Being a destination-based, transaction-wise tax, Goods and Services Tax or GST, ropes in strict compliance procedures for all taxpayers. Since every transaction is recorded and tracked between the source and destination, the taxpayers must maintain and declare information with utmost accuracy.
To have a crystal clear movement of goods intra-state or locally, reduce corruption, and efficient tax collection system, GST defines strict penalty rules and offenses guidelines, which the taxpayers have to follow.
In this article, we’ve explained Offenses, Penalties, And Appeals In GST which every business owner should be aware of.
21 set offenses have been identified under the GST regime. There is one more offense that can be penalized that of availing composition scheme, even if the person is not liable for doing so.
The 21 set offenses
- A supplier supplies goods or services without any proper invoice or has issued a false invoice.
- He affects the issuance of an invoice without supplying the goods or services as per provisions of GST.
- He uses the GSTIN of any other person instead of his own.
- He submits false information during registration.
- He gives wrong information while filing returns or files false returns.
- He gives wrong information or false information during assessment proceedings.
- He fails to submit GST with the Government that was deducted by him, within 3 months from the date of such deduction.
- If TDS is deducted in contravention of provisions of GST, he is still liable to pay the same within three months from the date of such deduction. If such falsely deducted TDS is not submitted within the prescribed time, then it is an offense.
- He claims and obtains a refund of CGST or SGST by fraud.
- He claims an Input Tax Credit without the actual receipt of goods or services.
- He understates his sales during the period to evade tax.
- He transports or affects the movement of goods without proper documentation.
- He supplies goods that will be confiscated by law.
- He destroys or tampers with, the goods that have been confiscated.
- He does not register himself even though he is liable to do so.
- He does not deduct TDS wherever applicable or deducts lesser than the prescribed amount.
- He does not collect TCS wherever applicable or collects lesser than the prescribed amount.
- He does not distribute credit properly or distribute against the provisions of law being an Input Service Distributor.
- He obstructs the officer in the performance of his duties.
- He does not maintain proper books of accounts as required mandatorily by law.
- He intentionally destroys any evidence.
As seen from the above, the Government has spelled out the offenses that are covered under GST. When a company commits any of the above offenses, the officer-in-charge, as well as the company will be held liable for such an offense. When the offense is committed by a HUF, LLP, or a Trust, then the Karta, partners, and managing trustee will be held responsible for such offense.
Penalties Under GST In Case Of Fraud
For those who have committed fraudulent activities intentionally w.r.t. the provisions of GST, then he/she shall be liable to pay a 100% penalty, i.e. an amount equivalent to the amount of tax evaded or short deducted, subject to a minimum of Rs. 10,000/-. Where there is no fraudulent intent, i.e. the tax evasion is unintentional, then the penalty shall be 10% in this case, subject to a minimum of Rs. 10,000/-.
Where a person, not being a taxable person:
- Abates in committing fraud
- Acquires goods or services knowingly that these are against the provisions of GST
- Fails to issue a genuine invoice
- Fails to maintain or vouch for the books of accounts
- Fails to appear before the relevant authority upon a summon issued to his name,
Then he shall also be liable to pay a penalty of Rs. 25,000/-.
If fraud is ascertained, then apart from the above amounts, the following shall also apply:
- When the amount of tax involved is up to 50 lakhs, the person has to serve a jail term of 1 year along with paying the penalty.
- When the amount ranges between 50 lakhs to 100 lakhs, then the jail term shall be three years plus a penalty
- When the amount exceeds 100 lakhs, then jail term shall be up to 5 years plus penalty.
The respective authority shall issue a Show Cause Notice to the taxable person and offer him a reasonable time for being heard. The authority shall have to justify the imposition of such penalty as well as the nature of the offense committed. Where a taxable person intentionally discloses an offense committed by him, it is within the powers of the respective authority to reduce the amount of penalty to be imposed.
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Prosecution Under GST
Where a person commits the following offenses with a deliberate intention to cause fraud, then criminal proceedings shall be held against him.
- Claiming refund of CGST/SGST by fraud
- Submission of fake documents or returns
- Issuing any invoice without making a supply of goods or services
- Abetting in fraud under GST
Inspection, Search/Seizure under GST
Where the Joint Commissioner CGST/SGST has sufficient reason to believe that a taxable person is deliberately suppressing transactions to evade taxes or has claimed excessive Input Tax Credit, then he can order an officer of GST to inspect the locations of such person.
Similarly, the Joint Commissioner can order for search and seizure within the premises of a taxable person when he has sufficient reason to believe that there are goods, which should be confiscated or some important documents that are being hidden somewhere.
Appeals In GST
A taxable person, who is unhappy with the order passed by an adjudicating officer, can appeal against such order to the First Appellate Authority. A competent authority that has the power to pass a decision or an order under the Act is known as the adjudicating officer.
