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
- Offences without GST Penalties (but interest may apply)
- 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
| 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)
| 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 very important. If you ever miss the due date, you will have to pay a late fee. The penalty is ₹100 for each day of delay, and it can go up to a maximum of ₹50,000. So, the longer you delay, the more you will end up paying.
For annual GST returns, the penalty is even higher. It’s 0.25% of your total sales within your state or area. So, it’s always better to file your GST returns on time and avoid paying these extra charges.
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
A person can be fined up to ₹25,000 for doing any of these:
- Helping someone commit GST fraud.
- Knowingly buying or receiving goods or services against GST rules.
- Not following a court order or refusing to appear before the tax department.
- Not giving proper GST invoices.
- Not recording or verifying invoices in the books of accounts.
Penalty for Aiding and Abetting GST Fraud
Whether registered under GST or not, anyone found involved in GST fraud can face a fixed penalty of ₹25,000. This applies equally to all individuals or companies linked to the fraud.
Actions That Constitute Aiding GST Fraud:
- Helping any GST-registered person or business in doing fraudulent activities
- Buying goods or services while knowingly breaking GST rules
- Not being able to prove the invoices recorded in business accounts
- Issuing invoices that do not follow GST rules
- Ignoring court orders to appear before tax officers for GST hearings
General Penalty
If any offence under GST does not have a specific penalty mentioned, a fine of up to Rs. 25,000 can be charged. If a person is found guilty of fraudulent activities, then along with the above fine, the following punishments will apply:
- If the tax amount involved is up to Rs. 50 lakh, the person may face imprisonment for 1 year and a fine equal to the tax evaded.
- If the tax amount is between Rs. 50 lakh and Rs. 1 crore, the jail term can extend to 3 years along with the penalty.
- If the tax amount is more than Rs. 1 crore, the jail term can go up to 5 years, along with the penalty.
Minor and Major Breach Under GST
Under GST, breaches are divided into two types:
- Minor Breach:
A minor breach is when the tax amount involved is less than Rs. 5,000. It also covers small mistakes like typing errors or missing details in documents that can be easily corrected. For such cases, the officer cannot impose heavy penalties. In most situations, it is settled with a simple warning. - Major Breach:
When the tax amount involved is more than Rs. 5,000, it is treated as a major breach. In these cases, strict penalties can be applied under the GST law, and in serious situations, it may even lead to imprisonment.
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 benefits of minor breaches?
Ans: Small and medium businesses may make small mistakes when they start their operations. Minor breaches are helpful for them as no monetary penalty is charged, giving new businesses some relief in the beginning.
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.
Q. What is the penalty for a fake invoice?
Ans: If anyone is caught issuing a fake invoice, they may have to pay a penalty equal to the tax amount evaded or ₹10,000, whichever is more.
