illegal act and penalty is defined as the punishment for committing an offence. Section 122 to 138 of the GST Act defines Offences and Penalties under GST.
The GST late filing penalty has been specified as follows:
While, the GST penalty interest rates on the applicable offences is yet to be notified, the GST late payment penalty has been specified as follows:
Like the pre-existing indirect taxes, offences under GST system are divided into two categories:
The offences drawing fiscal penalties involve proceedings that are quasi-judicial in nature. Such proceedings are carried out by the departmental officers. Offences attracting prosecution, on the other hand, are judicial in nature. Such proceedings are dealt by Courts and may lead to imprisonment or fine.
Furthermore, the offences attracting fiscal penalty can be further bifurcated into Revenue Issues and Procedural Issues. Revenue issues involve demand and recovery of amount of tax, interest, penalty or fine due to government. The procedural issues, on the other hand, include contravention of prescribed procedures or modalities not involving revenue.
Section 122 of the CGST Act, 2017, lays down certain offences along with the fiscal penalties. This section is divided into 3 sub-sections, each attracting different penalties.
Following offences relate to section 122 (1)(i), 122 (1)(ii) and 122 (1)(xix) respectively. Accordingly, such offences occur if as a taxable person:
Following offences relate to section 122 (1)(viii), 122 (1)(x) and 122 (1)(xii) respectively. Accordingly, such offences occur if as a taxable person:
At the time of applying for registration or Subsequently
Following offences relate to section 122 (1)(iii), 122 (1)(iv) and 122 (1)(xv) respectively. Accordingly, such offences occur if as a taxable person:
Following offences relate to section 122 (1)(v) and 122 (1)(vi) respectively. Accordingly, such offences originate if as a taxable person:
Following offences relate to section 122 (1)(vii) and 122 (1)(ix) respectively. Accordingly, such offences occur if as a taxable person, you:
Following offences relate to section 122 (1)(xi), 122 (1)(xvi) and 122 (1)(xvii) respectively. Accordingly, such offences occur if as a taxable person:
Following offences relate to section 122 (1)(xiv) and 122 (1)(xviii) respectively. Accordingly, such offences occur if as a taxable person:
Following offences relate to section 122 (1)(xiii), 122 (1)(xx) and 122 (xxi) respectively. Accordingly, such offences occur if as a taxable person:
Penalty levied: in case of any offence mentioned above ,you shall be liable to pay a sum which is higher of:
Following offence relates to section 122 (2). These provisions refer to you as a registered person if you supply goods or services on which:
Hence, if you are such a supplier who makes a supply for any of the following two reasons, the penalties attached would be levied.
Reasons For Supply
Firstly, for reasons other than fraud, willful misstatement or suppression of facts to evade tax. In such a case, you as an offender shall be liable to pay a penalty which is higher of:
Secondly, for any reason of fraud or willful misstatement or suppression of facts to evade tax. In such a case, you as an offender shall be liable to pay a penalty which is higher of:
Following offences relate to section 122 (3). These offences deal with the situations where you are not directly involved in tax evasion. Instead, you aid or abet or may be a party to such an evasion. Furthermore, it also includes cases where you do not attend summons or produce documents.
Penalty: If you as an offender commit any of the above offences, then you shall be liable to pay a penalty which may extend to INR 25,000.
Under the CGST Act, 2017, section 123 deals with circumstances where you fail to file an Information Return under section 150.
Section 150 lays down cases where you are obligated to furnish an Information Return. If you fail to furnish an Information Return in such cases within a stipulated period, it calls for a penalty. The stipulated period to file Information Return is 30 days from the date of issue of show cause notice.
Penalty: If you fail to file IR within stipulated time, you shall be liable to a penalty of INR 100 each day for which the failure continues. Such a penalty cannot exceed INR 5,000.
Section 124 of the CGST Act, 2017, deals with penalty levied in circumstances where you fail to furnish information under section 151.
According to section 151, a Commissioner has the power to collect statistics concerning any matter dealt with under the Act. He may issue a notice asking you to furnish information or returns in a prescribed format. Such information relates to the matters for which statistics are to be collected.
Therefore, section 124 specifies penalty for failure to provide information or return in two circumstances:
Penalty: If you fail to furnish such information, you shall be liable to a fine of up to INR. 10,000. But where the offence is continuing, a further fine of INR 100 is levied each day for which the failure continues. However, such a penalty cannot exceed INR 25,000.
Section 125 of the CGST Act, 2017, deals with such cases where no separate penalty is prescribed under the Act or Rules. Accordingly, it refers to cases where you contravene:
Provided, there is no penalty separately prescribed for such an offence under the Act.
Penalty: The penalty imposable in such a case is up to INR 25,000.
Section 132 of the CGST Act, 2017 describes cases of tax evasion and the penal actions applicable on specific events. This section provides for cases where your offences lead to prosecution and accordingly a punishment is initiated on you. The term prosecution means conducting legal proceedings against an offender before a legal tribunal. And the punishment for such an offence involves either imprisonment or fine or both.
A. This part enumerates cases identified by law makers as offences liable for prosecution:
a. Supplying goods or services or both without the cover of invoice. Provided it is done with the intention of evading tax.
b. Issuing any invoice or bill without actual supply of goods or services or both. Provided such an act leads to wrongful input tax credit or refund of tax.
c. Availing ITC using invoice referred to in point (ii) above.
d. Collecting taxes without any payment to the government for a period exceeding 3 months from due date.
e. Evading tax, availing credit or obtaining refund with the intent of fraud. Where such offence is not covered in clause (i) to (iv) above.
f. Falsifying financial records or producing false records/ accounts/ documents/ information. Provided it is done with the intention of evading tax.
g. Obstructing or preventing any officer from doing his duties under the act.
h. Acquiring or transporting or in any manner dealing with goods liable for confiscation under this Act.
i. Receiving or dealing with supply of services which are in contravention of any provisions of this law.
j. Tampering or destroying any material evidence or documents.
k. Failing to supply information which a person is required to supply under this law. Or supplying false information.
l. Attempting or abetting the commission of any of the offences mentioned above.
Now, this section enables commencement of prosecution proceedings against the offenders. It also lists the period of imprisonment and quantum of fine for all such prosecution offences. Such a punishment varies depending on the amount of tax evaded or seriousness of the offence as listed below.
B. This part deals with persons committing any offence specified in clause (vi), (vii) or (x) above. Such offenders shall be punishable with:
C. This part deals with repetitive offences.
There are cases where you are convicted of repetitive offences. And such offences without any specific/special reason are to be recorded in the judgment of the Court. Such offences will entail an imprisonment term of not less than 6 months. But such imprisonment could extend to 5 years plus a fine.
D. All offences mentioned in this section are non-cognizable and bailable except the following cases:
(i) Where the amount exceeds INR 5 crores and
(ii) Instances covered by (a) to (d) in Para A.
Also read: How to apply for GST refund on GST portal
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Posted bySanjeev Singhal