Under the Goods and Services tax Act, there are cases where small procedural lapse which is generally ignored and which is easily rectifiable may lead to big penalties. In this write up, I tried to list out all small lapses which may lead to big penalties which I observed are generally ignored even today in many business places. The Tax officers are levying penalties for these lapses already. Quantum of penalties is really alarming. Penalty for the non-compliance is costlier than cost for complying the same. As a matter of awareness, I tried to brief on those lapses which may be rectified easily to avoid paying penalties.

Nature of Default Penalty Remarks
GST Identification Number (GSTIN) to be mentioned on the name board Upto Rs. 25,000 If you are regular GST dealer, GSTIN needs to be mentioned on the name board. If you opted for Composition levy, you need to mention ‘Composite Taxable person’ on the name board. This rule is to make the buyer to choose the supplier on seeing the details on the name board.
GST Registration Certificate (GST REG – 06) to be displayed at prominent place of business at all places of business Upto Rs. 25,000 Any registered person needs to display his GST registration certificate at prominent place of business and at all additional places of businesses also. This is to ensure that the person is registered on seeing the certificate itself.
Not issuing Proper Invoice Rs. 25,000 Invoice is the document which contains all details of supply and also an important document based on which ITC is availed. Hence, Invoice is given utmost importance in GST, rather any indirect tax law. So, all details as mentioned in rules need to be mentioned on the Invoice.
Not maintaining proper Stock record Upto Rs. 25,000 Stock record is one of the mandatory records to be maintained as per Rule 56(2) of CGST Rules, 2017. From that record, the whole operations can be known.
Availing Input Tax Credit based on wrong Invoice Rs. 10,000 or 100% of ITC wrongly availed, whichever is higher + 24% Interest from date of availment to date of reversal Input Tax Credit (ITC) is backbone of GST structure. To avail ITC, proper Invoice is must.
Paying CGST instead of IGST/SGST

Paying SGST instead of CGST/IGST

Paying IGST instead of CGST/SGST

Pay Tax under correct head with no interest and claim refund of tax paid under wrong head. CGST & SGST is payable for intra-state supplies and IGST for inter-state supplies. Taxes paid under respective heads are transferred to respective governments. For Example, taxes paid under SGST head is transferred to respective state government determined based on place of supply. So, Tax paid under wrong heads leads to transfer of tax to that respective government which leads to wrong accounting. Hence, under GST, paying tax under correct heads is important and hence, the penalty. However, GST portal is now generating challan automatically after entering data in GSTR 3B. Chance of making this mistake is reduced to great extent.
Not filing GSTR 3B on or before 20th of next month Rs. 20 (Rs. 10 SGST + Rs. 10 CGST) per day of delay in case of NIL returns.

In other cases, Rs. 50 (Rs. 25 CGST + Rs. 25 SGST) per day of delay

Timely Compliance is key to success of GST return process and matching. Hence, to encourage timely compliance, this penalty
Not filing GSTR 1 on or before due date
Not obtaining registration within 30 days of date on which he is liable to get registered Rs. 10,000 + ITC during the period of delay is lost Section 22 of CGST Act 2017 mandates every person to register if the aggregate turnover exceeds Rs. 20 Lakhs. Every registered person needs to pay tax and file returns. Hence, registration is an important aspect in GST. Non-registration even though he is liable or takes registration late are both wrong doings.
Invoice without supply (Accommodation Bills) Rs. 10,000 or 100% of tax evaded , whichever is higher This situation may lead to availment of higher ITC without actually selling goods.
Supply without Invoice (Non- Issuance of Invoice) Rs. 10,000 or 100% of tax evaded, whichever is higher This situation may lead to supply without recording it and also the buyer may lose ITC since he doesn’t possess proper invoice.
Collects GST but doesn’t pay to Government within 3 months from due date Rs. 10,000 or 100% of tax evaded, whichever is higher In indirect taxes, the tax is collected from the consumer and paid to Government. It is not an expense to the supplier. So, whenever tax is collected from a third party on behalf of Government and the same is not paid leads to mis-appropriation of public money.
General Penalty Upto Rs. 25,000 If any of the provisions are defaulted and nowhere penalty is specified, this general penalty provision may be resorted to.

All the above mentioned defaults are easily rectifiable with minimal time and minimum effort. Hence, all are requested to see that the simple provisions are being complied and avoid big penalties.

Author Bio

Qualification: CA in Practice
Company: Billapati & Co
Location: Anakapalle, Visakhapatnam, Andhra Pradesh, IN
Member Since: 23 Dec 2017 | Total Posts: 4

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21 responses to “Petty Defaults – Higher Penalties in GST Regime”

  1. JITHIN RAPHAEL says:

    Thank you for the valuable information. But how can we identify whether the input is correct by the supplier? Still the reconciliation is not possible, i think so.

    • bvg1988 says:

      Dear Mr. Jithin,
      GSTR 2A is already available on the GST portal. One can view all invoices uploaded by the supplier and can reconcile.

