PENALTIES UNDER GST LAW - Handbook of GST Law & Procedures (CBIC) [October 2024] - GST

6. PENALTIES UNDER GST LAW 6.1 If any of the offenses are committed then a penalty will have to be paid under GST. The principles on which these penalties are based are mentioned by law. Penalty means a temporary punishment (monetary as well as prosecution) imposed by the statute given to a person for the commission of a certain offence. 6.2 GST Penalties resulting from breach of the CGST Act, 2017 are subject to fines depending on various factors, including but not limited to the severity of the breach. 6.3 Section 122(1) of the CGST Act, 2017 prescribes penalty of Rs. 10,000/- or an amount equivalent to the tax involved, whichever is higher, on the taxable person for the following omissions and commissions - (i) supply of goods or services or both without issue of any invoice or issuance of incorrect or false invoice with regard to any such supply; (ii) issuance of invoice or bill without supply of goods or services or both in violation of the provisions of the CGST Act, 2017 or the rules made thereunder; (iii) failure to pay any amount collected as tax to the Government beyond a period of three months from the date on which such payment becomes due; (iv) collection of any tax in contravention of the provisions of the CGST Act, 2017 and failure to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (v) failure to deduct the tax (TDS) in accordance with the provisions of sub-section (1) of Section 51 of the CGST Act, 2017 or deduct an amount less than the amount required to be deducted under the said sub-section, or failure to pay to the Government the amount deducted as tax; (vi) failure to collect tax (TCS) in accordance with the provisions of sub-section (1) of Section 52 of the CGST Act, 2017 or collect an amount less than the amount required to be collected under the said sub-section or failure to pay to the Government the amount collected as tax; (vii) availment or utilisation of input tax credit without actual receipt of goods or services or both either fully or partially; (viii) obtaining refund of tax fraudulently; (ix) availment or distribution of input tax credit by Input Service Distributor (ISD) in contravention of Section 20 of the CGST Act, 2017; (x) falsification or substitution of financial records or producing fake accounts or documents or furnishing false information or return, with an intention to evade payment of tax; (xi) failure to obtain registration despite being liable to be registered; (xii) furnishing of false information with regard to registration particulars, either at the time of applying for registration, or subsequently; (xiii) obstructing or preventing any officer in discharge of his duties; (xiv) transporting any taxable goods without the cover of specified documents; (xv) suppression of turnover leading to evasion of tax; (xvi) failure to keep, maintain or retain books of account and other documents in accordance with the provisions of CGST Act, 2017 or the rules made thereunder; (xvii) failure to furnish information or documents called for by an officer or furnishing false information or documents during any proceedings under CGST Act, 2017; (xviii) supplying, transporting or storing any goods liable to confiscation under CGST Act, 2017; (xix) issuance of invoice or document by using the registration number of another registered person; (xx) tampering or destroying any material evidence or document; (xxi) dispose off or tamper with any goods detained, seized, or attached under CGST Act, 2017. (xxii) retaining the benefit of a transaction covered under Sr. No. (i), (ii), (vii) or (ix), and at whose instance such transaction is conducted; (xxiii) any electronic commerce operator, who is liable to collect tax at source under Section 52 of the CGST Act, 2017, who allows a supply of goods or services or both through it by an unregistered person other than a person exempted from registration to make such supply, allows an inter-State supply of goods and/or services through it by a person who is not eligible to make inter-State supply and who fails to furnish the correct details in the statement of outward supply of goods effected through it by an exempted person. 