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Offences and Penalties under GST

By Annapoorna

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Updated on: Feb 8th, 2023

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11 min read

Offences under GST and respective applicable penalties are enlisted under the CGST Act. The provisions of offences and penalties are dealt with from Section 122 to Section 128 of the CGST Act.

Recent Updates on Offences and Penalties under GST

1st February 2023
Union Budget 2023 (to be notified)-
1. Penalty of Rs.10,000 or the tax amount, whichever is higher, shall be charged on e-commerce operators who- 
- Allow an unregistered persons to sell goods or services or both through the operator except when they are exempt.
- Allow any GST-registered person from supplying outside their registered state any goods or services via the operator where they are ineligible to do so. 
- Operator do not file accurate GSTR-8 for information on the online sale through them by e-tailers except persons exempted from GST registration.

2. The following offences are proposed to be decriminalised under GST-
- Where a person obstructs or prevents an officer from discharging their duties under the CGST Act
- Where a person tampers with or destroys material evidence or docuemnts, and
- Where a person fails to supply information that is required under the CGST Act, or supplies false information
 

 

Offences Under GST

What is an offence?

An offence is a breach of a law or rule, i.e., an illegal act. Similarly, an offence under GST is a breach of the provisions of the GST Act and Rules.

What are the offences under GST?

When has anyone committed an offence under GST?

There are 21 offences under GST. For easy understanding, these have been grouped into heads as given below:

Fake or wrong invoices:

  1. A taxable person supplies any goods/services without any invoice or issues a false invoice.
  2. He issues any invoice or bill without supply of goods/services in violation of the provisions of GST
  3. He issues invoices using the identification number of another bonafide taxable person

Fraud:

  1. He fails to supply information that is required to be supplied under the Act or submits false information* 
  2. He submits fake financial records/documents or files fake returns to evade tax
  3. Does not provide information/gives false information during proceedings

Tax evasion:

  1. He collects any GST but does not submit it to the government within 3 months
  2. Even if he collects any GST in contravention of provisions, he still has to deposit it to the government within 3 months. Failure to do so will be an offence under GST.
  3. He obtains a refund of any CGST/SGST by fraud.
  4. He takes and/or utilizes input tax credit without actual receipt of goods and/or services
  5. He deliberately suppresses his sales to evade tax

Supply/transport of goods:

  1. He transports goods without proper documents
  2. Supplies/transports goods that he knows will be confiscated
  3. Destroys/tampers goods that have been seized

Others:

  1. He has not registered under GST although he is required to by law
  2. He does not deduct TDS or deducts less amount where applicable.
  3. He does not collect TCS or collects less amount where applicable.
  4. Being an Input Service Distributor, he takes or distributes input tax credit in violation of the rules
  5. He obstructs the proper officer during his duty (for example, he hinders the officer during the audit by tax authorities)*
  6. He does not maintain all the books that he required to maintain by law
  7. He tampers with or destroys any material evidence*

*In Budget 2023, it was proposed that these offences be removed/decriminalised from the CGST Act. The same will come into force once notified by the CBIC.

 

For the 21 offences above, for fraud cases, penalty will be 100% (minimum Rs. 10,000)

For cases mentioned in 1, 2 under fake invoicing and 4th under both tax evasion and others heads, the penalty is equal to the tax evaded or ITC availed or passed on.

Offences under GST by Companies, LLPs, HUFs and others

For any offence committed by a company, both the officer in charge (such as director, manager, secretary) as well as the company will be held liable. For LLPs, HUFs, trust, the partner/Karta/managing trustee will be held liable. Read our article on liability to pay unpaid GST dues in certain cases.

Penalties under GST

 What does penalty mean?

The word “penalty” is not specifically defined in GST and so it takes the meaning from various judicial pronouncements and principles of jurisprudence. A penalty is a punishment imposed by law for committing an offence or failing to do something that was the duty of a party to do. A penalty can be both corporal or pecuniary, civil or criminal. Both corporal (jail) and pecuniary (monetary) penalties are applicable under GST.

