In this article, Ashok Kumar Samal of Hidayatullah National Law University discusses consequences of non-registration or non-compliance with GST in a business

Goods and Services Tax or better known as GST is a simplified indirect and uniform tax structure applicable throughout India to replace taxes levied separately by the central and state governments. First, it was introduced as The Constitution (One Hundred and First Amendment) Act 2016, which followed the passage of Constitution 122nd Amendment Bill. GST Council is the governing body of GST.

The introduction of Goods and Services Tax in India is a gigantic step in the indirect taxation reform. The simplicity of the tax has various advantages such as:-

• Simpler enforcement and administration;
• reduction in the aggregate tax burden on goods/services;
• Unrestricted intrastate movement of goods;
• reduction in paperwork to a large extent.

The Central Goods And Services Tax Act was passed in 2017 and is composed of 174 Sections which provide in detailed clauses regarding registration, tax payment structure, the consequence of non-compliance with the Act etc.

Section 122-138 of the Central Goods and Services Tax Act, 2017 provide various regulations regarding the liability of taxable/registered persons under the act for any reasons such as non-payment of tax or non-compliance with the provisions of the act.

When Penalty is unspecified under the Act

Section 125 defines the clause that what shall happen in cases an offence is not mentioned under the act. For committing offences or contravening provisions of this Act for which no penalty has been provided under this Act, a person shall be liable to a fine of upto Rs. 25,000. Act shall be liable to a penalty which may extend to twenty-five thousand rupees.

Liability of a Taxable Person

Sub-clause 1 of Section 122 of the Act talks about cases when a taxable person shall be liable and will have to pay a fine of Rs. 10,000 or an amount equivalent to the tax evaded, whichever is more. The following are these cases:-

• When he supplies any goods and/or services without issue of any bill;
• When he issues an incorrect or false invoice;
• When there is issuance of any bill or bill without supply of goods and/or services;
• When he fails to pay the collected tax to the government within 3 months.
• When he fails to deduct the tax in accordance with the provisions of this act.
• When he takes or utilises input tax credit without actual receipt of goods and/or services;
• When he fraudulently obtains refund of tax under this Act;
• When he takes or distributes input tax credit in contravention of this act;
• When he falsifies or substitutes financial records or produces fake accounts or documents with a clear intent to evade payment of tax due under this Act.
• When he fails to register;
• When he provides fake particulars at the time of registration;
• Obstructs or prevents any officer in discharge of his duties under this Act;
• When he suppresses his turnover leading to evasion of tax under this Act;
• Upon failure to keep, maintain or retain books of account;
• Upon supply, transport or storage of any goods which he has reasons to believe are liable to confiscation under this Act;
• Upon tampering or destruction of any important evidence or document.

Liability of a registered person on supplying untaxed products

While Sub-clause 1 of Section 122 talks about the liability of a taxable registered/unregistered person, Sub-clause 2 talks about when a taxable and registered person is specifically liable for supplying products/services on which tax has not been paid or short-paid,

• For reasons other than the reason of fraud or any willful misstatement for the purpose of evasion of tax, shall pay the higher amount between a fine of Rs. 10,000 or 10% of the tax evaded.
• For reasons equal to fraud or any willful misstatement for the purpose of evasion of tax, shall pay the higher amount between a fine of Rs. 10,000 or the total amount of tax evaded.

A separate fine of upto Rs. 25,000 is applicable on any taxable person who:-

• Works towards the aiding or abetting of any of the offences specified above;
• Is in possession of any goods which he knows are liable to confiscation under this Act;
• Receives any supply of services which he knows are in contravention of any provisions of this Act;
• Fails to appear before the officer of central tax, when summoned for appearance.

Furnishing of Information

Section 151 talks about furnishing of information. It says that when any person is called upon by the commissioner for furnishing information or returns under the act, he shall mandatorily do so in any manner prescribed and Section 124 talks about the penalty for non-compliance with Section 151. It says that if any person required to furnish any information or return under section 151, without any reason fails to furnish such information or does so wilfully, or produces false information shall be liable to a fine upto Rs. 10,000.

Minor Contravention of the Act

Section 126 of the Act says that no penalty or fine shall be imposed for minor violation of procedural requirements or tax omissions. Then it goes on to define minor breaches and says that a breach will be considered minor in nature if the amount of tax involved is Rs. 10,000 or if the mistake in document is visible on the face of it. The fine imposed under this Act shall depend on the facts and circumstances and severity of breach of each case. It also says that everyone will be given a chance to justify their actions before imposing a penalty.

Waiver of Penalty

Section 128 specifies cases in which penalty may be waived. It says that the Government may, by notification, waive in part/full, any penalty mentioned in section 122 or section 123 or section 125 on the recommendations of the GST Council.

Transportation or Storage in Contravention

Section 129 says that in case of storage or transportation of any products in contravention of this act are liable to detention or seizure. They shall only be released on payment of the applicable tax and penalty equal to one hundred per cent. of the tax payable on such goods and, in case of exempted goods, on payment equal to 2% of the value of goods or twenty-five thousand rupees, whichever is less, where the owner of the goods comes forward for payment of such tax and penalty. Where the person transporting the goods fails to pay the amount of tax and penalty within seven days of such detention or seizure, further proceedings shall be initiated in seven days. When the seized products are perishable or hazardous in nature or their value is likely to deteriorate with time, the period of 7 days might be considerably reduced.

Contravention with an intent to Avoid Tax

Section 132. (1) Whoever commits any of the following offences with an inherent intent to evade tax shall be punishable with imprisonment for a term which may extend to six months or with fine or with both:-

• Supplies any goods or services or both without issue of any bill, with the intention to evade tax;
• Issues any bill without supply of goods in violation of the Act, which may also lead to wrongful utilisation of input tax credit;
• Avails input tax credit using fake bill;
• Collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the due date;
• Evades tax, fraudulently avails input tax credit or fraudulently obtains refund;
• Falsified his financial records and documents or produces fake accounts;
• Obstructs an officer employed under this act while discharging his duties;
• Tampers or destroys any material evidence;
• Fails to supply any information which he is required to supply under this Act;

If any person convicted of an offence under this section is convicted repeatedly of an offence under this clause he shall be punishable for the second conviction including every subsequent offence with imprisonment of term upto five years

It also specifies that all the punishments under this clause shall be non-cognizable and bailable.

Jurisdiction of Courts

Section 134 mentions that no court shall take cognizance of any offence punishable under this Act or the rules made thereunder unless it has been previously sanctioned by the Commissioner, and the lowest court that can try any offence under this act shall be the court of a Magistrate of the First Class.

Existence of Mens Rea shall be presumed

Section 135 says that any offence which has the mandatory requirement of a culpable mental state on the part of the accused, it shall be presumed by the court that such a mental state exists. The burden rests upon the accused to prove that he had no such mental state during the commission of such offence.

Who shall be liable in cases of a Company

Section 137 provides the answer to this particular question. It says that where an offence was committed by a person who is a company, every individual who was in responsibility for the conduct of the company at the time of the offence, shall be held to be guilty of the offence and can be convicted and punished accordingly.

Where an offence has been committed by a taxable person being a partnership firm or a Limited Liability Partnership or a Hindu Undivided Family or a trust, the partner or karta or managing trustee shall be deemed to be guilty of that offence and shall be liable to be proceeded against and punished accordingly.

If a person had no knowledge of the offence committed or exercised due diligence to prevent the commission of such offence he shall not be held liable.