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In July 2017, the concept of Goods and Services Tax (GST) was introduced in India to ensure the smooth flow of taxes across the entire supply chain. This was done with a view to reduce tax evasions, provide frictionless interstate or intrastate movement of goods, and establish an efficient tax collection system.

GST is a seamless taxation system which ensures that the Input Tax Credit is being channeled properly, making tax collection more transparent and efficient. With robust support and power backup by the GSTIN system, the effective e-way bill mechanism ensures that all transactions are recorded.

The GST Network ensures that returns are filed timely and taxes are deposited within the due dates, reducing operational hassles for the GST taxpayer, thereby decreasing its operational cost. However, despite having a good and simple tax structure where only minimal returns have to be filed, GST has noticed some offences being committed. These offences are hereby described below:

Offences under GST

The types of offences are described as follows:

1. Improper issuance of an invoice for the supply of goods and services, or both.

2. Use of a third party’s GST number to file improper GST returns.

3. Bogus claim of input tax credit.

4. TDS being deducted and TCS being collected at less than the prescribed amount.

5. Providing improper or misleading information during GST registration.

6. Filing false GST returns with improper or misleading information.

7. Claim of bogus GST refund.

8. Non-cooperation by a taxpayer during an assessment proceeding.

9. GST collected by the taxpayer and not deposited to the government.

10. Sales being understated to evade tax.

11. Mismatch in the details of goods being transported than the ones declared in the e-way bill.

12. Not obtaining GST registration when it is mandatorily required.

13. ISD distributing the input tax credit against the provision of law.

14. Destroying or tampering with evidence with a view to evade taxes.

15. Sale of goods or services, or both, without the issuance of an invoice.

Considering the offences as prescribed above, the GST tax authorities have outlined certain penalties and prosecution with a view to curb such malpractices being followed by the GST taxpayers.

Penalties under GST

The penalty depends upon whether the default is wilful or non-wilful. The penalty is described as follows:

Wilful Default: The GST tax system imposes a 100% penalty when the intent of the taxpayer is willful evasion of taxes, subject to a minimum of Rs 10,000.

Non-Wilful Default: The GST tax structure imposes a 10% penalty in the case where tax evasion is due to a mistake or any unintentional error being committed, subject to a minimum of Rs 10,000.

Imprisonment for Offences under GST

Such imprisonment has been categorised based on specific financial amounts:

For Tax Default from Rs 1 Crore – Rs 2 Crore: Up to 1 Year.

For Tax Default from Rs 2 Crore – Rs 5 Crore: Up to 3 Years.

For Tax Default above Rs 5 Crore: Up to 5 Years.

Decriminalisation of Offences under GST

Certain offences have been decriminalised with a view to ensure that genuine taxpayers are not affected by the GST law.

1. The threshold limit of Rs 1 Crore has been increased to Rs 2 Crore, except for the offence of non-issuance of an invoice for the supply of goods or services, or both.

2. The compounding amount has been reduced from 50%-150% of the tax amount to 25%-100%.

3. Decriminalised offence under clause (g), (j), and (k) of subsection (1) of Section 132 of the CGST Act 2017. For example, obstruction or prevention of an officer from discharging duties, deliberate tampering with material evidence, and failure to supply the required information.

Legal Proceedings under GST

The legal proceedings include the steps to be taken by the tax authorities upon determination of any offence and the procedure to be followed by the taxpayer upon the action taken by the tax authorities.

Step 1: The tax authorities shall issue a Show Cause Notice (SCN) upon determination of any offence, and such SCN shall include the reason for the offence along with a reasonable opportunity being provided to be heard.

Step 2: Upon receipt of SCN, the taxpayer must reply within a reasonable time period or within the time period stated in the SCN.

Step 3: It is the responsibility of the tax authority to justify the penalty imposed by them as well as the nature of the offence committed.

Step 4: Upon examining the reply, the tax authority will either issue an order of demand or non-demand or may further opt for an audit or investigation if the situation demands.

Step 5: After the receipt of the order, the taxpayer can either appeal if unsatisfied with the demand order, or may deposit if the tax default has been fully justified.

Conclusion: This article discusses the types of GST offences, penalties, and legal proceedings prescribed under the GST law. GST is an efficient taxation system that ensures the smooth flow of ITC and taxes across the entire supply chain. The law also prescribes penal actions wherever the supply chain gets disrupted due to any offence being committed, providing legal remedies to protect genuine taxpayers.


Disclaimer: The Above said article is author viewpoint only, Please refer the respective sections, rules framed under GST Law.

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One Comment

  1. om prakash jain says:

    Wh1ether penalty can be directly imposed for issuance of fake bills as per CBIC circular.
    CA Om Prakash Jain s/o J.K.Jain, Jaipur
    Tel 9414300730/9462749040

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April 2024