6.4 The following Table depicts the list of offences subjected to penalty under Section 122 of the CGST Act, 2017 and the applicable penalty - Section Person liable to pay Penalty 122(1) Any taxable person who has committed the following offence Rs.10,000/- OR An amount equivalent to: (i) tax evaded OR (ii) Tax not deducted or short deducted or deducted but not paid to the Government OR (iii) Tax not collected or short collected or collected but not paid to the Government OR (iv) Input tax credit availed of or passed on or distributed irregularly OR (v) the refund claimed fraudulently. Whichever is higher. S. No. Nature of Offence Committed (i) Supplying any goods or services or both without issue of any invoice or an incorrect or false invoice. (ii) Issuing any invoice or bill without supply of goods or services or both in violation of GST. (iii) Collecting any amount as tax but failing to pay the same to the Government beyond a period of three months from the due date. (iv) Collecting any tax but failing to pay the same to the Government beyond a period of three months from the due date. (v) Failing to deduct tax, or deducting an amount which is less than the amount required to be deducted, or failing to pay deducted tax to the Government. (vi) Failing to collect tax in accordance, or collecting an amount which is less than the amount required to be deducted, or failing to pay deducted tax to the Government. (vii) Taking or utilizing input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of provisions of CGST Act, 2017 Rules thereunder. (viii) Fraudulently obtaining refund of tax. (ix) Taking or distributing input tax credit in contravention of provisions of CGST Act, 2017 Rules thereunder. (x) Falsifying or substituting financial records or producing fake accounts or documents or furnishing any false information or return with an intention to evade payment of tax. (xii) Furnishing any false information with regard to registration particulars either at the time of applying for registration, or subsequently. (xiii) Obstructs or prevents any officer in discharge of his duties under the CGST Act, 2017. (xiv) Transports any taxable goods without the cover of documents as may be specified in this behalf. (xv) Suppresses his turnover leading to evasion of tax under CGST Act, 2017. (xvi) Fails to keep, maintain or retain books of account and other documents in accordance with the provisions of CGST Act, 2017 or the Rules made thereunder. (xvii) Fails to furnish information or documents called for by an officer in accordance with the provisions of CGST Act, 2017 or the Rules made thereunder or furnishes false information or documents during any proceedings under the CGST Act, 2017. (xviii) Supplies, transports or stores any goods which he has reasons to believe are liable to confiscation under the CGST Act, 2017. (xix) Issues any invoice or documents by using the registration number of another registered person. (xx) Tampers with, or destroys any material evidence or document. (xxi) Disposes off or tampers with any goods that have been detained, seized, or attached under the CGST Act, 2017. 6.5 In cases pertaining to non-issuance of invoice or issuance of invoice without supply of goods and/or services, availment of ITC without receipt of goods and/or services and distribution of ITC by ISD, Section 122(1A) of CGST Act, 2017 prescribes penalty of amount equivalent to the tax evaded or ITC availed or passed on. As per Section 122(1A) of the CGST Act, 2017 any person who retains the benefit of a transaction covered under the below mentioned clauses of Section 122(1) of CGST Act, 2017 and at whose instance such transaction was conducted, shall be liable to a penalty of an amount equivalent to the tax evaded or an amount equivalent to the Input tax credit availed of or passed on. (i) Supplying any goods or services or both without issue of any invoice or an incorrect or false invoice. (ii) Issuing any invoice or bill without supply of goods or services or both in violation of GST. (vii) Taking or utilizing input tax credit without actual receipt of goods or services or both either fully or partially, in contravention of provisions of CGST Act, 2017 Rules thereunder. (ix) Taking or distributing input tax credit in contravention of provisions of the CGST Act, 2017 Rules thereunder. 6.6 Section 122(1B) of the CGST Act, 2017 prescribes penalty of ten thousand rupees, or an amount equivalent to the amount of tax involved, whichever is higher, on the e-commerce operator (Substituted (w.e.f. 01.10.2023) by Section 144 of The Finance Act (No. 2) Act, 2024 No. 15 of 2024 dated 16.08.2024.) [who is liable to collect tax at source under Section 52] if he allows supply of goods or services through their platform, by an unregistered person other than a person exempted from registration, allows an inter-State supply of goods or services by a person who is not eligible to make such inter-State supply or fails to furnish the correct details in the statement to be furnished of any outward supply of goods effected by a person exempted from obtaining registration. 