Penalty imposed on GST collected but not deposited to Government even after Tax payment within 30 days from Notice
Introduction:
In a recent case, the Hon’ble Kerala High Court addressed a crucial issue related to the Goods and Services Tax (GST). The court’s verdict dealt with the imposition of penalties on taxpayers who had collected GST but failed to deposit it to the government, even though they had paid the tax along with interest within 30 days from the issuance of a notice.
Kerala High Court in the case of M/s. Global Plasto Wares v. Assistant State Tax Officer [WP (C) No. 33787 of 2023 dated October 17, 2023] dismissed the writ petition and held that Assessee is liable to pay a penalty when the amount of GST collected has not been credited to the government even when GST along with interest has been paid within 30 days of Notice issued for raising demand concerning non-payment of GST.
Facts:
M/s. Global Plasto Wares (“the Petitioner”) was issued a Show Cause Notice dated February 28, 2022, by the Revenue Department (“the Respondent”) raising demand for the payment of GST. The Petitioner paid the amount of GST demanded along with interest vide FORM GST DRC-03 receipt dated March 10, 2022. The Petitioner was issued a Notice dated May 11, 2023 (“the Notice”), for payment of the amount of penalty. The Petitioner vide Order dated September 14, 2023 (“the Impugned Order”) demanded the amount of penalty to be paid by the Petitioner as per Section 73(9) read with Section 73(11) of the Central Goods and Services Tax Act, 2017 (“the CGST Act”) and Section 20(xxv) of the Integrated Goods and Services Tax Act, 2017 (“the IGST Act”). Aggrieved by the Impugned Order, the Petitioner filed a writ petition before the Hon’ble Kerala High Court.
The Petitioner contended that, the Petitioner has paid GST within thirty days before the date of notice. The Petitioner further submits that, as per Section 73(8) of the CGST Act, no penalty is payable and notice would be deemed to be concluded in cases where, the Assessee under Section 73(1) or Section 73(3) of the CGST Act, has paid the amount of GST demanded along with interest, within thirty days from the date of issuance of notice.
The Respondent contended that, Section 73(11) of the CGST Act would be applicable in the present case as the Petitioner has collected the GST from the recipient but not credited it to the Government, and therefore, the Petitioner is liable to pay a penalty under Section 73(9) of the CGST Act.
Issue:
Whether the Assessee is liable to pay a penalty when the amount of GST collected has not been credited to the Government even when GST along with interest has been paid within 30 days of issuance of Notice?
Held:
The Hon’ble Kerala High Court in the case of WP(C) No. 33787 of 2023 held as under:
- Observed the central issue that arises before the Court is whether the Petitioner is liable to pay the amount of penalty when the Petitioner has already paid the GST amount along with interest within 30 days of receiving the notice.
- Noted that, the demand raised for payment of GST is on account of not crediting the amount of GST received by the supplier from the recipient to the government.
- Opined that, as per sub-section 6,8 and 9 of Section 73 of the CGST Act, the Petitioner is liable to pay the amount of penalty as the amount of GST collected by the Petitioner has not been deposited with the government, within 30 days from the due date of payment of GST.
- Held that, the Respondent has taken the correct view and no error of law has been committed which requires the interference of the Court. Hence, the writ petition is dismissed.
Conclusion:
The verdict from the Hon’ble Kerala High Court in the case of M/s. Global Plasto Wares underscores the importance of timely depositing the GST collected with the government. The Court upheld the liability of the Petitioner to pay the penalty under Section 73(9) of the CGST Act because the GST amount collected was not deposited with the government within the stipulated timeframe.
This case serves as a reminder to taxpayers about the significance of complying with GST regulations, including the timely deposit of collected tax. Failure to do so can result in the imposition of penalties, even if the GST amount is paid within 30 days from the issuance of a notice. It is essential for businesses to ensure strict adherence to GST provisions to avoid legal consequences and financial liabilities.
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(Author can be reached at info@a2ztaxcorp.com)
Author Bio
Respected Bimal Ji,
Thank you for the insightful article on the Kerala High Court’s verdict in the case of M/s. Global Plasto Wares. I would like to seek your learned view on a related practical issue.
In a situation where the taxpayer has deposited the entire GST liability through DRC-03 after the due date (i.e., beyond 30 days from the original due date of payment), but before the issuance of any intimation or Show Cause Notice, would the provisions of Section 73(11) still attract penalty under Section 73(9)?
In other words, if the tax collected was not deposited within the prescribed time, but the taxpayer voluntarily paid the tax along with applicable interest prior to issuance of any notice under Section 73(1), can the benefit of Section 73(5) or Section 73(6) be claimed, or would Section 73(11) override and mandate penalty merely because the tax was “collected but not deposited” within time?
Your clarification on this nuanced aspect—especially the interplay between Sections 73(5), 73(6), 73(8), and 73(11)—would greatly benefit professionals dealing with similar cases.
Looking forward to your valuable response