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The GST law has clearly defined descriptions of offenses and the penalties levied in each scenario. This is important information for all business owners, CAs and Tax Professionals as an inadvertent mistake can cause severe consequences.
Union Budget 2021 Outcome
a. Exemption from ITR filing to senior citizens aged 75 years and above, earning only pension and interest income.
b. The income tax department launched pre-filled ITRs with additional details to simplify the return filing process.
c. The due date for filing belated and revised returns is reduced by 3 months. This also means that the IT department will have to process the returns and send a notice under section 143(1) by 31st December.
To prevent tax evasion and corruption, GST has brought in strict provisions for offenders regarding penalties, prosecution, and arrest.
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. The major offenses under GST are:
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.
Late filing attracts penalty called late fee. The late fee is Rs. 100 per day per Act. So it is 100 under CGST & 100 under SGST. 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 late fee, interest has to be paid at 18% per annum. It has to be calculated by the taxpayer on the tax to be paid. The time period will be from the next day of filing to the date of payment.
*Subject to changes announced via Notifications. Check out for updates here
If you don’t file any GST return then subsequent returns cannot be filed. For example, if GSTR-2 return of August is not filed then the next return GSTR-3 and subsequent returns of September cannot be filed. Hence, late filing of GST return will have a cascading effect leading to heavy fines and penalty (see below).
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.
An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty, subject to a minimum of Rs. 10,000.Additional penalties as follows-
|Tax amount involved||100-200 lakhs||200-500 lakhs||Above 500 lakhs|
|Jail term||Upto 1 year||Upto 3 years||Upto 5 year|
|Fine||In all three cases|
Cases of fraud also face penalties, prosecution, and arrest.
The Joint Commissioner of SGST/CGST (or a higher officer) may have reasons to believe that in order 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 places of business of the suspected evader.
The Joint Commissioner of SGST/CGST can order for a search. He will order a search on the basis of results of inspection (or other reason) if he has reasons to believe –
Such incriminating goods and documents can be seized.
The person in charge of a vehicle carrying goods exceeding Rs. 50,000 is required to carry the following documents:
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 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 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.
The prosecution is conducting legal proceedings against someone in respect of 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-
If the Commissioner of CGST/SGST believes a person has committed a certain offense he can be arrested under GST by any authorized CGST/SGST officer (click here for the list of offenses for which one can be arrested).
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).
A person unhappy with any decision or order passed against him under GST can appeal against such decision.
The first appeal against an order by an adjudicating authority goes to the First Appellate Authority.
If the taxpayer is not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.
To avoid the long process of appeal and litigation, a taxpayer may request for the advance ruling under GST. The taxpayer asks for clarification from GST authorities on GST treatment before starting the proposed activity. The tax authority gives a written decision (called advance ruling) to the applicant on the query.