Having a four-level appeal structure, the GST provides all unhappy taxpayers to reach out to the Government. The second level after the First Appellate Authority is the Appellate Tribunal. After the Appellate Tribunal, the taxpayer can reach out to the High Court. The last resort left with the taxpayer is the Supreme Court.
All appeals shall only be entertained provided the same is filed as per prescribed forms, and minimum fees are paid. The fee for an appeal shall be:
- 100% of the tax amount, interest, fee, and penalty, arising from such challenged order
- 10% of the disputed amount.
The above amount of 10% can increase up to 25% of the disputed amount, where the disputed tax amount is above INR 25 Crores.
On the other hand, where the Commissioner of GST or an officer is the appealing person, then no such prepayment of fees is required.
5 Frequently Asked Questions AboutPenalties And Appeals In GST
1) Can an authorized representative appear for a taxable person in court?
A: Yes. A person required to appear before the Court, unless he has to appear personally as per law, can appoint an authorized representative. An authorized representative can be an employee, a lawyer practicing in India, a Chartered Accountant, a Company Secretary, and Cost Accountant with an active Certificate of Practice, a relative of the person, a B-Grade and above Gazetted Officer, or any Tax Return Preparer.
2) What are the cases against which appeals cannot be filed?
A: Certain decisions of a GST officer cannot be appealed against. They are as follows:
- Where the matter is transferred from one officer to another
- A Prosecution Order
- Payment of taxes or other amounts order
- Seizure or retention of books of accounts order
3) Whether a Commissioner of CGST revise an order passed by himself?
A: No. A GST officer subordinate to him can make the required appeal against the First Appellate Authority. The appeal shall set out the points that are concerning his decisions, and the Appellate Authority shall treat it as a proper appeal.
4) What is the maximum time limit for filing appeals with the First Appellate Authority?
A: It is three months from the date of order. The same time limit applies to departmental appeals.
5) What are the powers entrusted with the First Appellate Authority?
A: The FAA can condone the delay in filing an appeal up to 1 month from the date of expiry of the period, i.e. three months. He can also allow some additional grounds to be included in the appeal.
Be Safeguarded Of Penalties And Appeals In GST: The Way Forward To A Happier GST
The GST regime has brought in a tougher and stricter compliance diaphragm, which every person has to follow religiously. Any sort of non-compliance can have a severe effect on the daily business of the taxpayer and can attract huge amounts of interest and penalties.
If the offenses are grievous, it can lead to holding criminal proceedings against the offenders. Under the GST Act, no reservation has been given for first-time offenders. Therefore, even if you are unintentionally avoiding paying taxes or short deducting taxes wherever applicable, you will still be served a notice from the relevant authority.
Moreover, the right to appeal is only invoked when a specific sum of money is deposited beforehand with the repository, which will block your working capital until the appeal is completed.
Hence, it is always better to have a proper accounting system that can enable you to reconcile and file returns within due dates and also make payments of taxes, wherever applicable. Any slippage in the above process might lead to inspection from the relevant authorities.
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What are some common penalties imposed under GST?
Common penalties under GST include late filing penalties, non-compliance penalties, tax evasion penalties, incorrect refund claim penalties, and penalties for inadequate invoicing or record-keeping.
Late filing penalties are levied for not submitting GST returns on time. Non-compliance penalties are imposed for failing to meet specific requirements, such as registration or bookkeeping. Tax evasion penalties apply to intentional evasion or fraudulent activities. Incorrect refund claim penalties occur when inaccurate information or documents are used for claiming refunds. Penalties for inadequate invoicing or record-keeping are applied when proper invoices are not issued or accurate records are not maintained as per GST regulations.
How can a taxpayer appeal against a GST penalty?
To appeal a GST penalty, a taxpayer should file an appeal within the specified time limit, usually within 30 days of receiving the penalty order. They need to prepare a written application stating the grounds for appeal and include supporting documents. The appeal is then submitted to the appropriate appellate authority, such as the Commissioner (Appeals) or the Appellate Tribunal, as per the GST laws of the jurisdiction.
What grounds can a taxpayer use to appeal a GST penalty?
Taxpayers can appeal a GST penalty based on various grounds. These may include incorrect application or interpretation of the law by the tax authority, discrepancies in facts or evidence relied upon, violations of natural justice during penalty proceedings, or errors/irregularities in the penalty order.
Can a taxpayer request a stay on the penalty during the appeal?
Yes, a taxpayer can request a stay on the penalty during the appeal process. They need to make a separate application explaining the reasons and provide supporting documents. The appellate authority considers factors like financial hardship or the merits of the case when deciding whether to grant a stay. If a stay is granted, it temporarily suspends the enforcement of the penalty until the appeal is concluded.
What are the possible outcomes of a GST penalty appeal?
Possible outcomes of a GST penalty appeal include upholding the penalty (requiring payment), partial reduction of the penalty, setting aside the penalty entirely (waiving the amount), or providing additional instructions to the tax authority. The specific outcome depends on the merits of the case and the GST laws and regulations of the jurisdiction.