The GST Act, 2017 introduced a single tax regime across India while also providing the legal framework for ensuring that businesses large and small alike comply with requirements specified by the Act. As part of the legal framework for implementation of the GST Act, 21 separate offences have been listed and applicable penalties under GST Act have also been specified. In the following sections we will discuss the key GST penalties and offences as specified by the GST Act as well as the appeals process for contesting orders passed by an appellate authority.
Offences under GST Act
GST Offences related to Invoicing and Documentation
- Issuing false/incorrect invoice or not issuing invoice for goods/services that have been supplied
- Issue of GST invoice without actual supply of goods/services
- Issue of invoice/document using GSTIN of a different GST registered person/entity
- Transport of taxable goods without adequate/correct documentation
- Failure to maintain relevant documents/records in line with requirements of the GST Act
GST Offences related to Fraudulent Intent
- Submission of false information at the time of GST registration or at a later date
- Obtaining GST refund by supplying fraudulent information
- Falsification of documents/records or providing false information with the intent of tax evasion
- Not registering under GST even though required to do so under GST Act
- Tampering with/disposing off goods that have been attached, seized or detained under GST Act.
- Knowingly supplying, transporting or storing any goods that are liable to be confiscated as per GST rules.
GST Offences related to Tax Evasion
- Under reporting/suppressing turnover resulting in tax evasion
- Failure to pay tax to the government within three months of due date after collecting the tax from receiver of goods/services
- Failure to pay tax to the government within three months of due date even though such tax has been collected in contravention of provisions specified by the GST Act
- Taking or utilizing Input Tax Credit (ITC) without actual receipt/supply of goods or services
- Failure to deduct tax, deducting tax amount less than the actual amount deducted or not paying the tax owed to the government (Tax liability under subsection 2 of Section 52 of GST Act)
- Failure to deduct tax, deducting tax amount less than the actual amount deducted or not paying the tax owed to the government (Tax liability under subsection 3 of Section 52 of GST Act)
- Taking/utilizing input tax credit in breach of Section 20 and its sub-sections under the GST Act
GST Offences related to Obstruction
- Obstructing/preventing any officer from discharging his/her duties as per the GST Act
- Destroying/tampering with documents or material evidence
- Providing false documents or failure to furnish documents/information demanded by an officer acting with authority provided by the GST Act
Minor Breach and Major Breach under GST Act
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.
Appeals Process under GST Act
In case a GST registered person/entity is unhappy with any GST penalties related order/decision passed by a tax authority/official acting as an adjudicating authority under the GST Act, there is an appeals process that has been specified. The appeals process under GST Act operates in the same manner irrespective of the type of offence or the GST penalties (monetary or otherwise) that is applicable in case of the specific offence. The following are the different levels of appeal available:
First Appellate Authority
The first appellate authority is the first court of appeal available to those seeking redress against an order passed by the adjudicating authority.
The GST appellate tribunal is a quasi-judicial body that was formed in order to mediate disputes and to hear appeals against orders of the first appellate authority.
Appeal to High Court
State level high courts are the next court of appeal for those contesting a verdict announced by the appellate tribunal.
Appeal to Supreme Court
India’s apex court, the Supreme Court is the final court of appeal for contesting any GST penalties or other tax order. The judgement passed by the Supreme Court on any GST penalties, jail sentences or fines is final under existing GST rules.