To prevent tax evasion and corruption, GST has brought in strict provisions for offenders regarding penalties, prosecution and arrest.
Please click on the blue headings for more detailed analysis on each topic.
There are 21 offences under GST apart from the penalty under section 8 covering fake/wrong invoices, fraud, tax evasion and others. A few are mentioned here. For the entire list please go to our main article on offences.
- Supply of any goods/services without any invoice or issue of a false invoice.
- Issue of invoices by a taxable person using the identification number of other bona fide taxpayer(s).
- Submission of false information while registering under GST.
- Submission of fake financial records/documents or files, or fake returns to evade tax.
- Obtaining refunds by fraud.
- Deliberate suppression of sales to evade tax.
- Non-registration under GST by a taxpayer, although required to by law.
- Opting for composition scheme even though a taxpayer is ineligible.
For cases with no intention of fraud or tax evasion
An offender not paying tax or making short payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs. 10,000.
For cases of fraud
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||50 lakhs||100 lakhs||250 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.
If Joint Commissioner of SGST/CGST (or a higher officer) “has reasons to believe” that –
In order to evade tax, a person has suppressed any transaction or claimed excess input tax credit etc., then he can authorize any other officer of CGST/SGST (in writing) to inspect places of business.
Joint Commissioner of SGST/CGST can order for a search on the basis of results of inspection or any other reason, if he has “reasons to believe” –
- There are goods which are liable for confiscation
- Any documents or books or other things which will be useful during proceedings and are hidden somewhere.
The person in charge of a vehicle carrying goods exceeding a specified value is required to carry certain prescribed documents.
The proper officer has the power to intercept goods in transit and inspect the goods and the prescribed documents.
If the goods are in contravention to 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 u/s 89.
Before confiscating the goods, the tax officer shall give an option of paying a fine instead of confiscation.
Compounding of offences is a short cut method to avoid litigation. In case of prosecution for an offence in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. Compounding will save time and money. However compounding is not available for cases where the value involved exceeds 1 crore.
Prosecution is the conducting of legal proceedings against someone in respect of a criminal charge.
A person committing an offence with the deliberate intention of fraud, becomes liable to prosecution, i.e., face criminal charges. A few examples of these offences are-
- Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
- Obtaining refund of any CGST/SGST by fraud.
- Submitting fake financial records/documents or files, and fake returns to evade tax.
- Helping another person to commit fraud under GST.
If the Commissioner of CGST/SGST believes a person has committed an offence u/s 92 above, he can be arrested by any authorised CGST/SGST officer.
The arrested person will be informed about the grounds of his arrest. He will appear before the magistrate within 24 hours in case of a cognizable offence.
A person unhappy with any decision or order passed against him under GST by an adjudicating authority can appeal to the First Appellate Authority.
If they are 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.