Under current rules regarding GST Penalties, a minor breach is defined as a situation where the amount of tax involved is less than Rs. 5,000. Additionally, a minor breach also includes easily rectifiable documentation errors/omission. Under existing rules, minor breaches do not attract substantial GST penalties and the tax authorities may only issue a warning without charging a monetary penalty if they so decide.
In case the tax amount involved exceeds Rs. 5,000, the situation is classified as a major breach under the GST Act and penalties under GST including jail sentences may be applicable depending on the tax amount consideration. The minor vs. major breach clause is designed to help businesses especially those with small turnovers including SME by ensuring that they do not get penalized for genuine errors.
GST Penalties under the GST Act
GST Penalties resulting from breach of the GST Act, 2017 are subject to fines depending on various factors including but not limited to the severity of the breach. The following are the applicable penalties under the act for some key offences*:
| Type of GST Offence |
Applicable GST Penalty Amount |
| Delayed filing of GST Returns |
Rs. 200 per day (Rs. 100 per day under CGST and an additional Rs. 100 per day under SGST) up to a maximum of Rs. 5000. Late fee not applicable to IGST unpaid by delayed filing |
| Not filing GST Returns |
Higher amount among – Rs. 10,000 or 10% of tax due under GST |
| Committing Fraud |
Higher amount among – Rs. 10,000 or 100% of tax due under GST (may include jail term for fraud cases of higher value) |
| Aiding and Abetting Fraud |
Rs. 25,000 irrespective of whether offender is GST registered or not |
| Charging wrong GST rates (higher rate than actual) |
Higher amount among – Rs. 10,000 or 100% of the tax amount due (applicable only if excess tax is not submitted with the government) |
| Not issuing an invoice |
Higher amount among – Rs. 10,000 or 100% of tax amount due |
| Not Registering Under GST (even though required to by law) |
Higher amount among – Rs. 10,000 or 100% of tax amount due |
| Issuing incorrect invoice |
Rs. 25,000 |
*The list is indicative and penalties are subject to periodic change.
From the above list, it is clear that GST penalties are higher in cases where fraudulent activities have been identified or proven and in such cases, the penalties are higher. Penalties under GST in such cases can be as high as 100% of the tax amount unpaid or a minimum penalty of Rs. 10,000. This penalty is of course in addition to the tax amount that had remained unpaid.
GST Penalties for High Value Frauds
High value frauds under the GST Act feature situations where the tax amount unpaid exceeds Rs. 100 lakhs or more. While the monetary penalty under GST is 10% of the tax amount unpaid (as this will be higher than Rs. 10,000), a jail sentence is also applicable in case of high value frauds. Following are the jail sentences as specified by the GST Act in addition to GST penalties:
- Jail term not exceeding 1 year if tax amount involved is between Rs. 100 lakhs to less than Rs. 200 lakhs.
- Jail term not exceeding 3 years if tax amount involved is between Rs.200 lakhs to less than Rs. 500 lakhs.
- Jail term not exceeding 5 years if tax amount involved is Rs. 500 lakhs or higher.
Penalty for Aiding and Abetting GST Fraud
If GST fraud is committed by a registered person/entity with the help from another person (whether registered or unregistered), penalty under GST is applicable to all parties considered. Currently this penalty under GST Act has been fixed at Rs. 25,000 irrespective of whether both parties are registered under GST or not. The following are some key actions that constitute as aiding and abetting GST fraud:
- Helping any GST registered entity/person commit fraud
- Acquisition/receipt of goods and/or service while knowing that it violates the GST Act
- Failure to substantiate/account for any invoice that appears on the books of the business
- Issuing invoices that are not in line with applicable GST rules
- Not appearing before tax authorities after receiving summons to attend a GST hearing
Offences without GST Penalties
In case of certain offences, there are no GST penalties applicable but these GST offences can incur interest at a specified rate (18% annually) on the amount of tax under consideration. The following are some key instances where no penalty under GST is applicable:
- No GST penalty is applicable for charging incorrect GST such as charging CGST/SGST instead of IGST. The registered business/entity has to pay the correct GST and get a refund for the wrong GST paid.
- No penalty under GST Act for incorrect filing of GST returns but interest at the rate of 18% p.a. is chargeable on the tax amount shortfall.
- No penalty is applicable for delayed invoice payments. But any input tax credit claimed in lieu of such invoices is liable to be reversed if invoice payment is delayed beyond 6 months.
- No penalty under GST Act for charging a wrong GST rate (lower than the actual rate) but the registered business/person is required to pay interest at 18% annually on the shortfall in tax amount.
