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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.
1st February 2021
Union Budget 2021:
Section 129 is delinked from section 130. Accordingly, proceedings relating to detention, seizure and release of goods and conveyances in transit will be separate from the levy of penalty for the confiscation of goods and conveyance.
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.
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:
Supply/transport of goods:
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.
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.
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.
|Type of offence||Amount of penalty|
|Penalty for delay in filing GSTR||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.|
|Penalty for not filing GSTR||Penalty 10% of the tax due or Rs. 10,000 – whichever is higher|
|Penalty for committing a fraud||Penalty 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 eligible||Demand & 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 rate||Penalty 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 invoice||Penalty 100% of the tax due or Rs. 10,000 – whichever is higher|
|Penalty for not registering under GST||Penalty 100% of the tax due or Rs. 10,000 – whichever is higher|
|Penalty for incorrect invoicing||A penalty of Rs. 25,000|
|Type of offence||Action|
|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 return||No 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 rate||Interest @18% applicable on the shortfall|
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.
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).
Not only the taxable person but any person who does the following will have to pay a penalty extending up to Rs. 25,000
Yes, GST has corporal punishments (jail) for high-value fraud cases as follows-
|Tax amount involved||100-200 lakhs||200-500 lakhs||Above 500 lakhs|
|Jail term||Up to 1 year||Upto 3 years||Upto 5 year|
|Fine||In all three cases|
These punishments are applicable along with monetary penalty. For more details please read our article on the 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.
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.
Any offence under GST for which penalty is not specifically mentioned will be liable to a penalty extending Rs. 25,000.
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.
These rules of penalty are generally the same in all laws whether tax laws or contract law or any other law.