Offences and Penalties under GST

• Penalty is a temporary punishment, or a sum of money imposed by statute, to be paid as punishment for committing an offence. It is the punishment imposed by law or contract for doing or failing to do something that was the duty of a party to do.
• Prosecution is initiating and carrying on the legal proceedings against a person.
• Conveyance includes a vessel, an aircraft, and a vehicle.
• Proper Officer means the Commissioner or the officer of the central tax who is assigned by the Commissioner in the Board.
• Confiscation means transfer of the title in goods to the Government.

Offences will be classified into cognizable (non-bailable) and non-cognizable (bailable) offences. A person with fraudulent intention to evade tax payment will be subjected to higher penalty in comparison to a relatively lower penalty for non-fraudulent offences.

Penalty for certain offences

There are 21 offences for which a taxable person may be held liable to penalty.

• Supply of goods or services or both without issue of invoice or incorrect or false invoice.
• Issue of any invoice or bill without supply of goods or services or both in violation of provisions or rules prescribed.
• Collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due.
• Collects any tax in contravention of the provisions of this Act but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due. Any money collected as tax even if it is not required to be as per the provisions of the Act, must be remitted to the Government.
• Fails to deduct the tax or deducts an amount which is less than the amount required to be deducted or where he fails to pay the deducted amount under Section 51.
• Fails to deduct the tax or deducts an amount which is less than the amount required to be deducted or where he fails to pay the deducted amount under Section 52.
• Takes or utilises ITC without actual receipt of goods or services or both either fully or partially, in contravention of the provisions.

 

• Fraudulently obtains refund of tax under the Act.
• Takes or distributes ITC in contravention of Section 20, or the rules made thereunder.
• Falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information or return with an intention to evade payment of tax.
• Is liable to be registered under the Act but fails to obtain registration.
• Furnishes any false information regarding registration particulars, either at the time of applying for registration, or subsequently.
• Obstructs or prevents any officer in discharge of his duties under the Act.
• Transports any taxable goods without the cover of documents as prescribed.
• Suppresses his turnover leading to evasion of tax under the Act.
• Fails to keep, maintain, or retain books of accounts and other documents as required.
• Fails to furnish information or documents called for by an officer as required or furnishes false information or documents during any proceedings under the Act.
• Supplies, transports, or stores any goods which he has reasons to believe are liable to confiscation under the Act.
• Issues any invoice or document by using the registration number of another registered person.
• Tampers with or destroys any material evidence or document.
• Disposes off or tampers with any goods that have been detained, seized, or attached under the Act.

The Amount of Penalty shall be:

1. INR 10,000/- or
2. An amount equivalent to higher of the following-

• Tax evaded or
• Tax not deducted under Section 51 or short deducted or deducted and not paid to the Government or
• Tax not collected under Section 52 or short collected or collected and not paid to the Government or
• ITC availed of or passed on or distributed irregularly or
• Refund claimed fraudulently.

Any registered person who supplies goods or services or both on which tax has not been paid or short paid or erroneously refunded or where ITC has been wrongly availed or utilised, the Penalty shall be:

• • Fraud or wilful misstatement or suppression of facts – INR 10,000 or tax due from such person, whichever is higher.
  • For reasons other than above – INR 10,000 or 10% of tax due from such person, whichever is higher.

However, Penalty shall be extended upto maximum INR 25,000/- in certain circumstances.

Penalty for failure to furnish information return – Section 123

• When a person fails to furnish information return within specified time, the Commissioner or an authorized officer may serve a notice requiring him to furnish the information return within 90 days from the date of service of notice.
• If the said person still fails to furnish the return, Penalty shall be INR 100/- per day subject to maximum INR 5,000/-.

Fine for failure to furnish statistics – Section 124

If any person fails to furnish information or return without reasonable cause, or willfully furnishes or causes to furnish which he knows to be false, the penalty shall be INR 10,000/- and in case of a continuing offence, INR 100/- per day after the first day during which the offence continues subject to a maximum limit of INR 25,000/-.

General penalty

Any person who contravenes any provisions of the Act or rules prescribed for which no penalty is separately provided, shall be liable to pay INR 25000/-.

General Provisions

The Government may, by notification, waive in part or full, any penalty or late fee for such class of taxpayers or circumstances as maybe prescribed.

Levy of penalty is based on jurisprudence, principles of natural justice and principles governing international trade and agreements.

