Article explains Provisions under GST Law of Penalty For Fraudulent Transactions Apart From Supplier/ Recipient Of Goods Or Services Or Both, Prosecution For Fraudulent Transactions Apart From Supplier/ Recipient Of Goods Or Services Or Both, Prosecution On Availment Of Input Tax Credit Without Invoice and Transitional Credit- Retrospective Amendments.

1. Penalty For Fraudulent Transactions Apart From Supplier/ Recipient Of Goods Or Services Or Both

Earlier as per Section 122(1)(vii) of CGST Act, 2017, penalty was imposed on the recipient of the goods or services or both read as follows:

(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

Now further onus has been placed on any person by insertion of new-subsection 1A of Section 122of CGST Act, 2017

(1A) “Any person who retains the benefit of a transaction covered under clauses (i), (ii), (vii) or clause (ix) of sub-section (1) and at whose instance such transaction is conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or input tax credit availed of or passed on

Clause (i), (ii), (vii) or clause (ix) of Section 122(1) of CGST Act, 2017

(i) supplies any goods or services or both without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;

(ii) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act or the rules made thereunder;

(vii) takes or utilises input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of the provisions of this Act or the rules made thereunder;

(ix) takes or distributes input tax credit in contravention of section 20, or the rules made thereunder;

Insertion of the new sub-section 1A of sub-section 122 as imposed further onus

a. Any person retaining the benefit of such transactions and

b. At whose instance such transactions is conducted

Comments: The said amendments propose to impose penalty on “ANY PERSON” apart from the supplier and recipient of the goods or services or both.

The amendments proposes to impose penalty on the person retaining the benefit of transaction and at whose instance the transactions are conducted referred in Clause (i), (ii), (vii) or clause (ix) of Section 122(1) of CGST Act, 2017.

Goods and Services Tax GST- Laptop, pen, coins, banknotes on wood background

2. Prosecution For Fraudulent Transactions Apart From Supplier/ Recipient Of Goods Or Services Or Both

Insertion of Words in 132(1) “or causes to commit and retain the benefits arising out of”

After insertion read as follows-

132(1) Whoever commits, or causes to commit and retain the benefits arising out of, any of the following offences

Comments: Amendment has been made to prosecute the person retaining the benefit arising out of transactions-

(a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax;

(b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;

(c) avails input tax credit using such invoice or bill referred to in clause (b)

……………………………….

3. Prosecution On Availment Of Input Tax Credit Without Invoice

Amendment to Section 132(1)(c )

avails input tax credit using the invoice or bill referred to in clause (b) or fraudulently avails input tax credit without any invoice or bill

Comments: Prosecution will now be imposed on the persons whoever avails the input tax credit without any invoice. Merely showing the transactions as Input Tax Credit in GSTR 3B without any invoice will lead to prosecution

Earlier prosecution was limited to availment of fraudulent credit.

4. Transitional Credit- Retrospective Amendments

140. (1) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, the amount of CENVAT credit 1[of eligible duties] carried forward in the return relating to the period ending with the day immediately preceding the appointed day, furnished by him under the existing law within such time and in such manner as may be prescribed:

(2) A registered person, other than a person opting to pay tax under section 10, shall be entitled to take, in his electronic credit ledger, credit of the unavailed CENVAT credit in respect of capital goods, not carried forward in a return, furnished under the existing law by him, for the period ending with the day immediately preceding the appointed day within such time and in such manner as may be prescribed:

(3) A registered person, who was not liable to be registered under the existing law, or who was engaged in the manufacture of exempted goods or provision of exempted services, or who was providing works contract service and was availing of the benefit of notification No. 26/2012-Service Tax, dated the 20th June, 2012 or a first stage dealer or a second stage dealer or a registered importer or a depot of a manufacturer, shall be entitled to take, in his electronic credit ledger, credit of eligible duties in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the appointed day within such time and in such manner as may be prescribed, subject to the following conditions, namely:

5. Comments:

Earlier Time Limit for availment of Transitional Credit was prescribed under Rule 117 of CGST Rules 2017 only.

With the amendments having retrospective effect, limitations of time has been prescribed u/s 140 of the CGST Act, 2017. Amendments has been done in the main provision to restrict the availment of the transitional credit within the time limit prescribed. To strengthen the rule, restriction of time limit has been incorporated in the main provisions.

Writ Petition filed and allowed will now be subject matter of appeal before Supreme Court of India.

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