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Section 122 to Section 128 of the Central Goods and Services (CGST) Act, 2017, provide the details of the various types of GST frauds and also prescribe the applicable penalties. This information is crucial for all Chartered Accountants (CAs), tax professionals, and business owners as even a minor inadvertent error while filing the GST can land you in legal trouble.

Offences Under GST

A total of 21 offences are mentioned in the CGST Act, 2017. These offences can be broadly classified into the following five categories:

Wrong Invoicing

  • Supply of goods/services by a taxable individual without an invoice or with a false invoice.

  • Issuance of the invoice without the supply of the goods/services.

  • Using the invoice identification number of someone else.

Fraud

  • Submission of wrong information at the time of GST registration.

  • Submission of wrong financial records with an intent to evade the applicable tax.

  • Not providing the required information or giving wrong information during the proceedings.

Tax Evasion

  • Collecting GST but not submitting the same to the government within a period of 3 months.

  • Not collecting the GST in line with the provisions laid down by the law and not submitting the same to the government.

  • Obtaining CGST/SGST refund by committing fraud.

  • Utilising input tax credit without actually receiving the goods/services.

  • Deliberate suppression of sales with an intent to evade the tax.

Transport/Supply of Goods

  • Transport of goods without proper documentation.

  • Transport of goods that can be seized.

  • Destroying/tampering with goods which have been seized.

Others

  • Not registering under GST despite being required by the law.

  • Not deducting TDS or deducting less TDS whenever required.

  • Not deducting TCS or deducting less TCS whenever required.

  • Taking or distributing the input tax credit in violation of the law.

  • Obstructing the authorised GST officer when they are performing their duty.

  • Not maintaining all the required books as mandated by the law.

  • Destroying any evidence.

Inspection Under GST

If the Joint Commissioner of CGST/SGST or a higher officer has sufficient reason to believe that a GST-registered business has committed any of the offences listed in the GST Act, they can authorise any CGST/SGST officer to conduct an investigation of the business and its owner. If the investigation finds the business owner guilty, appropriate legal action is initiated against them.

Types of Breaches Under GST

There are two types of breaches prescribed under the GST law: minor breaches and major breaches:

  • Minor Breaches: These are the breaches in which the tax amount involved is less than ₹5,000. These breaches include minor mistakes in filing returns such as documentation errors and omissions. In most cases, no penalty shall be imposed for such breaches.

  • Major Breaches: These breaches involve a tax amount of ₹5,000 or above. In case of such breaches, a penalty shall be imposed on the taxpayer - either monetary or corporal punishment (jail term), depending upon the amount of tax involved.

GST Penalties

A penalty is levied on the business owner if they commit any of the offences as mentioned under the GST Act. The penalty can be non-monetary (for minor offences), monetary, or even corporal (involving a jail term).

Monetary Penalties Under GST

The following table lists down all the offences as per the GST law for which a monetary penalty under GST is applicable:

Offence Type

Penalty Amount

Delay in filing GSTR

A late fee of ₹100 per day on both CGST and SGST, subject to a maximum of ₹5,000. No late fee applicable for IGST

Not filing the GSTR

10% of the tax due, subject to a minimum of ₹10,000

Fraud

100% of the tax due, subject to a minimum of ₹10,000 (jail term in case of a high-value fraud)

Helping someone commit fraud

Up to ₹25,000

Opting for the GST composition scheme without being eligible

Demand and recovery provisions of Sections 73 & 74 applicable: 

(i) Fraud cases: 100% of the tax due, subject to a minimum of ₹10,000

(ii) Non-fraud cases: 10% of the tax due, subject to a minimum of ₹10,000

Incorrect GST rate charged- charging a higher rate

100% of the tax due, subject to a minimum of ₹10,000

Not issuing invoice

100% of the tax due, subject to a minimum of ₹10,000

Not getting registered under GST

100% of the tax due, subject to a minimum of ₹10,000

Incorrect invoicing

₹25,000

 

Non-Monetary Penalties Under GST

There are some minor offences for which no penalty is applicable; however, interest may be levied on the tax due.

Type of offence

Action

Incorrect type of GST charged (e.g. IGST instead of CGST/SGST)

No penalty applicable. The correct GST amount is to be paid and the amount paid earlier is reversed.

Incorrect filing of GST returns

No penalty. An interest of 18% p.a. applicable on the shortfall amount

Delayed payment of the invoice.

No penalty. ITC is reversed if invoice not paid within 6 months

Incorrect GST rate charged— charging a lower rate

No penalty. An interest of 18% p.a. applicable on the remainder amount

 

Penalty for Fraud

If a person is found guilty of having committed fraud under the GST Act, they have to pay a penalty of 100% of the tax amount, subject to a minimum penalty of ₹10,000.

Penalty for Helping a Person Commit Fraud

In case a person is found guilty of helping a GST-registered business owner commit fraud, they will have to pay a penalty of up to ₹25,000 depending upon the type of fraud and their involvement in the same.

Corporal Punishments Under GST

In case of fraud exceeding ₹100 Lakhs, the offender might also have to serve a jail term apart from the applicable fine. The table below depicts the quantum of jail term based on the amount of fraud committed:

Tax Amount

100-₹200 Lakhs

200-₹500 Lakhs

Above ₹500 Lakhs

Jail Term

Max 1 Year

Max 3 years

Max 5 years

 

GST Appeal

If you are found guilty of committing any of the 21 offences under the GST law by a concerned GST officer, appropriate action will be taken as prescribed in the law. In case you are not satisfied with the decision of the GST officer, the law gives you the right to raise your grievance against the decision taken. In the following section, we will understand the procedure for filing an appeal against a decision taken by a GST officer.

GST Appeal Process and Revision

If you are not satisfied with an order passed against you by a GST officer for committing an offence under the GST law, you can raise an appeal with the first appellate authority. You are required to submit your appeal within 3 months from the date of communication of the GST officer’s order.

If you are still not satisfied with the first appellate authority’s decision, you can further raise your appeal with the Appellate Tribunal. A fee of ₹10,000 per Lakh involved in the tax dispute is charged while filing the appeal with the Appellate Tribunal. In case the tribunal’s decision does not satisfy you, you can always move to the court of law, i.e. first the high court and then the Supreme Court.

Conclusion

As a business owner and a responsible taxpayer, it is always advisable to ensure proper GST compliance. You should ideally take the help of a Chartered Accountant (CA) for filing your GST returns. Furthermore, in case a GST officer passes an unsolicited order against you, the GST law has ample provisions that allow you to raise your grievance.

FAQs

✔️What will be the penalty for an offence which is not mentioned in the GST Act?

Offences not mentioned in the GST Act are taken care of by the Indian Penal Code (IPC).

✔️What is the time limit for filing an appeal in GST?

You are required to raise your appeal with the first appellate authority within 3 months of the communication of the concerned order by the GST officer.

✔️Can a GST appeal be filed manually?

Yes, as per an order passed by the Andhra Pradesh High Court in August 2018, GST appeals can be filed manually.