Common Offences Under GST And Their Penalties

Type of offenceAmount of penalty
Penalty for delay in filing GSTRThe 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.
Penalty for not filing GSTRPenalty 10% of the tax due or Rs. 10,000 – whichever is higher
Penalty for committing a fraudPenalty 100% of the tax due or Rs. 10,000 – whichever is higher (High-value fraud cases also have jail term)
Penalty for helping a person to commit fraud Penalty extending up to Rs. 25,000
Penalty for opting for composition scheme even though he is not eligibleDemand & recovery provisions of sections 73 & 74 will apply.
(i) Fraud case- Penalty 100% of the tax due or Rs. 10,000 – whichever is higher
(ii) Non-fraud casePenalty 10% of the tax due or Rs. 10,000 – whichever is higher
Penalty for wrongfully charging GST rate— charging a higher ratePenalty 100% of the tax due or Rs. 10,000    -whichever is higher (if the additional GST collected is not submitted with the govt)
Penalty for not issuing an invoicePenalty 100% of the tax due or Rs. 10,000 – whichever is higher
Penalty for not registering under GSTPenalty 100% of the tax due or Rs. 10,000 – whichever is higher
Penalty for incorrect invoicingA penalty of Rs. 25,000

Situations where there is no penalty (but interest may apply)

Type of offenceAction
Penalty for incorrect type of GST charged (IGST instead of CGST/SGST)No penalty. Pay the correct GST and get a refund of the wrong type of GST paid earlier
Penalty for incorrect filing of GST returnNo penalty. But interest @18% on shortfall amount
Penalty for delay in payment of invoice.  ITC will be reversed if not paid within 6 months. No penalty as such
Penalty for wrongfully charging GST rate— charging a lower rateInterest @18% applicable on the shortfall

What are the penalties under GST?

If any of the offences 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.

Penalty in 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. For the 21 offences above, for fraud cases, the penalty will be 100% (minimum Rs. 10,000).

What is the penalty for helping someone to commit fraud under GST?

Not only the taxable person but any person who does the following will have to pay a penalty extending up to Rs. 25,000

  1. Helps any person to commit fraud under GST
  2. Acquires/receives any goods/services with full knowledge that it is in violation of GST rules
  3. Fails to appear before the tax authority on receiving a summons
  4. Fails to issue an invoice according to GST rules
  5. Fails to account/vouch any invoice appearing in the books

Are there any jail punishments?

Yes, GST has corporal punishments (jail) for high-value fraud cases as follows-

Tax amount involved100-200 lakhs200-500 lakhsAbove 500 lakhs
Jail termUp to 1 yearUpto 3 yearsUpto 5 year
FineIn all three cases

These punishments are applicable along with monetary penalty. For more details please read our article on the prosecution.  

Penalty for Other Cases (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. 
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 non-fraud cases, the penalty is 10% of tax.

General Penalty

Any offence under GST for which penalty is not specifically mentioned will be liable to a penalty extending Rs. 25,000.  

Minor Breaches under GST

  1. Minor breaches (where tax amount is less than Rs.5000) or errors are easily rectifiable and clearly made without any motive of fraud.
  2. There will not be substantial penalties for minor breaches
  3. 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.

General Rules Regarding Penalty

These rules of penalty are generally the same in all laws whether tax laws or contract law or any other law.

  1. Every taxable person, on whom the penalty is imposed, will be served with a show-cause notice first and will have a reasonable opportunity of being heard.
  2. The tax authority will give an explanation regarding the reason for the penalty and the nature of the offence
  3. When any person voluntarily discloses a breach of law, the tax authority may use this fact to reduce the penalty
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About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more

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Quick Summary

Offences under GST and their penalties are regulated by the CGST Act. Recent updates on penalties include proposed decriminalization of certain offences. Offences range from fake invoices to tax evasion, each with specific penalties. Corporal and pecuniary penalties apply under GST. Specific penalties include late filing, fraud, helping in fraud, wrongful GST charges, issuance errors, non-registration, and incorrect invoicing. Jail terms also apply for high-value fraud cases. Minor breaches receive warnings or lower penalties.

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