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Overview

To prevent tax evasion and corruption, GST has brought in strict provisions for offenders regarding penalties, prosecution and arrest.

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Please click on the blue headings for more detailed analysis on each topic.

Offences & Penalties

Offences

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.

GST penalties & Approvals

  • 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.

Penalty

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.

Inspection Under GST

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.

Search & Seizure Under GST

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.

Goods in Transit 

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 Under GST

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 Under GST 

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-

  1. Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
  2. Obtaining refund of any CGST/SGST by fraud.
  3. Submitting fake financial records/documents or files, and fake returns to evade tax.
  4. Helping another person to commit fraud under GST.

Arrest 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.

Appeals

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.

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Steps of Appeals under GST

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All Articles

  1. Updated: 5.4.2017 There are certain offences where a taxable person can get arrested. Click here for the offences which lead to arrest under GST.
  2. Updated: 4/4/17. When any person transports any goods against GST Act then the goods will be seized. In cases of tax evasion, goods will be confiscated.
  3. GST authorities can produce documents in court against a taxpayer. Presumption of documents implies that all documents furnished are true.
  4. There are certain offences where a taxable person can get arrested. Click here to find out more about the offences which lead to arrest under GST.
  5. Tax evaders can face inspection and search under GST. They can even end up getting arrested and have their goods seized by the GST officers.
  6. There are severe prosecutions under GST to punish tax-evaders, keeping in mind the government’s anti-tax evasion stance. Read here for more.
  7. There is a list of 21 offences under GST. GST has strict penalties for defaulters keeping in mind the government's anti-tax evasion stance. Click here for more.
  8. When any person transports any goods against GST Act then the goods will be seized. In cases of tax evasion, goods will be confiscated.
  9. If the aggrieved person is not happy with the decision of the National Appellate Tribunal, he can appeal to the High Court and finally Supreme Court.
  10. If the aggrieved person is not happy with the decision of the First Appellate Authority, he can appeal under GST to the National Appellate Tribunal.
  11. A person unhappy with any order passed against him can appeal under GST to the First Appellate Authority. Click here to read more.
  12. Any appeal under any law is an application to a higher court for a reversal of the decision of a lower court. How to appeal under GST against an order?