Interest and Penalty under GST l penalties under GST l GST penalty

Interest and Penalty under GST are levied for various offences made by taxpayer’s. Few Penalties & Interest are mandatory and others are at the discretion of the GST authorities. In this article, we will discuss in brief relating to Interest and Penalty under GST.

What are Offences under GST?

Offences under GST is a breach of the provisions of GST Act & GST Rules. It is an illegal Act & if the taxpayer is charged with an offence that means taxpayer has been accused of doing something against the law.

What are the offences committed under GST?

Offences under GST committed by taxpayer’s are-

Supplies any goods or services without any invoice or issues a false invoice.
Issues any invoice or bill without supply of goods or services in contravention of the provisions of GST.
Invoices are issued by using the identification number of another registered taxable person.
Wrong information is submitted while doing GST registration.
Submitted fake financial records or documents or filing of fake returns to avoid tax.
Gives wrong information during proceedings or does not provide information.
Collects the amount of GST but not submitted to the government within 3 months.
Obtains any refund of CGST or SGST by fraud.
Taking or utilizing ITC without actual receipt of goods or services
Transportation of goods without proper documents.
Transports or supplies seized goods.
Not registered under GST, while required to be registered by law.
No deduction or collection of TDS or TCS or less amount is deducted or collected.
Obstructing the Proper Officer (PO) during his duty.
Do not maintain books of account as required by law.
Destroys any Evidence.

How many Penalties & Interest are there under GST Law?

Common Offences and their GST Penalties and Interest are as follows-

Types of Offence committed by an Assessee	Penalties or Interest
GST Return late Filing Penalty	Late Fee is Rs. 200 per day (i.e. CGST Rs. 100 & SGST Rs. 100). GST Penalty imposed shall not Exceed Rs. 5000. No late fee on IGST.
Incorrect type of GST charged i.e. IGST charged instead of CGST/SGST	There is No penalties under GST. Pay the correct amount of GST & get refund of the wrong type of GST amount paid earlier.
Not filing GSTR	10% of Tax due or Rs. 10,000 Whichever is higher
Incorrect filing of GSTR	There is no GST penalty, but Interest is applicable on shortfall amount i.e. @18%.
Committing a fraud	100% of Tax due or Rs. 10,000 Whichever is higher
Helping a person to commit Fraud	Penalties under GST may extends up to Rs. 25,000
Opting for Composition Scheme even though an Assessee is not eligible	Demand & Recovery provisions under Section 73 & 74 will apply Fraud Case 100% of Tax due or Rs. 10,000 Whichever is higher Non-Fraud Case 10% of Tax due or Rs. 10,000 Whichever is higher
Charging higher GST rates wrongfully	100% of Tax due or Rs. 10,000 Whichever is higher
Charging lower GST rate wrongfully	Interest is applicable on shortfall amount i.e. @18%.
Invoice not Issued	100% of Tax due or Rs. 10,000 Whichever is higher
Issued Incorrect Invoices	Penalty of Rs. 25,000
Delay in payment of Invoice	If the payment of Invoice is not paid within 6 months, then ITC will be reversed.
Not Registered under GST	100% of Tax due or Rs. 10,000 Whichever is higher

Is there any Imprisonment for committing High Value Fraud under GST Law?

GST has Corporal Punishments i.e. Imprisonment (Jail) for the person committing offenses (Mentioned above) or High Value Frauds which are as follows-

Amount of Tax Involved	Bailable or Non Bailable	Imprisonment	Fine (Penalties & Interests)
1 to 2 Crore	Bailable	Up to 1 year	Imposed in all cases as mentioned above
2 to 5 Crore	Bailable	Up to 3 years
More than 5 Crore	Bailable (Non Bailable in certain offences)*	Up to 5 years

*Note- If an Assessee commits the following offences and the Tax amount involved exceeds 5 Crore then the offences are Non-Bailable-

If an Assessee supplies any goods or services without an Invoice in order to avoid Tax.
Invoice issued without supplying any goods or service to Claim Input Tax Credit or refund by fraud.
If an Assessee Collects the amount of GST (even if the provisions are contravened), but does not submit it to the government within 3 months.

