In the way of operations of businesses and the compliance of the laws of taxation the Goods and Services Tax (GST) regime in India has brought about important amendments. The enforcement of penalties for violations and non-compliance with the terms of the GST Act and Rules is one such feature that has acquired relevance under the new tax system. The idea of a general penalty under GST Laws, the pertinent provisions, and the most recent High Court rulings that have a bearing on the application of such penalties will all be covered in this article. We’ll also discuss the circumstances in which courts have waived or reduced fines in certain situations, as well as the significance of publishing GST registration numbers in accordance with Rule 18 of the GST Rules.
Fill Form for GST Compliance Software
What is GST Section 125 Under CGST?
Any person who violates a provision of the GST Act or rules established thereunder would be subject to a general penalty under Section 125 of the Central Goods and Services Tax (CGST) Act, for which no distinct penalty is specified. Under this clause, the highest fine that may be assessed is 25,000 rupees.
When would the General Penalty U/S 125 Apply?
When a person violates a GST Act provision or a regulation adopted under it and no certain punishment has been set forth for that violation, the General penalty under Section 125 would be applicable. This acts as a residual penalty clause to make sure that any GST law infraction is not left unpunished.
Any offence for which there is no particular mandated penalty somewhere in the law cannot be absolved without repercussions. In situations when no specific penalty is imposed under the Act or rules, Section 125 of the GST statute provides for general penalties. The maximum fine under this clause is Rs. 50,000 for IGST or Rs. 25,000 for CGST, SGST, and UTGST.
General Disciplines of Penalty U/S Section 126 of CGST Act
Specific guiding principles that should be complied with when assessing penalties under the GST regime are outlined in Section 126 of the CGST Act. These guidelines guarantee that the punishments are meted out in a fair, impartial, and equitable way.
Major Points of GST Section 126 Under CGST Act
- Zero penalties for lower breaches- According to the Act, there should be no penalties for small violations of tax laws or procedural requirements, especially if they can be quickly fixed and were committed without fraud or severe carelessness.
- Punishment appropriate with the violation: The punishment charged under the GST Act shall be appropriate to the degree and extent of the violation and should be based on the specific facts and circumstances of each instance.
- Hearing opportunity: Without furnishing a chance of being heard a person must not be imposed with any penalty.
- As a mitigating factor the voluntary disclosure: The proper officer may take into account this fact as a mitigating factor when calculating the penalty if an individual voluntarily reveals the details of a breach of a tax law, regulation, or procedural needs before the breach is discovered by the tax authorities.
- Anomalies: When the penalty stipulated under the GST Act is either a fixed amount or represented as a fixed percentage, the rules outlined in Section 126 do not apply.
Dismissal of the General Penalty by the High Court
The general penalty levy under Section 125 of the GST Act would have been removed or reduced by the High courts in India while interrupting. Below are the mentioned two notable judgments in this concern:
- Pallavi Gulati and Ors. vs. Puri Constructions Pvt. Ltd.: Towards this case, a penalty would be levied by the National Anti-Profiteering Authority on the respondent for not issuing the advantage of input tax credit (ITC) to the buyers of flats in their project. The respondent was deemed responsible for a penalty under Section 122(1)(i) of the CGST Act. But, the High Court witnessed that the respondent does not act deliberately in defiance of the law and that their conduct was neither dishonest nor in conscious disregard of their legal obligation. Hence, the penalty was dismissed. [ Pallavi Gulati vs Puri Constructions Pvt. Ltd. (National Anti-Profiteering Authority) Case No. 30/2019, dated 08-May-2019; MANU/NT/0029/2019]
- Jaipur IPL Cricket Pvt. Ltd. and Ors. vs. Sp. Director Directorate of Enforcement: To the extent of this case, the Appellate Tribunal for FEMA witnessed that the penalty levied would be discretionary in nature, and the practice of such discretion should be directed by fair, objective, and pertinent references. The tribunal, the exercise of discretion at the time of levying the penalty should not be on the foundation of arbitrary, vague, or fanciful considerations. [Jaipur IPL Cricket Pvt. Ltd. and Ors. vs. Sp. Director Directorate of Enforcement (Appellate Tribunal FEMA) Case No. FPA-FE-9/MUM/2013 dated 11-Jul-2019; (2019) 8 TMI 133 (ATFEMA)]
Displaying GSTIN According to GST Rule 18
Rule 18 of the GST rules made it necessary for every registered person to display their GST registration certificate and Goods and Services Tax Identification Number (GSTIN) on the name board at their primary place of business. Section 125 of the CGST Act imposes penalties for violations of this rule.
- The business location must prominently display the GST registration number.
- The GST registration number must appear on all written correspondence between businesses and their clients, including quotes and invoices.
- Businesses with several locations are required to display the appropriate GST registration numbers there.
- The GST number must be printed on notices or signboards placed in noticeable areas of the business premises.
- The GST registration number must be prominently displayed on the company website if the business conducts its operations online.
- Penalties outlined in the CGST Act may apply if these rules are violated.