6.7. Penalty for short payment or non-payment of tax or wrong availment of ITC or erroneous refund - If the taxpayer supplies goods and services, on which the tax is not paid or partially paid or erroneously refunded or ITC wrongly availed or utilised, penalty is imposable under Section 122(2) of the CGST Act, 2017. The quantum of penalty for the above offences are divided into two parts, i.e. offence committed for any reason other than fraud or any wilful misstatement or suppression of facts or offence committed for reasons of fraud or any wilful misstatement or suppression of facts. The two sets of penalties provided under Section 122(2) of the CGST Act, 2017 are as under: For any reason other than reasons of fraud or any willful misstatement or suppression of facts Rs.10,000/- OR 10% of the tax due from such person, whichever is higher For reasons of fraud or any willful misstatement or suppression of facts Rs.10,000/- OR The tax due from such person, whichever is higher 6.8 It is pertinent to mention here that penalty under Section 73(9) and Section 74(9) of the CGST Act, as applicable, is liable to be imposed in cases where determination of tax not paid or short paid has been ordered. Therefore, if penalty has been imposed on a person under Section 73 or Section 74 of the CGST Act, 2017 then no penalty for the same act shall be imposed on that person under any other provision of CGST Act, 2017. 6.9 Penalty on person other than taxable person - Section 122(3) of CGST Act, 2017, provides for levy of penalty extending to Rs. 25,000/-, on any person, other than the taxable person for five specific nature of offences as detailed hereunder: No. Nature of Offence a. Aiding or abetting any of the 21 offences specified in Section 122(1) of the CGST Act, 2017. b. Acquires possession of, or in any way concerning in transporting, removing, depositing, keeping, concealing, supplying, or purchasing or in any other manner dealing with any goods, which are liable to confiscation under of the CGST Act, 2017. 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 reasons to believe are in contravention of any provisions of this Act or the rules made thereunder. d. Fails to appear before the officer of Central tax, when issued with a summon for appearance to give evidence or produce a document in an inquiry; e. Fails to issue invoice in accordance with the provisions of this Act or the rules made thereunder or fails to account for an invoice in his books of account. 6.10 Penalty for failure to furnish information return: (I) It is mandatory for all taxable persons to provide information return as per Section 150 of the CGST Act, 2017. If the person fails to furnish the return within the specified duration, then such person needs to pay penalty at the rate of Rs. 100/- per day for the period during which the failure to provide such information return continues, subject to maximum of Rs. 5000/-, as per Section 123 of the CGST Act, 2017. (II) As per Section 150(1) of the CGST Act, 2017, the following persons responsible for maintaining record of registration or statement of accounts or any periodic return or document containing details of payment of tax and other details of transaction of goods and/or services or transactions related to a bank account or consumption of electricity or transaction of purchase, sale or exchange of goods or property or right or interest in a property under any law for the time being in force, shall furnish an information return in respect of such periods, within the stipulated time and in prescribed form and manner (a) a taxable person; or (b) a local authority or other public body or association; or (c) any authority of the State Government responsible for the collection of value added tax or sales tax or State excise duty or an authority of the Central Government responsible for the collection of excise duty or customs duty; or (d) an income tax authority appointed under the provisions of the Income-tax Act, 1961 (43 of 1961); or (e) a banking company within the meaning of clause (a) of section 45A of the Reserve Bank of India Act, 1934 (2 of 1934); or (f) a State Electricity Board or an electricity distribution or transmission licensee under the Electricity Act, 2003 (36 of 2003), or any other entity entrusted with such functions by the Central Government or the State Government; or (g) the Registrar or Sub-Registrar appointed under section 6 of the Registration Act, 1908 (16 of 1908); or (h) a Registrar within the meaning of the Companies Act, 2013 (18 of 2013); or (i) the registering authority empowered to register motor vehicles under the Motor Vehicles Act, 1988 (59 of 1988); or (j) the Collector referred to in clause (c) of section 3 of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 (30 of 2013); or (k) the recognised stock exchange referred to in clause (f) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956); or (l) a depository referred to in clause (e) of sub-section (1) of section 2 of the Depositories Act, 1996 (22 of 1996); or (m) an officer of the Reserve Bank of India as constituted under section 3 of the Reserve Bank of India Act, 1934 (2 of 1934); or (n) the Goods and Services Tax Network, a company registered under the Companies Act, 2013 (18 of 2013); or (o) a person to whom a Unique Identity Number has been granted under sub-section (9) of section 25; or (p) any other person as may be specified, on the recommendations of the Council, by the Government. (III) The Proper officer in