This article is written by Niharika Agrawal, from IFIM Law School. This article deals with the offences under GST laws and their penalties, fines, and prosecution.
This article has been published by Oishika Banerji.
Table of Contents
Goods and Services Tax (GST) was introduced in India in 2017. Since then, GST is a single domestic indirect tax for the whole of India. This tax is levied on every value addition. Any breach of these laws leads to offences. Under GST laws, offences are well explained in the Central Goods and Services Tax Act, 2017. This Act also imposes penalties, fines, and imprisonment for such offences. This article highlights the offences under GST laws provided in CGST Act and also briefly about the fine penalties and prosecution imposed upon such breach.
Offences generally means an illegal act or a crime or something that disgrace the mental and physical sense among the people. It also affects the moral and social conduct in society. An offence is a breach of rule of law. Under the Central Goods and Services Tax Act, 2017 (CGST Act) or any other Good and Services Tax (GST) laws that were introduced in the year 2017, there is no specific definition of an offence, however, the provisions for the offences and its penalties are explained in Central Goods and Services Act, 2017. Hence, any act or conduct that commits a breach of the provisions under the CGST Act is known as an offence under GST laws.
Provisions related to offences are covered under Chapter XIX, Section 122 of the CGST Act. This section constitutes those offences that attract penalties for any infringement or breach and also apply tax and interest. Some of the offences are also provided under Section 132 that is liable for prosecution depending upon the gravity of the offences. These provisions are applicable in various State and Union Territories Goods and Service Laws and Integrated Goods and Services Tax Act, 2017.
Section 122 of the CGST Act, consists of a list that includes 21 offences on which the law imposes a penalty. Thus non-compliance with the laws under the Act may lead to penalties. For the sake of better understanding, such offences are divided into four broad categories, and these are as follows
Fake or wrongful invoices
This category of offence is about a taxable person that conducts the following:
- If a person supplies any kind of either goods or services or both without issuing invoices or issuing fake invoices related to such supply will be liable for the offence.
- Without supplying the goods or services or both, the issue of any invoice or bill is a violation of the provision of the CGST Act along with rules given under.
- If they wrongfully avail Input Tax Credit (ITC) with the help of fake and illegal invoices or bills.
- If the invoice or bill is issued with a GST identification number of some other bonafide taxable person.
Evasion or non-payment of tax
- If a person collects any tax but does not pay the same amount to the government within the period of three months from the date when such payment is declared to be due.
- If any person avoids tax payment or fraudulently benefits himself of ITC or obtains any refund provided such offences or refund is not covered under (1) and (4) clauses of Section 122.
- If a tax is collected in violation of the provisions of the Act and also fails to pay the same tax to the government beyond a period of three months from the date on which such payment becomes due.
- If the person fails to deduct the tax pursuant to the provisions of Section 51(1) that states about tax deduction or even if deducted by less than a required amount, or if deducted full tax but fails to pay the government as per Section 51(2).
- If collected tax is not as per Section 52(1) that explains about the collection tax at sources or if collected, the amount is less than the required or fails to pay the same to the Government as per Section 52 (3).
- If the person avails ITC without actual receipt of goods and services or both either wholly or partly in violation of the provisions or rules of this Act.
- Either take or distribute ITC in infringement of Section 20 which is distribution of ITC by input service distribution or the rules made thereunder.
Commission of fraud
- If a person with an intention to avoid payment of tax due under the GST laws either fraudulently gets a refund of tax or falsifies or replaces financial records or shows fake accounts or documents or provides false information or return.
- Suppresses his turnover.
- If the goods are supplied, transferred, or stored for the reason to be liable for confiscation under the Act.
- Tries to tamper, destroy any material evidence or document.
- If someone tries to interfere with any goods that are detained, seized, or attached under this Act and are liable to be registered but fails to do so.
- If someone at the time of registration or subsequently frames any fake information related to registration particulars.
- If the person retains or prevents any office in the discharge of his duties.
- If the person transports any taxable goods without the required documents as specified under the Act.
- If the books of accounts are not kept, or maintained, or retained as per the provisions of the Act.
- If fails to provide information or documents asked by the officer pursuant to the provisions of this Act or the rules thereunder. Also if someone provides false information or documents during any proceedings under this Act.
Penalties under GST laws
Penalty for the supply of goods and services for non-payment or short payment of tax
According to Section 122(2) if the person has registered himself and supplies goods and services for which the tax is yet to be completely or partially be paid or by any other wrongful means refunded or utilized ITC. The following are the conditions:
In case of misstatement or suppression of facts to avoid tax, with or without the reason being a fraud, the person is liable to pay the penalty of Rs. 10,000 or 10% of the tax due, whichever is higher.
