Offences, Penalties, Prosecution under GST


Goods and Service Tax has been one of the greatest reforms in the history of India since its independence in 1947.

The tax system has been introduced with a view to bring a single point of taxation.

This means that the people of India will not be required to pay tax at different levels. Rather they will only be required to pay tax at a single point. This includes eradication of State level taxes, VAT, etc.

Another objective of GST was to curb the growing instances of tax evasion.

There is a total of 22 offences which comes under the purview of taxation and each of the offence is treated by penalties. Let’s take a look into the list of offences, based on circumstances:

Cases of Generating Wrong/ Fake Invoices

  1. When a person registered under GST has not issued an invoice, or has issued an invoice with a false value.
  2. When a person has issued a bill without affecting any sales/ transaction. This is associated with showing fake sales.
  3. When a person uses GST number of some other registered person and issues an invoice.

Cases of Fraud

  1. When a person submits information with is untrue, false or tampered with a view to reduce his tax liability.
  2. When a person submits documents or financial records that are intentionally tampered to lower or evade tax liability.
  3. When a person intentionally offers false information at the time of proceedings.

Cases of tax evasion

  1. When a person collects GST from normal business transactions but doesn’t forwards it to the Government in the next 3 months from the date of transaction.
  2. When a person wrongfully collects GST (an amount which should not have been charged under GST) and fails to submit the same to the Government within the next 3 months from the date of obtaining such tax.
  3. When a person obtains a refund from the Government through fraud.
  4. When a person shows input tax credit without having an actual proof, such as receipt.
  5. When a person supresses his actual income with a view to minimize his tax liability.

Cases of Supply/ transport of goods

  1. When a person transports his goods and services without any transaction documents.
  2. When a person intentionally transports good with a view to get them confiscated
  3. When a person tries to destroy goods that have been seized by the respective authority.

Other cases

  1. When a person ignores to register under GST, even though he was required to.
  2. When a person avoids deducting TDS or is deducting lower TDS
  3. When a person avoiding collecting TCS or is collecting lower TCS
  4. When a person distributes input tax credit in violation, being an Input Service Distributor
  5. When a person tries to disturb/ creates hindrances an officer who is carrying his duty
  6. When a person fails to maintain the required books of accounts
  7. When a person tries to destroy or has destroyed evidences.
  8. When a person has availed the composition scheme even though he was not eligible.

On whom the offences will be imposed?

Offences for GST will be imposed on the following:

  • For a company – In case an offence has been committed by a company under GST Act, then the person in charge (manager, secretary or whosoever is looking after GST compliances) and the company, both would be held liable.
  • For HUF, LLP, Trust, etc – In case of an offence has been committed by a HUF, LLP, Trust, etc., the Karta, Partner or Trustee (active) would be held liable.

Penalties under GST

The following penalties would be applicable to people who have been convicting of tax evasion under GST Act 2017-

For cases of Fraud (Intentional)

Any offender has to either pay the amount of tax evaded or INR 10, 000, whichever is higher. This means that if a tax payer has evaded tax amounting to INR 11, 000 then his tax payable for him would be: 11, 000 (tax liability evaded) + 11, 000 (penalty imposed) = INR 22, 000.

Apart from the person in fault, if there are additional people who have helped the person evade tax, then the helpers would be required to pay a penalty. For them the extent of penalty can increase to INR 25, 000.

Here are a few cases with explicit penalties:

Amount of tax evadedAbove 5 crores2-5 crores1-2 crores
JailUpto 5 yearsUpto 3 yearsUpto 1 year
FineAs applicable

For other cases (Fraud not intended)

Offenders not paying tax under GST or making short payments are required to pay a penalty of 10% on the tax liability or INR 10, 000, whichever is higher.

Incase there is an offence under GST which has not been specifically mentioned in the list of offences, the penalty would be up to INR 25, 000.

No penalty for minor breaches

  • Imposition of substantial penalties for minor breaches of tax regulations or procedural requirements has been restricted, i.e., a breach where amount of tax involved is less than Rs. 5,000.
  • No penalty in respect of any omission or mistake in documentation which is easily rectifiable and obviously made without fraudulent intent or gross negligence, i.e., errors apparent on record –V

How to handle penalty cases under GST as a tax payer?

As a tax payer, if you have been convicted under tax evasion, please take a note of the following:

  1. A show cause notice would be served to you and you would be given an opportunity of being heard. During this period, keep your documents/ financial records ready.
  2. The respective authority will explain you the sections imposed on you and the amount of penalty that would be imposed on you. This would also include educating you on your nature of offense.
  3. If there is a breach of law from your side. You can show the same voluntarily and the authority may help you to reduce the imposed tax penalty.

Thus, this was an overview on the set of offences and penalties under the GST Act 2017.  Always remember the fact that tax evasion is not a good idea. It may land up you and your business in a big trouble. Always seek help from a professional and learn about various ways to reduce your tax liability as permitted by the law, but never evade the same.

Categories GST

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