Offences and Penalties under GST

By | September 6, 2016

OFFENCES AND PENALTIES UNDER GST

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Offences under GST Law

Following are offences under GST Law. Penalties can be imposed by departmental authorities to person committing the specified offence.

As per clause 66(1) of Model GST Law, 2016,

Where a taxable person who —

(i) supplies any goods and/or services without issue of any invoice or issues an incorrect or false invoice with regard to any such supply;
(ii) issues any invoice or bill without supply of goods and/or services in violation of the provisions of this Act, or the rules made thereunder;
(iii) collects any amount as tax but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due;
(iv) collects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of the appropriate Government beyond a period of three months from the date on which such payment becomes due;
(v) fails to deduct the tax in terms of sub-section (1) of section 37, or deducts an amount which is less than the amount required to be deducted under the said sub-section, or where he fails to pay to the credit of the appropriate Government under sub-section (2) thereof, the amount deducted as tax;
(va) fails to collect tax in terms of sub-section (1) of section 43C, or collects an amount which is less than the amount required to be collected under the said sub-section, or where he fails to pay to the credit of the appropriate Government under sub-section (4) thereof, the amount collected as tax;
(vi) takes and/or utilizes input tax credit without actual receipt of goods and/or services either fully or partially, in violation of the provisions of this Act, or the rules made thereunder;
(vii) fraudulently obtains refund of any CGST/SGST under this Act;
(viii) takes or distributes input tax credit in violation of section 17, or the rules made thereunder;
(ix) falsifies or substitutes financial records or produces fake accounts and/or documents or furnishes any false information or return with an intention to evade payment of tax due under this Act;
(x) is liable to be registered under this Act but fails to obtain registration;
(xi) furnishes any false information with regard to particulars specified as mandatory, either at the time of applying for registration, or subsequently;
(xii) obstructs or prevents any officer in discharge of his duties under the Act;
(xiii) transports any taxable goods without the cover of documents as may be specified in this behalf;
(xiv) suppresses his turnover leading to evasion of tax under this Act;
(xv) fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder;
(xvi) fails to furnish information and/or documents called for by a CGST/SGST officer in accordance with the provisions of this Act or rules made thereunder or furnishes false information and/or documents during any proceedings under this Act;
(xvii) supplies, transports or stores any goods which he has reason to believe are liable to confiscation under this Act;
(xviii) issues any invoice or document by using the identification number of another taxable person;
(xix) tampers with, or destroys any material evidence;
(xx) disposes off or tampers with any goods that have been detained, seized, or attached under this Act;

shall be liable to a penalty of rupees ten thousand or an amount equivalent to the tax evaded or the tax not deducted or short deducted or deducted but not paid to the Government or input tax credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, as the case may be, whichever is higher.

Penalty for repeatedly making short payments

Any registered taxable person who repeatedly makes short payment of tax shall be liable to a penalty of rupees ten thousand or ten percent of the tax short paid, whichever is higher – clause 66(2) of GST Model Law, 2016.

A taxable person shall be deemed to have made short payments ‘repeatedly’, if there were short payments in three returns during any six consecutive tax periods – explanation to clause 66(2) of GST Model Law, 2016.

Other offences

Any person who—

(a) aids or abets any of the offences specified in clauses (i) to (xx) of sub-section (1) above;
(b) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner deals with any goods which he knows or has reason to believe are liable to confiscation under this Act or the rules made thereunder;
(c) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reason to believe are in contravention of any provisions of this Act or the rules made thereunder;
(d) fails to appear before the CGST/SGST officer, when issued with a summon for appearance to give evidence or produce a document in an enquiry;
(e) fails to issue invoice in accordance with the provisions of this Act or rules made thereunder, or fails to account for an invoice in his books of account;

shall be liable to a penalty which may extend to rupees twenty five thousand.

General i.e. residual penalty

Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no penalty is separately provided for in this Act, shall be liable to a penalty which may extend to rupees twenty five thousand – clause 67 of GST Model Law, 2016.

General disciplines related to penalty

General principles of imposing penalty are given in clause 64 of GST Model Law, 2016.

No penalty for minor breaches – No tax authority shall impose substantial penalties for minor breaches of tax regulations or procedural requirements. In particular, no penalty in respect of any omission or mistake in documentation which is easily rectifiable and obviously made without fraudulent intent or gross negligence shall be greater than necessary to serve merely as a warning.

For the purpose of this sub-section –

(a) a breach shall be considered a ‘minor breach’ if the amount of tax involved is less than rupees five thousand

(b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on record- clause 68(1) of GST Model Law, 2016.

Penalty to be commensurate with severity of breach – The penalty imposed shall depend on the facts and circumstances of the case and shall be commensurate with the degree and severity of the breach- clause 68(2) of GST Model Law, 2016.

No penalty without notice and hearing – No penalty shall be imposed on any taxable person without giving a notice to show cause and without giving the person a reasonable opportunity of being heard- clause 68(3) of GST Model Law, 2016.