• No penalty for minor breaches of tax regulations, or procedural requirements of the law, or any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.
• No penalty shall be imposed on any person without issue of SCN and proper hearing in the matter.
• While imposing penalty, the officer shall mention the nature of breach and the applicable regulations.
• On voluntary disclosure of breach by a registered person, the proper officer shall consider the same while determining the penalty amount.
• The provisions of this section shall not apply in such cases where the penalty specified under this Act is either a fixed sum or fixed percentage.

Power to impose penalty in certain cases

Proper Officer may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person in case of below proceedings:

• Assessment of non-filers of Returns, Assessment of unregistered persons, Summary Assessment,
• Determination of tax not paid or short paid or erroneously refunded or ITC wrongly availed or utilized for any reason other than fraud or any willful misstatement or suppression of facts or by reason of fraud or any willful misstatement or suppression of facts.
• Detention, seizure and release of goods and conveyances in transit, Confiscation of goods or conveyances and levy of penalty

Detention, Seizure and Release of goods and conveyances in transit

Any person who transports goods or stores any goods while they are in transit in contravention of the provisions/rules, all such goods and conveyance used as a means of transport shall be liable to detention or seizure.

The Goods and/or conveyance after detention or seizure shall be released:

– if owner of the goods comes forward for payment of applicable tax and penalty 

On payment of tax and penalty or upon furnishing a security equivalent to the amount payable in such form and manner as may be prescribed.
However, in case of exempted goods, on payment of an amount equal to 2% of the value of goods or INR 25,000/- whichever is less or upon furnishing a security equivalent to the amount payable.

-if owner does not come forward for payment of applicable tax and penalty

On payment of tax and penalty equal to 50% of the value of goods reduced by the tax amount paid thereon or upon furnishing a security equivalent to the amount payable.
However, in case of exempted goods, on payment of an amount equal to 5% of the value of goods; or 25,000/- whichever is less or upon furnishing a security equivalent to the amount payable.

• No such goods or conveyance shall be detained or seized without serving an order on the person transporting the goods.
• If the invoice or any other specified document is accompanying the consignment of goods, then the deemed owner will be either the consignor or consignee. Otherwise, the proper officer must determine the owner of goods.
• The goods and/or conveyance shall be released on provisional basis on payment of applicable tax and penalty or on furnishing of security.
• The proper officer detaining or seizing the goods shall issue a notice specifying the tax and penalty payable and then pass an order.
• Opportunity of being heard shall be granted to the person before determining liability.
• If the person or owner transporting the goods, fails to pay tax and penalty within 14 days of detention or seizure, further proceedings shall be initiated. On payment of amount, all proceedings shall be deemed to be concluded.

However, where the detained or seized goods are perishable or hazardous in nature or are likely to depreciate over time, the said period of 14 days may be reduced by the proper officer.

Confiscation of goods or conveyances and levy of penalty

All goods or conveyances shall be liable to confiscation and penalty if any person –

• supplies or receives any goods with intent to evade payment of tax;
• does not account for any goods on which he is liable to pay tax;
• supplies any goods liable to tax without having applied for registration;
• contravenes any provisions or rules to evade tax;
• uses any conveyance as a means of transport for carriage of goods in contravention of provisions or rules unless the owner of the conveyance proves that it was used without the knowledge of the owner himself, his agent, if any, and the person in charge of the conveyance.

Whenever confiscation of any goods or conveyance is authorised by the Act, the officer shall provide an option to the owner to pay in lieu of confiscation, such fine as it deems fit subject to –

1. Fine shall not exceed market value of the goods confiscated, less the tax chargeable thereon.
2. Aggregate of fine and penalty shall not be less than the amount of penalty leviable u/s 129(1).

• No order for goods confiscation or penalty imposition shall be issued without giving the person an opportunity of being heard.
• The title of any goods or conveyance confiscated shall thereupon vest in the Government.
• The proper officer adjudging confiscation hold possession and every Police officer, on the requisition of such proper officer, shall assist him in taking and holding such possession.
• When the proper officer is satisfied that the confiscated goods or conveyance are not required in any other proceedings and after giving a reasonable time upto three months to pay fine in lieu of confiscation, dispose and deposit the sale proceeds thereof with the Government.

No Overriding Effect

No confiscation or penalty imposed under the Act or rules shall prevent the infliction of any other punishment to which the person affected thereby is liable for the time being in force.

