In response to a DRC-01 penalty notice for late e-invoice generation with an Average Annual Turnover (AATO) less than 100 crores, this article aims to dissect the legal aspects, compliance details, and the rectification process involved in challenging the penalty.
The GST Officer,
Ward – ,
IN THE MATTER OF______________
GSTIN – ______
Reg : REPLY OF DRC – 01 DT. .
Notice Period : August, 2023 to December, 2023
Penalty under Section 122
That the registered tax payer (hereinafter called as RTP) wants to submit as under :-
1. That the RTP is a small person registered under GST from last many years and is having an average annual turnover of less than 100 crores.
2. That your goodself levied a maximum penalty under section 122 of the CGST Act, 2017 of Rs 25000/- in IGST, CGST and SGST respectively for non generation of e-invoices .
However, as per Section 122 of the CGST Act, 2017 states that “……………………… shall be liable to penalty which may extend to Rs 25000/-.” But in present case, the penalty levied by your goodself in IGST was Rs 25000/- and CGST and SGST of Rs 25000/- each which may be Rs 12,500/- in CGST and Rs 12,500/- in SGST because maximum amount of penalty is Rs 25,000/- for an offence which may be equally divided into CGST and SGST respectively.
3. That as per Section 31 of the CGST Act, 2017, a registered person shall issue a tax invoice showing description, quantity and value of goods, tax charged thereon and such other particulars as may be prescribed.
4. That as per Rule 48 of the CST Rules read with Notification Number 10/2023 dated 10.05.2023 states that “a registered person whose annual turnover in any preceding financial year from 2017-18 onwards exceeds Rs 5 crores would be required to comply with the e-invoicing provisions.”
It is also pertinent to note that an GST Advisory No. 602 dated 13.09.2023 was issued by the CBIC stating that “the persons having average annual turnover (AATO) exceeding 100 crores will not be allowed to report old invoices later than 30 days on the date of reporting.” Hence, it clearly reveals that the persons having AATO less than 100 crores will be allowed to report old invoices of anytime on the date of reporting.
Therefore, in present case, the RTP had already issued all the e-invoices within the time and no penalty may be called for.
Secondly, the e-invoicing is applicable only for B2B supplies, Export supplies and is not applicable for Exempted or Nil Rated Supplies. The same was clarified in CBIC Instruction No. 20006/15/2023-GST dated 18th October, 2023. The RTP made the following outward supplies and corresponding e-invoices as under which can be verified by your goodself :-
Thirdly, the penalty under section 122 of CGST/DGST Act, 2017 may be levied at the time of any offence committed by the RTP by making any taxable supplies without E-invoicing. But in the present case, the RTP had generated all the e-invoices and the same can be verified at GSTIN Portal which leads to ZERO Tax effect. Therefore, the RTP has not committed any breach of law under any IGST/CGST/DGST Act, 2017 and consequently, no penalty may be imposed and be deleted in full.
5. That the RTP had already paid the necessary taxes in GSTR 3B as per outward Supply shown in the GSTR-1 and GSTR-3B of all relevant financial years. Therefore, no tax evasion was involved and is a minor breach of tax regulation of late generation of e-invoices due to lack of awareness of the new regime of GST and all the e-invoices were generated now and is well in time. Therefore, no penalty may be imposed.
6. However, as per sub clause 1 of section 126 of the CGST Act, 2017, “No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.”
Therefore, non/late generation of e-invoice was an omission on part of RTP but was not a fraudulent activity and was rectified now. Therefore, the penalty may be deleted.
Therefore, looking into the facts and circumstances of the case, the tax payer is ready to fully co-operate with you and request you to quash the notice and delete the proposed penalty of Rs 75,000/- on account of non-generation of e-invoice and further, issue the DRC-05 accordingly and oblige.
Naman Gupta | B.Com (Hons), F.C.A., C.C.A. | I.D.(M.C.A.), L.L.B. | 9891468846 | firstname.lastname@example.org