Know about penalties and offences under GST: FAQs

What is an offence under GST?

An offence under GST is when a GST rule is broken.

What are the offences under GST?

There are 21 major offences under GST, which can be categorised as shown below:

Involvement in fraudulent activities

• Not registering under GST when required to do so.

• Obtaining refunds of CGST or SGST by fraud.

• Submitting false information when registering under GST.

• Either not providing information at all, or providing false information throughout the proceedings under GST.

Not filing your returns on time

• Failing to file the monthly return for sales (GSTR-1) by the 10th of the following month.

• Failing to file the monthly return for purchases (GSTR-2) by the 15th of the following month.

• Failing to file the annual return (GSTR-9) by the 31st of the following month.

Issuing incorrect invoices

• Issuing an erroneous or fake invoice for the sale of goods or services.

• Supplying goods and services with no invoice or with a false one.

• Issuing invoices using the GSTIN of a different taxpayer.

• Issuing an invoice or bill without a supply in violation  GST rules.

Non-compliant supply of goods or services

• Transporting taxable goods without necessary documents.

• Transporting taxable goods without GST registration even though they are required to be registered.

• Supplying or transporting goods with the intent of having them confiscated.

Intentionally evading taxes

• Collecting GST but not submitting it to the government within 3 months.

• Collecting or utilising ITC in the absence of a receipt for the goods and services.

• Deliberately suppressing sales to evade tax.

• Failing to deduct or deposit tax with the government.

Involvement in activities related to tampering/obstruction

• Destroying evidence.

• Destroying or tampering with goods which have been seized.

• Hindering another officer in performing their duty.

Other offences

• Failing to deduct TDS (Tax Deducted at Source) or not deducting enough where applicable.

• Failing to collect TCS (Tax Collected at Source) or not collecting enough where applicable.

• Not maintaining records which are required to be maintained by law.

What are the offences for which a person can be arrested?

The commissioner of SGST or CGST (depending on the situation) can issue a warrant for the arrest of an individual who has committed one of the following offences:

• Supplying goods or services with either no invoice or with a false one.

• Issuing an invoice or bill without a supply in violation to GST rules.

• Collecting GST but not submitting it to the government within 3 months. (Note that GST collected falsely or in contravention of provisions also must be submitted to the government within 3 months.) 

• Committing a second offence, if the individual has already been convicted for a previous offence.

What is a penalty under GST?

A penalty is a punishment or monetary fine imposed by rules and acts under GST, to be paid as compensation for committing an offence.

What penalties are prescribed under GST?

For a delay in filing GSTR

• Late fee of Rs. 100 per day for each of SGST and CGST (for a total of Rs. 200 per day), for up to 25 days.

For not filing GSTR

• Fine of Rs. 10,000 or 10% of tax due, whichever is higher.

For committing fraud

• Fine of Rs. 10,000 or 100% of tax due, whichever is higher.

For helping another individual commit fraud

• Fine of up to Rs. 25,000.

For opting for the composition scheme when ineligible

• Fraud cases: Fine of Rs. 10,000 or 100% of tax due, whichever is higher.

• Non-fraud cases: Fine of Rs. 10,000 or 10% of tax due, whichever is higher.

For charging a higher GST rate than is applicable

• Fine of Rs. 10,000 or 100% of tax due, whichever is higher.

For not issuing an invoice

• Fine of Rs. 10,000 or 100% of tax due, whichever is higher.

For not registering under GST

• Fine of Rs. 10,000 or 100% of tax due, whichever is higher.

For issuing an incorrect invoice

• Fine of Rs. 25,000.

For charging the wrong GST type

• No penalty, but the taxpayer should pay the correct amount of GST and get a refund for any incorrectly paid GST.

For incorrectly filing GSTR

• Interest of 18% on any shortfall amount applicable.

For a delay in pay an invoice

• Applicable ITC will be reversed if not paid within 6 months.