Punishment for certain offences

Whoever commits or causes to commit and retain the benefits out of the below offences –

(a) supplies without issue of any invoice, with the intention to evade tax;
(b) issues any invoice or bill without supply of goods or services or both in violation of provisions or rules, leading to wrongful availment or utilisation of ITC or refund of tax;
(c) avails ITC using the above mentioned invoice or bill or fraudulently without any invoice or bill;
(d) collects tax but fails to pay to the Government beyond three months from the date on which such payment becomes due;
(e) evades tax or fraudulently obtains refund and such offence is not covered above;
(f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information to evade tax;
(g) obstructs or prevents any officer in the discharge of his duties under the Act;
(h) acquires possession of or gets involved in any manner to deal with, any goods which he knows or has reasons to believe are liable to confiscation under the Act or rules;
(i) tampers or destroys any material evidence or documents;
(j) fails to supply any information or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) supplies false information; or
(k) attempts to commit or abets the commission of any of the above-mentioned offences.

Shall be punishable as mentioned below:

Offence	Amount involved (in INR)	Punishment (minimum 6 months imprisonment extending to)
Tax evaded or ITC wrongly availed or utilised or refund wrongly taken	Between 1 – 2 Crores	1 year with fine
	Between 2 – 5 Crores	3 years with fine
	> 5 Crores	5 years with fine
Commits or abets the commission of offence specified in clauses (f) (g) (j)		6 months with or without fine
For second and every subsequent offence	No limit	5 years with fine

Liability of officers and certain other persons

Any person who wilfully discloses any information or the contents of any return furnished otherwise than in execution of his duties under the said sections or for the purposes of prosecution for an offence under any act for the time being in force, shall be punishable with imprisonment for six months or fine of INR 25,000/-, or both.

A Person being a Government Servant, shall be prosecuted for any offence with the previous sanction of Government only and in case of any other person, with the previous sanction of Commissioner only.

Cognizance of offences

No court shall take cognizance of any offence punishable under the Act or rules, except with the previous sanction of the commissioner, and no court inferior to that of a Magistrate of the First Class shall try any such offence.

Offences by companies

• If any offence has been committed with the consent of or on account of negligence on the part of any director, manager, secretary or other officers (incase of companies) or the partner, Karta or managing trustee (incase of a partnership firm or a LLP or a HUF or a trust), all such persons shall be deemed to be guilty of the offence and liable to be proceeded against and punished accordingly.
• If such person proves that the offence was committed without his knowledge or he had exercised all due diligence to prevent the commission of such offence, then he shall not be punished.

Compounding of offences

Compounding Procedure –

• Any offence may be compounded by the Commissioner, either before or after the institution of prosecution, upon payment of such compounding amount, by the person accused of the offence, to the Central Government or the State Government,
• On receipt of application, the commissioner shall call for a report from the concerned officer for examination.
• On being satisfied about the applicant’s cooperation in the proceedings, the Commissioner may, by order, allow the application indicating the compounding amount and grant him immunity from prosecution or reject such application within 90 days of the receipt of the application.
• The application shall not be decided without affording an opportunity of being heard to the applicant and recording the grounds incase of rejection.
• The application shall be allowed only on payment of tax, interest and penalty involved in the offence.
• The applicant shall, within 30 days of receipt of the order, pay the compounding amount as ordered by the commissioner and shall furnish the proof of such payment to him. On failure to pay, the compounding order shall be considered void.

However, the following offences shall not be compounded –

• Committing/Aiding/abetting offences if the person charged with offence had been allowed to compound earlier.
• Any other offence in respect of supplies of value > INR 1 crore, if the person charged with offence had been allowed to compound earlier in respect of any of the said offences.
• A person who has been accused of committing an offence which is also an offence under any other law for the time being in force.
• A person who has been convicted for an offence by a court.
• A person who has been accused of committing an offence under Section 132(1) – (g), (j) & (k).
• Any other class of persons or offences as may be prescribed.

The amount for compounding of offences shall be such as maybe prescribed, subject to – 

• The minimum limit for compounding amount is higher of the following amounts – 50% of tax involved, or INR 10,000/-.
• The upper limit for compounding amount is higher of the following amounts – 150% of tax involved or INR 30,000/-.

On payment of above determined amount, no further proceedings shall be initiated against the accused person in respect of same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.

A compounding allowed shall not affect the proceedings, if any, instituted under any other law.

Immunity granted to a person may be withdrawn by the Commissioner, if he is satisfied that such person had concealed any material particulars or provided false evidence during the compounding proceedings.