Updated on 10th April 2017Goods and service tax GST will bring in “One nation one tax “to unite indirect taxes under one umbrella and facilitate Indian businesses to be globally competitive. The Indian GST is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc.
To prevent tax evasion and corruption, the GST Law lists the offences and penalties. There are 21 offences under GST, apart from the penalty for availing compounding by a taxable person who is not eligible for it.
There are 21 offences under GST. For easy understanding, we have grouped them as-
He has opted for composition scheme even though he is not eligible
For any offence committed by a company, both the officer in charge (such as director, manager, secretarty) as well as the company will be held liable.
For LLPs, HUFs, trust, the partner/karta/managing trustee will be held liable.
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.
Not only the taxable person but any person who-
-Will have to pay a penalty extending upto Rs. 25,000
For cases of fraud, 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|
For more details please read our article on prosecution.
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.
[Note: In the earlier model law, the person was penalized if he made short payments “repeatedly”, i.e., in 3 returns out of 6 consecutive tax periods. This has been removed from the revised model law. So it stands, even first-time offenders may be liable to penalty.]
Therefore, the penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud.
For other genuine errors, the penalty is 10% of tax.
Any offense under GST for which penalty is not specifically mentioned will be liable to a penalty extending Rs. 25,000.
General rules regarding penalty
These rules of penalty are generally the same in all laws whether tax laws or contract or any other law.
There will not be substantial penalties for minor breaches (tax amount is less than Rs.5000) or errors which are easily rectifiable and clearly made without any motive of fraud. The tax authority may issue a warning in such cases.
This will be beneficial to businesses, especially SMEs, who may make genuine mistakes especially in the first few months of GST implementation. Being penalized for genuine errors will be a hard blow to the SMEs who do not have as many resources as the larger organizations to adapt to GST.
Persons supplying/receiving goods in contravention of GST law will have such goods confiscated. Please read our article on confiscation.