What are the GST Penalties and prosecution?

GST is a tax which is paid by every person but it is collected by some persons known as registered person who collects GST and pay it to the government. What if these people forget or intentionally doesn’t submit GST to the government? These persons have to pay Penalty and prosecution comes in role.

Now let us understand GST Penalty and related terms in details.

Penalty and Prosecution

Penalty isn’t defined under the CGST Act but in simple language it can be understood as “a punishment or sum of money imposed by law or contract for doing or failing to do something that was duty of the party to do or has committed an offence”

Prosecution is carrying the legal proceeding against a person or an offender.

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The amount of penalty imposed on the offender will depend on the intention of the offender. If the intention of the offender in evading the payment is intentional then higher penalty will be imposed than the non- fraudulent offenders.

Is there any provision of offenders getting arrest due to GST?

Yes, if prosecution is executed (as discussed earlier) then offence is classified and it is checked that offence falls in which classification.

Offence is classified as Cognizable (serious category of offence) and Non – Cognizable offence (relatively less serious category of offence).  Whereas, former is non-bailable (not released on bail) and latter is bailable offence.

Offences and penalties related provisions are present in CGST Act, and in SGST & UTGST Act provisions are identical to CGST Act. But in IGST Act penalty amount is sum total of both Acts (CGST and SGST/UTGST) penalties.

Let us understand penalty for certain offences in details.

Penalty for certain offences in details-

As per the law Sec.122 (1) deals with offences, there are 21 offences for which a person is liable for penalty. Those are –

1. Supply of goods or services or both without issue of any invoice or issue of an incorrect or false invoice with regard to any such supply;
2. Issue of any invoice or bill without the supply of goods or services or both in violation of the provisions of the act or rules made.
3. Collects any amount as tax but fails to pay the same to Government within three months from the date of payment becomes due.
4. Collects any amount as tax in contravention of the act but fails to pay the same to Government within three months from the date of payment becomes due.
5. Fails to deduct the tax as mentioned or has deducted less tax than the amount required as per law or has failed to pay the deducted tax to government.
   

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6. Fails to collect the tax as mentioned or has collected less tax than the amount required as per law or has failed to pay the collected tax to government.
7. Takes or utilizes the ITC without the actual receipt of goods or services or both fully or partially.
8. Fraudulently obtains refund of tax.
9. Takes or redistribute tax under the section 20 of the act.
10. Falsifies or substitute the financial records or produces fake accounts or documents or furnishes false information or return with an intention to evade payment.
    

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11. Is liable to register under the act but didn’t take registration
12. Furnishes wrong information while applying for registration or subsequently.
13. Obstructs or prevent any officer in discharge of his duties.
14. Transport if taxable goods without specified documents.
15. Suppresses turnover to evade tax.
16. Fails to maintain books, records and documents as required.
17. Supplies, transports or stores any goods which he has reasons to believe are liable to confiscation.
18. Fails to furnish information or documents called for by an officer or furnishes false information or documents during any proceeding.
19. Issuing any invoice or document by using the registration number of another registered person.
20. Tampers with, or destroys any material evidence or document.
21. Disposes off or tampers with any goods that have been detained, seized or attached.

Above are the 21 cases as per law.

AMOUNT OF PENALTY

The amount of penalty may extend to Rs25,000

Penalty for failure to furnish information return

A person needs to furnish information return within 90 days if he has got notice from the officer for committing any default. If person fails to file the return then minimum fine is Rs 100/day and maximum is Rs 5,000.

Fine for failure to furnish statistics

If he doesn’t provide information without any logical reason or willfully doesn’t provide information, then person shall be liable with a fine which may extend to Rs 10,000 and in case of continuing offence to further fine which may extend to Rs100 for each day after first day. Maximum limit is Rs25,000.

General penalty

Person who contravenes any of the rule mentioned in law for which there is no separate penalty prescribed, then penalty for that may extend to Rs25,000.

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The author of above article is Sneha Bhalotia, ICAI. 

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