For charging a lower GST rate than is applicable

• Interest of 18% on any shortfall amount applicable.

For any offence for which the penalty has not been specifically mentioned

• A general fine of up to Rs. 25,000.

For what situations are taxpayers not penalised?

When there is no motive of fraud behind an error, it is considered a minor breach under GST. These minor breaches are easily amended and may call for a warning instead of a penalty. Taxpayers are not penalised in the following cases:

• If the amount involved in the offence is less than Rs. 5,000.

• If the offence had no intent or malicious motive of fraud and was committed unknowingly.

• If the offence was committed due to incorrect understanding or lack of understanding of the GST laws.

• If the offence is easily amended, such as a simple omission or incorrectly-recorded information.

What recourse does the taxpayer have if a penalty has been imposed on them?

Once the taxpayer receives a penalty notice, they will be given an opportunity to be heard by the tax officials. The taxpayer will be furnished with an explanation and the legal provisions under which the penalty was imposed. If the taxpayer wishes to voluntarily disclose the offence and take credit for it, tax officials may use this to reduce the penalty imposed.

What is an inspection under GST?

If a higher official such as the Joint Commissioner doubts an individual’s intent and suspects an offence has been committed, they have the authority to request an inspection of the individual’s place of business.

Can property be searched or seized under GST?

Based on the results of an inspection, if a higher official has reason to believe an offence has been committed, they can call for a search and seizure of goods, documents, or records which may be helpful during the proceedings.

How long will the seized evidence be kept?

The records, books, or documents which have been seized are considered evidence, and they can remain with the officer for as long as the enquiry persists.

What is compounding of offences under GST?

• Compounding is a simpler form of prosecution. Whereas normally the offender is required to appear before a magistrate for a hearing, in compounding they are not required to do so and can be discharged on payment of the compounding fee.

• However, compounding is not applicable where the sum involved exceeds 1 crore.

When does a person become liable to prosecution under GST?

Prosecution is when legal proceedings are conducted against an individual for criminal charges. The following offences make an individual liable for prosecution:

• Supplying goods or services without an invoice in an attempt to evade tax.

• Issuing an invoice without a supply and claiming ITC by fraud.

• Collecting GST but not submitting it to the government within 3 months.

• Claiming inapplicable refunds.

• Submitting fake records or information to evade tax. 

• Hindering tax officers in their duty.

• Receiving goods or services with the intent of offence and fraud.

• Destroying any evidence against a guilty party.

• Not providing information at all, or providing falsified information during proceedings.

• Helping another individual commit fraud under GST.

What is an appeal?

An appeal is a plea to a higher court to change or reverse a decision made in a lower court. 

There are 4 levels of appeal under GST: 

• Appeal to First Appellate Authority

• Appeal to Appellate Tribunal

• Appeal to High Court

• Appeal to Supreme Court 

If a taxpayer is not happy with the decision made by the First Appellate Authority regarding their appeal, then they can file an appeal with the Appellate Tribunal, then the High Court and finally the Supreme Court. 

What are the rules about filing an appeal under GST?

• The taxpayer must apply for an appeal with a GST tax officer, then file the appeal within 3 months.

• Filing an appeal requires a fee, the full amount of tax, interest, fines, fees and penalties arising from the challenged order, plus 10% of the disputed amount.

• Fees are not applicable if the taxpayer who is applying for an appeal is an officer under GST or the Commissioner.

What is the pre-deposit payable to file an appeal to the Appellate Authority and Appellate Tribunal?

A pre-deposit of Rs. 25 crores and Rs. 50 crores must be payed as a pre-deposit to file an appeal to the Appellate Authority and Appellate Tribunal respectively.

When can an appeal not be filed?

An appeal under GST cannot be filed in the following cases:

• If an order has been made to transfer proceedings to a different officer.

• If books of accounts or other records have been seized or retained.

• If there is an order to sanction the prosecution.

• If the tax and other amounts are allowed to be paid in instalments.