In Continuation of our earlier article on GST Registration: Caution, Compliance, and Consequence in case of Defaults Part-1, which is accessible from the below link, I am focusing on some more points, which should also be considered by all registered dealers to avoid penal action.

1. Annual Return & GST Audit: To give relief to Small Registered dealers GST Department has made GST Annual Return for F.Y -17-18 and F.Y -18-19 Optional for them. However, it is still mandatory, for all dealers having GST Turnover in excess of Rs.2 Crore. Some dealers who are associated with accountants, who are also not fully aware of these provisions, must ensure that they have to file Annual Return and to get their books of accounts audited as per GST Law, which is a separate Audit other than Income Tax Audit.

Consequence: Non-filing of Annual Return within due date attracts late fee under Sec- 47, which is Rs.200/- Per day subject to 0.50% of Aggregate Turnover.

2. Taking Bogus Purchase Bill – Now GST Department is trying to make the best use of technology, to track such kinds of malpractices done by dealers. In recent periods, we have seen many registered persons who are held guilty by GST Department who are issuing Bogus Sale Bill.

With the help of technology, now GST Department can easily track all dealers who have taken bills from these dealers. Practically also, we have seen notices issued by departments related to these transactions and the department has also recovered wrongly utilized credit from dealers also.

Consequence: In the case of Regular bogus dealers, the department is conducting a search of their premises and canceling their GST Number. This contravention attracts a penalty of Section – 122 (1) (vii) which is higher of Rs.10000/- or amount equal to the tax/input tax credit.

3. Final Return: This is the biggest mistake done by almost all registered persons whose GST Registration has been canceled by Department Suo-Motto or in the response to dealer application. Final Return is filed after GST Cancellation in which you have to pay taxes against any stock held against which GST Credit has been utilized by the dealer but in most cases, they are not aware of it and not filing this after GST Cancellation.

Consequence: Non Filing of Final Return attracts a late fee of Rs.200/- per day subject to Rs.10000/-

Cautions: Final Return has to be filed within 3 months from the date of the GST Cancellation Order Passed by Proper Officer. Please note that till the date you do not file Final Return your GST Number is not considered Cancelled properly in view of the GST Department. They may create problems in the future, so it is advised that you kindly file your final return and avoid any future litigation.

4. TCS Credit in Case of E-Commerce Dealers: With the use of smartphones and apps, now the trading of Goods has been shifted from market to E-Commerce portals. Now, all E-Commerce Portal like Flipcart, Amazon has to deduct 1% TCS on sale made by registered dealers from their portal and has to submit their GST Return within 10 days of closing of Month. This Information is auto-populated in registered dealer GST Account.


A common practice that has been observed in the case of E-Commerce registered dealers is that; either they are filing Nil Return or Filing Less Sale in comparison to Sale shown by E-Commerce dealers reflecting in their account. This may create a problem for them in the near future when GST Department starts sending Notices due to these variations.

Consequence: Above default invites penalty U/s 76 (1) and Section 122 (1) (x)

Caution: Check your TCS Details before Filing GST Return.

5. Inter-State Sale Transaction – In GST, turnover up to Rs.40 Lakh in case of Trading and Rs.20 Lakh (Except some specified states) in case of Service sector is not mandatory required to get GST Registration subject to that, they will not do Inter-State Sale in case of trading Activity, however, in case of small traders, it was observed that they are doing Inter-State Transaction and also receiving payment in bank accounts from their customers, it is contravention of GST Law.

Consequence:  In case of Interstate sale, it is mandatory to get GST Registration, without any threshold limit, if any person contravenes the above law, it attracts penalty U/s 122 (1) (xi) which is higher of Rs.10000/- or amount equal to the tax/input tax credit under per Act.

6. Failure to reply in response to Notice/ Information asked by GST Officer: This is also a very important factor in GST Law, if any Registered person or any person on behalf/connection to any registered person receives any notice/information from GST Officer, then he must submit his reply in response to that Notice, failure in submitting the reply of notice may invite penal action against you.

Consequence: As per Section 122 (3), if any person defaults in compliance with any notice received from GST Department, then he may be penalized with a penalty up to Rs.25, 000/-


Disclaimer- This article is for the purpose of information and shall not be treated as a solicitation in any manner and for any other purpose whatsoever. It shall not be used as a legal opinion and not be used for rendering any professional advice. This article is written on the basis of the author’s personal experience and provision applicable as on the date of writing of this article. Adequate attention has been given to avoid any clerical/arithmetical error, however; if it still persists kindly intimate us to avoid such error for the benefits of other readers.

The Author can be reached at mail – and Mobile/Whatsapp – 9911303737/ 9716118384

Author Bio

Qualification: CA in Practice
Company: Shiv Kumar Sharma & Associates
Location: Delhi, New Delhi, IN
Member Since: 03 Dec 2018 | Total Posts: 46
My Self CA. Shiv Kumar Sharma. I am a member of "The Institute of Chartered Accountants of India" since 2012. I have Qualified my B.Com (H) in 2010 And Cleared CS- Executive Exam in June 2013. Currently, I am in Practice and dealing in Direct and Indirect taxation along with ROC Compliances. View Full Profile

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December 2020