Penalty for aiding or abetting of offences
According to Section 122(3), any person who commits the following offence is liable to pay a penalty up to Rs. 25,000.
- Aiding or abetting any of the 21 offences under Section 122 of the Act.
- Deals with goods or services that are known to be liable for confiscation under the Act or the rules.
- Supply goods or services that are known to be in contravention under the Act or the rules.
- Fails to appear before the Central tax officer even after issuing the summon for appearance.
- Fails to provide invoices and maintain books of accounts as per the Act.
Penalty for failure to furnish or return
It is mandatory for all taxable persons to provide information or return as per Section 150 of the CGST Act. Thus, if the person required under Section 123 of the Act fails to do so within the duration specified in the notice, needs to pay the penalty of Rs. 100 per day for the period during which the failure to provide such information or return continues. This penalty cannot exceed Rs. 5000.
Penalty for failure to furnish statistics
If the Commissioner of CGST Act, 2017 is empowered under Section 151 that if he feels necessary to collect the statistics relating to any matters dealt with under the Act, he may direct to do so. If the directed person fails to provide any information as per under Section 124 without reasonable cause or provides any false information or returns willfully, shall be liable to pay penalty up to Rs. 10,000. If in case the offence continues, the penalty may further extend to Rs. 100 each day after the first day during which the offence continues. This is extended up to Rs. 25,000.
No other penalty is provided for these offences. According to Section 125, any person violates any provision or rules of the Act and if no penalty is provided for such violation, thus are liable to a penalty maximum up to Rs. 25000.
These penalties can be waived off either fully or partially under Section 128 if the government notifies to do so for such class of taxpayers and under such mitigating circumstances as specified therein on recommendations of the council.
Offences liable for prosecution
There are 12 certain offences under Section 132(1) that are liable for prosecution. The one who commits or causes to commit or retains any benefit accrued from these offences is liable for the same.
- If someone with an intention to evade tax supplies any goods or services or both without issuing any invoice in contravention of the provisions of this Act or the other rules.
- If there is availing of wrongful utilization of ITC or refund of tax by issuing any invoice or bill without supply of actual goods and services in contravention of the provisions of the Act.
- The one who fraudulently takes a benefit of ITC with or without the help of invoice or the bill as mentioned in clause (b).
- Collection of any amount in the name of the tax, at the same time, it fails to pay the same to the government within the period of three months.
- In order to avoid tax or fraudulently get a refund or where such offence is not covered under clause (a) to clause (d).
- In an intention to avoid tax if someone falsifies or replaces financial records or produces false accounts or documents or provides fake information under the Act.
- Prevents any officer in the discharge of his duties.
- If any person acquires possession, or involves himself in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other way deals with the goods or services knowingly that such goods are liable to be confiscated under this Act.
- The person is liable for the offence if he/she receives or is involved in any way with the supply of those goods and services which he knows and believes are a contravention of any provisions of this Act.
- Tries to tamper or destroy any material evidence or documents.
- If someone fails to provide information that is required to be supplied as per the provisions of the Act or deliberately supplies false information.
- If someone attempts to commit or abets the commission of the offences mentioned in clauses (a) to (k) of this section.
The offences mentioned above are liable for fines or punishment. Here are the following punishments:
- In the case where the tax is avoided or wrongfully availed or utilized ITC or in case of wrongfully refunded amount more than Rs. 5 crore is liable for imprisonment up to five years along with fine.
- If evaded tax or availed and utilized ITC or refunded any amount more than Rs. 2 crores but less than Rs. 5 crores are liable for imprisonment up to 3 years along with fine.
- If in the same case mentioned above the amount exceeds Rs. 1 crore but less than Rs. 2 crore is liable for imprisonment up to 1 year along with a fine.
- In case of the abatement or the offences specified in clause (f), (g), (j) under Section 132, they are punishable with imprisonment for a term which may be extended to six months or with a fine or with both.
Punishment for double conviction
According to the provisions of Section 132(2), if any person is already convicted of an offence under this section and if he again gets convicted, then he shall be punishable for the second offence with imprisonment for a term which may extend to five years and with fine.
It can be concluded that there are various provisions under the CGST Act, 2017 that explain various kinds of offences and for all those offences, there is a proportionate penalty, fines, or prosecution. A taxable person should always follow all the above provisions and should avoid committing such offences; if done so will be liable for the same.
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