Reason to be given for imposing penalty – The tax authority shall ensure that when a penalty is imposed in an order for a breach of the laws, regulations or procedural requirements, an explanation is provided therein to the persons upon whom the penalty is imposed, specifying the nature of the breach and the applicable law, regulation or procedure under which the amount or range of penalty for the breach has been prescribed- clause 68(4) of GST Model Law, 2016.

Lower penalty if breach voluntarily disclosed – When a person voluntarily discloses to a tax authority the circumstances of a breach of the tax law, regulation or procedural requirement prior to the discovery of the breach by the tax authority, the tax authority may consider this fact as a potential mitigating factor when establishing a penalty for that person- clause 68(5) of GST Model Law, 2016.

Provisions not applicable when law specifies fixed penalty – The provisions of this section will not apply in such cases where the penalty prescribed under the Act is either a fixed sum or expressed as a fixed percentage – clause 68(6) of GST Model Law, 2016.

Detention of goods and conveyances, and levy of penalty

Where any person – (i) transports any goods or stores such goods while they are in transit in violation of the provisions of this Act; or (ii) stores or keeps in stock goods or supplies goods which have not been accounted for in the books or records maintained by him in the manner required by this Act all such goods and the conveyance used as a means of transport for carrying the said goods shall be liable to detention, in the manner prescribed, by the proper officer and shall be released only after payment of applicable tax, interest and penalty leviable thereon or upon furnishing a security, in such form as may be prescribed, equivalent to the amount of the applicable tax, interest and penalty – clause 69(1) of GST Model Law, 2016.

No tax, interest or penalty shall be determined under sub-section (1) without giving a notice to show cause and without giving the person a reasonable opportunity of being heard.

Detention, seizure and confiscation

‘Detention’ means the goods are temporarily detained by officers to check whether there is any violation of law. If there is any violation, goods are seized. Otherwise, goods are released. Often ‘detention’ is only by verbal instructions and goods can be released without any formality, if the documents etc. are found to be in order.

‘Seizure’ means goods are taken in custody by the department. ‘Confiscation’ means the goods become property of Government and Government can deal with it as it wants. On the other hand ‘seizure’ means goods are in custody of Government, but the property of goods remains with the owner.

Contravening goods are liable to confiscation. Conveyance involved in offense is also liable to confiscation.

Goods confiscated by Government can be taken back on payment of redemption fine.

Confiscation of goods and levy of penalty

If any person -(i) supplies any goods in contravention of any of the provisions of this Act or rules made thereunder leading to evasion of tax; or (ii) does not account for any goods on which he is liable to pay tax under this Act; or (iii) supplies any goods liable to tax under this Act without having applied for the registration; or (iv) contravenes any of the provisions of this Act or rules made thereunder with intent to evade payment of tax, then, all such goods shall be liable to confiscation and the person shall be liable to penalty under section 66 – clause 70(1) of GST Model Law, 2016.

Goods belong to Government after confiscation – Where any goods are confiscated under this Act, the title of such goods shall thereupon vest in the appropriate Government – clause 70(3) of GST Model Law, 2016.

Confiscation after notice and adjudication order – No order of confiscation of goods and/or imposition of penalty shall be issued without giving a notice to show cause and without giving the person a reasonable opportunity of being heard – clause 70(4) of GST Model Law, 2016.

Police to assist in taking and holding possession – The proper officer adjudging confiscation shall take and hold possession of the things confiscated and every Officer of Police, on the requisition of such proper officer, shall assist him in taking and holding such possession – clause 70(6) of GST Model Law, 2016.

Redemption fine in lieu of confiscation – Whenever confiscation of any goods is authorized by this Act, the CGST/SGST officer adjudging it shall give to the owner of the goods or, where such owner is not known, the person from whose possession or custody such goods have been seized, an option to pay in lieu of confiscation such fine as the said officer thinks fit. Such fine shall not exceed the market price of the goods confiscated, less the tax chargeable thereon – clause 70(2) of GST Model Law, 2016.

Where any fine in lieu of confiscation of goods is imposed under sub-section (2), the owner of such goods or the person referred to in sub-section (1), shall, in addition, be liable to any tax and charges payable in respect of such goods – clause 70(3) of GST Model Law, 2016.

Confiscation of conveyances

Any conveyance used as a means of transport for carriage of taxable goods without the cover of documents as may be prescribed in this behalf shall be liable to confiscation, unless the owner of the conveyance proves that it was so used without the knowledge or connivance of the owner himself, his agent, if any, and the person in charge of the conveyance:

Where any such conveyance is used for the carriage of the goods or passengers for hire, the owner of the conveyance shall be given an option to pay in lieu of the confiscation of the conveyance a fine equal to the tax payable on the goods being transported thereon – clause 71 of GST Model Law, 2016.

Confiscation or penalty not to interfere with other punishments

No confiscation made or penalty imposed under the provisions of this Act or the rules made thereunder shall prevent the infliction of any other punishment to which the person affected thereby is liable under the provisions of this Act or under any other law – clause 72 of GST Model Law, 2016.

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