INTRODUCTION - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

CHAPTER XI OFFENCES AND PENALTIES 1. INTRODUCTION 1.1 This Chapter deals with the different types of offences and the penalties leviable under GST law. The contents of this Chapter would aid the officers, especially while issuing Demand Notices/Show Cause Notices and Adjudication orders. 1.2 The provisions of the CGST Act, 2017 and the CGST Rules, 2017 relevant to this Chapters, are as under- Sr. No. Sections / Rules Provisions pertaining to 1. Section 122 Penalty for certain offences 2. Section 123 Penalty for failure to furnish information return 3. Section 124 Fine for failure to furnish statistics 4. Section 125 General penalty 5. Section 126 General disciplines related to penalty 6. Section 127 Power to impose penalty in certain cases 7. Section 128 Power to waive penalty or fee or both 8. Section 129 Detention, seizure and release of goods and conveyances in transit 9. Section 130 Confiscation of goods or conveyances and levy of penalty 10. Section 131 Confiscation or penalty not to interfere with other punishments 11. Section 132 Punishment for certain offences 12. Section 133 Liability of officers and certain other persons 13. Section 134 Cognizance of offences 14. Section 135 Presumption of culpable mental state 15. Section 136 Relevancy of statements under certain circumstances 16. Section 137 Offences by companies 17. Section 138 Compounding of offences 18. Rule 162 Procedure for compounding of offences 1.3 GST is levied on every value addition at each stage of supply. Apart from the tax, the CGST Act, 2017 and the rules made thereunder, lays down provisions for registration, manner of determination of the tax, classification and valuation of the supply, various mandatory compliances to be made by the taxpayer, etc. 1.4 Any breach of these laws leads to offences. Under GST laws, offences are well explained in the CGST Act, 2017. This Act also provides for imposition of penalties, fines, and imprisonment for some type of offences. 1.5 The specific identification of offences and defined penal actions for any law is the teeth, which the lawmakers provide to the statute. Without the provision of proportionate punishment, neither deterrent nor retributive, let alone persuasive effect can be created in general. The institutions of State require an effective enforcement mechanism and GST administration, created by the GST law, is no exception. 1.6 For effective compliance by the taxpayers, CGST/SGST statutes have codified the offences and penalties in a detailed manner. A cursory reading of the relevant provisions gives an idea that GST Law is complete in itself and merely takes assistance of Criminal Procedure Code and others, only where it is required. 1.7 Under the GST system, businesses can commit various offences, resulting in penalties and fines. The penalties and fines deter businesses from engaging in fraudulent activities, non-compliance with tax laws and regulations, and other illegal activities. Some common GST offences include evasion of taxes, failure to register for GST, issuance of incorrect invoices, and claiming excess Input Tax Credit (ITC). 1.8 The penalties for these offences can range from monetary fines to imprisonment, depending on the severity of the violation. The CGST Act, 2017 lists the GST-related offences and the penalties that may be imposed. Sections 122 to 128 of the CGST Act, 2017 deal with the laws governing offences and penalties. 1.9 The CGST Act, 2017 provides for prosecution of the person indulging in various types of offences covered under the Act, which may lead to imprisonment for the period ranging from six months to five years, depending upon the amount of tax evasion involved. The CGST Act, 2017 also provides for compounding of offences, subject to the conditions prescribed.