The GST law defines strict penalty rules and offences guidelines for Indian taxpayers to follow and ensure frictionless intrastate or interstate goods movement, reduce corruption and efficient tax collection system. GST or the Goods and Service tax has been constantly bombarded with criticism about the compliance burden it mandates on the Taxpayers shoulders. To counter this point let’s look at some of the points below:
17% of the total world population lives in India. Out of the 1.21 billion people only 2.05 crore Indians or 1.7 percent pay taxes. Again out of these 2.05 crore taxpayers 90% pay minuscule tax. In the light of this, Don’t we need tax compliance? GDP and Tax Revenue are two important pillars of Economy.
India’s Gross Domestic Product Growth:
One of the main contributing factors towards GDP is the number of goods produced and the price that they can call when they are sold. Production depends on 3 factors, land, labour and capital and when any one or more of them are limited, then the GDP becomes lesser than the normal. This is precisely why The LARR was passed i.e to strengthen India’s GDP. However, it would be fair to say that as far as GDP is concerned, in the last twenty-five years India has been outshined only by China. However, to emulate China’s growth curve in the coming years, India needs to increase its taxpayer base and reduce the burden of Indirect taxes which were for a long time monopolies of the middlemen or the agents.
Hence, although GST increases tax compliance and increases operational costs, keeping in mind the demands of the future it for the time being seems the right step ahead. Powered by the GSTIN Network and the e-way bill, every transaction is now being recorded and tracked. The full cycle of a transaction from its source to the destination and vice versa is within the GST Radar now. Taxpayers must declare accurate details of their transactions to repel any concern or questions from the Tax Authorities. In this article, we throw light on the Offenses, Penalties, And Appeals In GST which every business owner should be aware of.
21 Offences Under GST Law that Attract Legal Proceedings
- Issuance of improper invoice against supplies goods or services.
- Affecting issuance of an invoice by not supplying the agreed upon goods and services.
- Using third-party GSTIN to file bogus returns.
- Furnishing wrong or misleading information during GST Registration.
- Intentionally filing false returns with misleading/wrong information.
- Non-cooperation in assessment proceedings by willfully giving wrong or false information during.
- Failure to submit GST with the Government that was deducted by him, within a given quarter starting from the date of such deduction.
- A taxpayer is liable to pay TDS deducted in contravention of provisions of GST within three months from the date of such deduction. This false deducted TDS has to be submitted within the prescribed time or else it would be taken as an of offence.
- Use of Fraudulent means to claim and obtain a refund of CGST or SGST.
- Claiming Input Tax Credit without the actual receipt of goods or services.
- Understating sales during a given Financial Quarter to evade tax.
- Interstate and intrastate transfer of goods without properly documented bills.
- Supply of goods confiscated under the law.
- Destroying or tampering with goods confiscated by the government.
- Intentionally escaped the mandatory GST registration
- Refrains from collecting eligible TCS wherever applicable or collects lesser than the prescribed amount.
- Does not deduct applicable TDS or deducts TDS much less than the prescribed amount.
- Improper distribution of credit or distribution against the provisions of law being an Input Service Distributor.
- Benefits of Input Tax Credit are not distributed properly. Luring government officials into tax evading schemes as well as creating a hindrance for tax officers.
- Abstaining from detailed maintenance of records as mandated by the GST law.
- Intentionally destroying any evidence leading to his/her conviction.
Hence we see that the above points have very clearly outlined the offences that are covered under GST. If the authorities discover any of the above misdoings on the part of a company then under GST norms the officer-in-charge would be responsible for the offence. Individual who are availing composition schemes but are not liable to do so may also attract the vigil of the authorities. In case of financial frauds committed by a HUF, LLP or a Trust, then the Karta, partners and managing trustee will be answerable and held responsible by GST norms.
Penalty on Tax Amount with Jail Term
| Tax amount involved | INR 100-200 lakhs | INR 200-500 lakhs | Above INR 500 lakhs |
| Jail term | Upto 1 year | Upto 3 years | Upto 5 year |
| Fine | In all three cases | ||
Provision for Penalties Under GST
The GST law provides for a set number of penalties levied on all kinds of tax-evaders. The provisions are:
- For Intentional Evasion: The GST law imposes 100 % penalty on intentional frauds found guilty of being party to activities like tax evasions, short deductions etc. Financial punishment equivalent to the total amount of tax evaded or short deductions, subject to a minimum of Rs. 10,000/.
- For Unintentional Evasion: Taxpayers/business-owners who were not a party to any fraudulent scheme and the tax evasion is unintentional are subjected to 10% penalty, subject to a minimum of Rs. 10,000/-.