respect of the above said Section 150(1) of the CGST Act, 2017 is the Assistant/Deputy Commissioner of Central Tax. 6.11 Penalty for failure to furnish statistics - Commissioner is empowered under Section 151 of CGST Act, 2017 to collect the statistics relating to any matters dealt with under the Act. He may direct the person to furnish the information or return to collect the statistics that he feels necessary. If such person fails to provide the information called for without reasonable cause or provides any false information or returns wilfully, then as per Section 124 of the CGST Act, 2017 he shall be liable to pay penalty up to Rs. 10,000/-. If the offence continues, then the penalty may further extend to Rs. 100/- each day after the first day during which the offence continues, subject to maximum of Rs. 25,000/-. 6.12 General penalty If in respect of any violation, contravention, omission or commission under GST a penalty is not specified under any other provision of the CGST Act, 2017 then a General Penalty of an amount up to Rs. 25,000/- can be imposed on the person. 6.13 Violations in respect of which no Penalty is applicable - In case of certain instances no GST penalties are applicable despite some provision being violated/contravened, but these GST offences can incur interest at a specified rate for delayed payment on the amount of tax under consideration. The following are some instances where no penalty under GST is applicable: No penalty is applicable for charging incorrect GST, such as charging CGST/SGST instead of IGST. The registered business/entity has to pay the correct GST and get a refund for the wrong GST paid. No penalty under GST Act for incorrect filing of GST returns but interest at the rate of 18% p.a. is chargeable on the tax amount shortfall. No penalty is applicable for delayed invoice payments. But any input tax credit claimed in lieu of such invoices is liable to be reversed if invoice payment is delayed beyond 6 months. Further, no penalty is imposed for minor violations, as under - Amount involved in the offense is less than Rs. 5000. The offense is easily rectifiable, like an omission or an erroneous record in a document. 6.14 The Section wise summarised penalty chart is as under: S. No. Section Type of Offence Penalty 1. 122(1) Specified 21 offences Rs. 10,000/- (or) equivalent to Tax/ITC involved, whichever is higher 2. 122(2) Other than fraud, suppression, mis-statement, etc. Rs. 10,000/- (or) 10 % equivalent to Tax/ITC involved, whichever is higher Fraud, suppression, misstatement, etc. Rs. 10,000/- (or) equivalent to Tax/ITC involved, whichever is higher 3. 122(3) Offences where person is not directly involved in any evasion but may be the party to evasion or if he does not attend summons or produce documents Upto Rs. 25,000/- 4. 123 Person fails to furnish an information returns u/s 150. Rs. 100/- per day (failure period), subject to Max. of Rs. 5,000/- 5. 124 Any person required to furnish information u/s 151 Normal Case- Upto 10,000/- Continuing offence- Rs. 100/- per day (failure period), subject to Max. Rs. 25,000/- 6. 125 General penalty Upto Rs. 25,000/- 7. 123 Delayed filing of GST Returns Rs. 200/- per day (Rs. 100/- per day under CGST + Rs. 100/- per day under SGST), up to a maximum of Rs. 5,000/-. Late fee not applicable to IGST unpaid by delayed filing. 8. 122(3) Issuing incorrect invoice Rs. 25,000/-. 9. 126 For minor rectifiable offences and amount of tax/ITC is less than Rs. 5,000/-, which is made without fraudulent intent. Nil 10. 127 Where the Proper Officer is of the view that a person is liable to a penalty and the same is not covered under proceedings related to Assessment of non-filers (Sec, 62), Assessment of unregistered persons (Sec. 63), Summary Assessment (Sec. 64), Demand of tax/ITC on account of reasons other than fraud, suppression, etc. (Section73), Demand of tax/ITC on account of reasons of fraud, suppression, etc. (Section 74), Detention, Seizure, and release of goods and conveyance (Sec. 129), Confiscation of goods and conveyance (Sec. 130). Power to levy penalty is with the Proper Officer. 11. 128 Waiver of penalty referred in Section 122, 123 and 125 and late fee for delay in filing returns. Power to waive penalty and late fee with Government on recommendation of GST Council, for the notified class of taxpayers. 12. 129 Release of goods and conveyance under detention or seizure: (A) Where owner comes forward for payment of tax and penalty. (B)Where the owner does not come forward for payment of tax and penalty (a) In case of taxable goods Penalty equivalent to 200% of the tax payable (b) In case of exempted goods Penalty 2% of the value of goods or Rs. 25,000/-, whichever is less (a) In case of taxable goods Penalty equivalent to 50% of value of goods or 200% of the tax payable whichever is higher (b) In case of exempted goods Penalty equivalent to 5% of the value of goods or Rs. 25,000/-, whichever is less.