Penalty under GST
Penalty Under GST: A Complete Guide to Offences and Fines
In this post, we will discuss the various penalties under GST, including common offences, applicable fines, and tips to avoid them. Let’s look at each section in detail:
- What does penalty mean?
- Common Offences Under GST And Their Penalties (Table format)
- Offences without GST Penalties (but interest may apply) (Table format)
- Penalty for Late Filing of GST Returns
- Penalty in cases of fraud
- Penalty for Helping a Person Commit Fraud
- Penalty for Aiding and Abetting GST Fraud
- General Penalty
- Minor and Major Breach Under GST
- How to Avoid GST Penalties?
- FAQs
What does penalty mean?
The meaning of “penalty” is not clearly defined in GST but is based on judicial opinions and legal concepts. In general, a penalty is a legal punishment for committing an offence or failing to meet a legal requirement. It can be physical (including jail) or financial (monetary), and it may be subject to civil or criminal liability. Under GST, both imprisonment and monetary punishments are allowed.
Common Offences Under GST And Their Penalties (Table format)
| Offence | Applicable Penalty |
| Late filing of GSTR | A late fee of Rs. 100 per day under CGST and Rs. 100 per day under SGST, for a total of Rs. 200 per day. The maximum penalty is Rs. 5, 000. There is no late fee for IGST. |
| Failure to file GSTR | A penalty of 10% of the unpaid tax, or Rs. 10,000, whichever is greater. |
| Fraudulent activities | A penalty equal to 100% of the tax due or Rs. 10,000, whichever is higher. In cases of substantial fraud, imprisonment may also be imposed. |
| Aiding or assisting in fraud | A penalty of up to Rs. 25,000. |
| Ineligible choice of the composition scheme. | Subject to demand and recovery provisions under sections 73 and 74:(i) Fraud cases: A penalty of 100% of the tax payable or Rs. 10,000, whichever is greater. (ii) Non-fraud cases: A penalty of 10% of the tax payable, or Rs. 10,000, whichever is greater. |
| Wrongful GST rate application – charging excess GST | If the excess GST collected is not paid to the government, a penalty of 100% of the tax payable or Rs. 10,000, whichever is higher, is going to be imposed. |
| Failure to issue an invoice | A penalty of 100% of the tax due or Rs. 10,000, whichever is greater. |
| Non-registration for GST when required | A penalty of 100% of the tax due or Rs. 10,000, whichever is higher. |
| Errors in invoicing | A fixed penalty of Rs. 25,000. |
Offences without GST Penalties (but interest may apply) (Table format)
| Type of Offence | Action |
| Incorrect GST type charged (IGST instead of CGST/SGST) | There is no penalty; but the correct GST must be paid, and the wrongly charged GST can be refunded. |
| Incorrect GST return filing | There is no penalty; however, any deficiency will be charged interest at 18%. |
| Delayed invoice payment | If you do not pay your ITC within six months, it will be reversed. There is no specified penalty. |
| Applying a lower GST rate incorrectly | Interest at 18% will be charged on the shortfall. |
Penalty for Late Filing of GST Returns
Filing your GST returns on time is important. Late filing penalties vary from ₹100 per day to a maximum of ₹50,000. These fees can add up fast and can have a significant influence on your finances.
Also, if you don’t pay your taxes on time, you’ll be charged 18% interest every year, and the longer you wait, the more you’ll have to pay.
The penalty for annual returns is much higher: 0.25 percent of your entire turnover in your state or region. This points out the importance of timely filing to avoid unnecessary financial problems.
Penalty in cases of fraud
An offender must pay a penalty equal to the tax evaded or short deducted, up to 100%, with a minimum penalty of Rs. 10,000. Fraud among the 21 mentioned offences continues to carry a 100% penalty, subject to the same minimum level.
Penalty for Helping a Person Commit Fraud
Anyone could face a penalty of up to ₹25,000 for the following actions:
- Helped someone in committing GST fraud.
- Knowingly purchasing or receiving goods/services in violation of GST regulations.
- Ignoring a court order and refusing to appear before the tax office.
- Not issuing GST-compliant invoices.
- Failure to record or validate invoices in the books of account.
Penalty for Aiding and Abetting GST Fraud
Whether registered or not, individuals or companies who participate in GST fraud face a ₹25,000 fixed penalty. All persons concerned are equally affected by this.
Actions That Constitute Aiding GST Fraud:
- Assisting a GST-registered individual or business with fraudulent activities.
- Purchasing goods or services while intentionally violating GST restrictions.
- Failure to substantiate invoices documented in the business accounts.
- Issuing invoices that do not adhere to GST laws.
- Disregarding court orders to appear before tax authorities for GST hearings.
General Penalty
Any violation or offence not specifically addressed under any provision of the Act falls under Section 125. As a result, the violator could be fined up to INR 25,000.
Minor and Major Breach Under GST
- Errors that are easily fixed and unintentional or small violations where the tax amount is less than ₹5,000, will not be penalized.
- Such minor offences will not result in significant sanctions.
- The tax authorities may decide to issue a warning in these situations instead.
This method will benefit businesses, particularly SMEs, because they may make accidental errors, especially in the early months of GST implementation.
Imposing penalties for legitimate mistakes would pressure SMEs, which lack larger enterprises’ substantial resources to adapt to GST.
How to Avoid GST Penalties?
To avoid GST fines, you must carefully follow tax regulations. Here are the key actions businesses should take:
- File GST returns on time: Ensure that your GST returns are submitted on time to prevent late costs. GST software may help with reminders and simplify the procedure.
- Ensure accurate tax payments: Check tax calculations before filing to avoid errors that could result in penalties.
- Issue proper invoices: Use the standard GST invoice format to ensure compliance and accuracy.
- Claim ITC only on eligible purchases: Input Tax Credit (ITC) should only be claimed for legal purchases with proper invoices and paperwork.
- Register under GST if applicable: Businesses that fulfil the threshold conditions must register to avoid penalties for non-compliance.
We have reached the end of this post. Please ask any questions or leave comments in the space below. We’re happy to help!
FAQs
Q, What are the advantages of minor breaches?
Ans: When SMEs and small-scale industries first begin operations, they may make minor blunders. Minor violations do not result in monetary penalties, which would be helpful for such emerging businesses.
Q, What is the penalty for a violation that is not specifically stated in the GST Act?
Ans: For every violation that is not stated specifically, the punishment would extend to INR 25,000.
Q, Is there a penalty for helping and abetting a GST violator?
Ans: Yes, anybody who assists and abets GST-related fraud will face penalties.
Q, What happens if a GST return is not filed for one year?
Ans: If a GST return is not filed for the entire financial year, it can be submitted by November 30 of the following financial year or the date of filing the annual return, whichever comes first. However, under GST rules, returns cannot be filed more than three years beyond the initial due date.