Offences Accountable for Non-Registered Person:
The GST radar equally takes into account the non-taxable people also. A person who is non-taxable under GST norms but is privy to fraudulent practices or is part of any, some or all of the below-mentioned offensive practices:
- Willingly goes against GST norms and in the process acquires goods or services.
- Fails to issue genuine invoice against the services/goods used by him.
- Fails to validate/testify the transactions part of his account books.
- Failure to appear before the relevant authorities when summoned by them.
Penalties Accountable for Non-Registered Person:
Under GST norms, even non-registered people under GST who are the partner to above practices attract a penalty of Rs. 25,000/. In addition to this fixed amount, other penalty provisions for any kind of tax evasion/fraud detected by the tax authority include:
- Intentional Evasion of Tax Liability to the amount of 50 lakhs: A jail term for 1 year in addition to the payment of Tax Liabilities.
- Pending Tax Liability for the amount of 50 lakhs to 100 lakhs: A three years jail term coupled with appropriate financial punishment.
- Evading tax liabilities worth 1 crore and more attracts financial punishment in the form of penalties coupled with a five-year jail term.
Specific Procedure and Protocols for Tax Authorities:
- A show cause notice must be issued against the taxable person. The Notice must provide sufficient time for a revert back from the taxable person under the radar.
- It is the onus of the Tax Authority as well as the investigation body to justify the imposition of such penalty as well as the nature of the offence committed.
- The GST has provisions that empower Tax Authorities to reduce penalties, wilful whistleblowers. In a scenario where a taxable person intentionally discloses an offence committed by him, it is within the powers of the respective authority to reduce the amount of penalty to be imposed.
Prosecution Under GST
Any deliberate intentions of fraud found in the following actions/activities of a person will attract criminal proceedings against them:
- Using fraudulent means to claim a refund of CGST/SGST.
- Fake documents submitted for filing online returns.
- An issue of dummy invoices without any supply of goods or services against them.
- Being a participant in any fraud scheme that misleads tax authorities.
- Any discrepancies discovered during Inspection, Search/Seizure under GST.
Based on the above findings If The Joint Commissioner CGST/SGST has enough proof that a registered person under GST has deliberately made attempts( successful or unsuccessful) to evade GST or has claimed excessive Input Tax Credit, then he can issue a notice as well as order GST officer to find the whereabouts of the concerned tax evader.
In addition to the above, the Joint Commissioner can order a search cum seizure probe across all registered properties/locations of the taxable person who may be supposedly concealing goods or some important documents.
Appeals in Goods and Services Tax
GST provisions deal with tax evaders with an iron hand. This, however, does not mean that a person charged with fraudulent means of tax evasion cannot appeal against orders passed by the adjudicating officer. First Appellate Authority, is the first in the four appeal structure of the GST law. The adjudicating officer or the designated person entitled with the responsibility to pass a decision or an order under the GST Act section 107 is the first in line representative of the First Appellate Authority. The person charged under GST can further appeal to the next in line to The Appellate Authority i.e The Appellate Tribunal under GSTs Act section 109,110 followed by a High Court appeal under GST Act section 111-116. The last resort for a charged tax evader is to claim innocence under GST Act 111-116 is the Apex Court or the Supreme Court, the highest court in the land.
Any unintentional attempt to avoid paying or short deducting taxes will attract the vigilant eyes of the authorities. Under GST the right to appeal can be invoked against the deposition of a fixed amount of money. SMEs can be the most affected by this as it could cause a huge dent in the working capital.
Important Steps Involved While Making Appeals Under GST Law:
The accused must make his appeal in the prescribed form as well as deposit the required fees beforehand.
The appropriate fee is determined as follows:
- The fee comprises of the full amount of tax, interest, fine, fee and penalty plus a sum of 10% on the disputed amount
- An officer or the GST Commissioner can make an appeal free of any fees or cost.
Conclusion: The GST has no doubt increased compliance burden but this is not a drawback but an advantage to the nation at large. The main objective of GST is simply to eradicate the termites that have long been slowing down and eating the growth of the people of the Nation. The wide economic gap between the haves and the have-nots has increased manifold across the globe. GST if properly implemented promises an ecosystem that will facilitate stupendous revenue generation for the government that will expedite infrastructure development as well as building world-class public services like schools, colleges, health centres etc.
New, as well as seasoned taxpayers, must remember that the GST Act, shows little mercy even for first-time offenders. In conclusion, we would like to remind our readers that the tougher and stricter compliance does not make the government synonymous with Big Brother. Taxpayers need to be alert as well as updated about their tax compliance. Also, taxpayers must stay away from Ponzi schemes that lure and provoke tax evasions. The days of such practices are over. There is an old Hindi saying that fits aptly to the GST Compliances which goes like this, “Savdhani Hati, Durghatna Ghati“.