  2. Sandeep Rathi says:

    Sir Please also quote relevant section or rule or any other legal backing behind every panalties

    • bvg1988 says:

      Dear Mr. Sandeep Rathi,

      Thank you for your suggestion. Will incorporate the same in my upcoming articles.

  3. Bishnu prasad says:

    Dear Sir,

    We have a situation that, we are charging gst on bills to our debtors. but we did not get payment from them on time. and the liability of gst is now on our head. if we have no fund at the time due date of payment of gst. and we did not get loan from any where, please advise what to do??? 6428

  4. Bishnu prasad says:

    Dear Sir,

    We have a situation that, we are charging gst on bills to our debtors. but we did not get payment from them on time. and the liability of gst is now on our head. if we have no fund at the time due date of payment of gst. and we did not get loan from any where, please advise what to do???

    • bvg1988 says:

      Dear Mr. Bishnu Prasad,

      Time of Supply is at the time of delivery of goods. So, GST has to be paid in the next month in which invoice is raised. No other option. This is actually your business problem and you need to change your business process so that tax is collected in time by wither reducing credit period or recovering the dues at the earliest.

  5. Satish Patankar ( Tax Consultant) says:

    Nice Article,Thanks for Sharing Valuable Information Sir.

  6. ANAND NIPPANI says:

    Sir,Your valuable information related to various penalties under GST,definitely alarms Tax Payers,to be punctual in their practical life.Mistakes committed by them, are not generally,intentional,but are inevitable.However,your warning undoubtedly results in correcting Tax Payers at large.

  7. K.CH.A.V.S.N MURTHY( a2z Murthy) says:

    dear sir….very good article….

  8. Rajesh says:

    I’m freelancer usually have client in US , turn over less than 20lakh. Do I need to register for GST, also if can you help me de-register the GST i will pay required charges.

    • bvg1988 says:

      Dear Mr. Rajesh,

      As per Notification No. 10/2017 – Integrated Tax dated 13.10.2017, any person who is providing inter-state supply of services whose turnover is less than Rs. 20 Lakhs are exempted from registration. Therefore, If your aggregate billing in a financial year is less than Rs. 20 Lakhs, you can surrender your registration. For further details, you may share your mail id for further communication.

  9. Rudrakant says:

    Sir, could you please provide the HSN code for E-Commerce operator in GST?

    Thanks & regards.

    • bvg1988 says:

      Dear Mr. Rudrakant,

      HSN for any operation depends on nature of activity being performed. In your query, it is not clear whether E-Commerce operator is acting as only a platform to connect buyer and seller where it can be said that it is providing services OR it owns the goods and sell them through the portal where it can be said that it is dealing in supply of goods. HSN codes are different for these 2 different activities.

  10. Girish says:

    Nice Article….Thanks for Sharing Valuable Information Sir.

  11. CA NARENDRA SEKSARIA says:

    V GOOD EFFORTS BUT pl forward toGST DEPT/OFFICERS/SUGGESTION -URGENTLY
    I SENTFOR LATE FEESRS50/RS 20 PER DAY BE MAXIMUM RS1000THEN AUTO /SYSTEM SHOW CAUSE FOR GST NO CANCELLATION 2 DATES THEN CANCEL AFTER 30DAYS–NO LATE FEES/MAX RTS1000 TILL 31-3-2018-BECAUSE NO SHOW CAUSE-NO REMINDER -NEW LAW-IN MY CASE OCT 3B MISSED NOW LATE FEES RS 8000 FOR EACH MONTH–A SMALL TAX PAYER-GST PAYABLE ONLY RS 5-000-FURHER RET BLOCKED A DRACONIAN LAW

  12. R K Murthy says:

    Very Informative write up. Thanks for the nice job.

    Could you clarify what is the penalty for repeat offence. For example – Non issue of Invoice –
    a) some on repeats the offence many times over a month.
    b) some entity repeats the offence repeatedly over different periods

    • bvg1988 says:

      Dear Sri RK Murthy,

      CGST Act is silent on punishment/penalty for repeated offences. Also, the act is silent on is penalty mentioned is to be levied only once or can be repeated. As far as general understanding goes, penalty is levied for non-issuance of proper invoice whenever department notices the default. Though many number of irregular invoices are issued till that date, penalty upto Rs. 25,000 may be levied and it cannot be Rs. 25,000 for each such invoice. So, we can logically conclude that the penalty can be repeated whenever department notices it.

  13. S G Karwa says:

    Dear Mr Vinay,
    Congrats for excellent write up on a subject that is neglected by most of the assessees.

    There is a query regarding penalty applicable for non-filing of form CMP-03. This form is for intimation of details of stock on the date of opting for composition levy by migrated dealers. It is to be filed by those dealers who were registered under the previous laws and were migrated to GST on the appointed day,i.e., 1/7/2017. If any such dealer fails to file the return, what will be the penalty?
    Thanks.

    • bvg1988 says:

      Dear Sri S G Karwa,

      Thank you so much for the compliments.

      Whenever there is no specific penalty mentioned for any offence, Sec. 125 of CGST Act, 2017 i.e. General Penalty may be resorted to which extends upto Rs. 25,000.

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