What are the Punishments for destroying Evidence?

If an Assessee Destroys evidence, disallows the Proper officer from his duty, manipulate the information or helping someone in the same, then an Assessee shall be liable up to 6 months imprisonment with Fine.

What are the Punishments for Repeated offences?

If an Assessee repeats the offence for the second time, then the punishment can extends up to 5 Years with fine. An Assessee cannot be prosecuted without the prior sanction of the Commissioner.

How offences can be Compounded under GST Law ?

It is a short cut method to avoid legal actions. The accused Assessee has to appear before the Magistrate at every hearing through an advocate in case of prosecution for an offence in a criminal court. But the court proceedings are time consuming & expensive as well. Thus, in compounding, the accused Assessee is not required to appear personally and can be discharged by paying compounding fees, which cannot be more than the maximum fine leviable under the relevant provisions.

Note-

Compounding of offence will be allowed only after payment of all tax, interest and penalty dues.
After the compounding amount is paid, no further proceedings shall be initiated against the accused person for the same offence and any criminal proceedings, if already initiated, will be abated

What is the amount payable for Compounding?

The minimum amount payable for Compounding of offences shall be

50% of the Tax involved

Rs. 10,000

– whichever is lower.

The maximum amount payable for compounding of offences shall be

150% of the Tax involved

Rs. 30,000

– whichever is higher.

When compounding of Offences will not be available under GST Law?

Compounding of Offences will not be available for-

An Assessee who has already accused of the same offences which are mentioned above, i.e., second time offenders will not be available to compound.
An assessee who had committed an offence earlier with supplies involving GST which is more than 1 Crore, has been allowed to compound before. Thus, it means any person who had previously enjoyed compounding for goods or services over Rs. 1 crore will not enjoy compounding for second time.
Any Assessee convicted by a court under GST
If an Assessee Destroys evidence, disallows the Proper officer from his duty, manipulates the information will not be available for compounding.

Note-

Where compounding of offence is not available, the accused Assessee has to appear before the Magistrate at every hearing, in case of prosecution for an offence in a criminal court.
Apart from prosecution, an accused Assessee can also be arrested under GST Law.

When someone can be arrested under GST?

If the Commissioner of GST believes that an Assessee has committed an offence under Section 132, the accused assessee can be arrested by any authorized GST officer.

What are the offences under Section 132 where arrest provisions become applicable?

Offences under Section 132 where arrest provisions become applicable are as follows-

Assessee supplies any goods or services without any invoice or issues a false invoice.
Assessee issues any invoice or bill without supply of goods or services in contravention of the provisions of GST.
Collects the amount of GST but not submitted to the government within 3 months.
If an Assessee Collects the amount of GST (even if the provisions are contravened), but does not submit it to the government within 3 months.
If an Assessee has already been convicted earlier under Section 132.

What are the powers directed by government to the CBIC against the defaulters?

The government has directed the powers to the senior officials of the Central Board of Indirect Taxes and Customs (CBIC) to go strong against the defaulters. Many GST-registered businesses fails to file their returns in due time, so the new set of norms allows GST authorities to either attach their properties or freeze their bank accounts, if the entities do not file their tax returns despite of repeated reminders.

Although the provisions of Seizure and Arrest seem rather harsh as GST is an Economic legislation, i.e., a tax law and not a Criminal legislation. The Commissioner has the power to Arrest or Seize on the basis of reasons to believe.

Conclusion-

From reading the above blog, we already know that there are various kinds of penalties & interest payable on defaults made by assessee. To avoid such Penalties & Interest payable on defaults, it is better to make compliance of business as per GST Law. For better & timely compliance of such provisions it is always advisable to take help of experts. If you require any assistance for GST Compliance or in handling notices of penalties issued by GST Department, contact your trustworthy advisors Manthan Experts at info@manthanexperts.com