Higher Penalties for Minor Defaults under GST Regime
People often tend to ignore the minor procedural mistakes related to GST. These mistakes if not rectified might lead to high amount of penalties under the GST regime.
So, one should be careful and make all the necessary changes to avoid penalty. There are a number of minor procedural lapses related to GST that are easily rectifiable yet generally ignored. These small defaults can lead to major penalties.
Update as per 1st February 2021
As per update on 1st February 2021 during Union Budget 2021, it was stated that Section 129 has been delinked from Section 130. It stated that any proceedings related to seizure, detention, and release of goods during transit will be different from the penalties imposed for the goods confiscated.
Offences under GST
Common offences under GST and the penalties imposed
Type of offence | Amount of penalty |
Penalty for delaying the filling of GSTR | A late fee of Rs.100 per day under CGST and SGST each will be chargeable. Hence, a sum total of Rs.200 per day will be imposed. The maximum fee levied is Rs.5,000. There won’t be any late fee on IGST. |
Non- filing of GSTR imposed | A penalty of 10% of the tax outstanding or Rs.10,000 whichever is higher. |
Committing a fraud | A penalty of 100% of the tax outstanding or Rs.10,000 whichever is higher. Jail term is possible if the fraud value is high. |
Penalty for aiding a person in committing fraud | Penalty imposed up to Rs.25,000 |
Penalty for applying for composition scheme even though the eligibility requirement is not being met | Provisions for demand and recovery under sections 73 and 74 will be applicable.(i) In case of fraud - Penalty of 100% of the outstanding tax amount or Rs.10,000 whichever is higher(ii) In case of non-fraud penalty- 10% of the outstanding tax amount or Rs.10,000 whichever is higher |
Penalty imposed if GST rate charged wrongfully | A penalty of 100% of the outstanding tax amount or Rs.10,000 whichever is higher |
Penalty for failure to issue an invoice | A penalty of 100% of the tax amount outstanding or Rs.10,000 whichever is higher |
Penalty for failure to register under GST | A penalty of 100% of the outstanding tax amount or Rs.10,000 whichever is higher |
Penalty for incorrect invoicing | A penalty of Rs.25,000 |
Situations where there is no penalty (but interest may apply)
Type of offence | Action |
Penalty for charging incorrect GST charged | No penalty. Simply pay the correct GST and get the refund of the incorrect amount paid. |
Penalty for filling GST return incorrectly | No penalty. However, an interest at 18% will be chargeable. |
Penalty for delaying the payment of invoice | No penalty, and the ITC will be reversed if unpaid within 6 months. No penalty as such |
Penalty for charging wrong GST rate— charging a lower rate | An interest at 18% applicable on the shortfall. |
Penalities Under GST
Mentioning GSTIN (GST Identification Number)
Regular GST dealers are required to mention their GSTIN on the name board. "Composite Taxable person" must be mentioned on the name board in case you have opted for composition levy. The reason for this is to ensure that the buyer selects the right supplier by looking at the details present on the name board. Failure to adhere to these rules could result in a penalty of up to Rs.25,000.
Displaying GST Registration Certificate
GST REG - 06 (the GST Registration Certificate) must be displayed at a noticeable place of the business at the place of business. Businesses that are registered under the Goods and Services Tax will have to adhere to these rules as it ensures that anyone can see that the business is registered upon looking at the certificate. Failure to display the certificate at a noticeable place will result in a fine of up to Rs.25,000.
Maintenance of Stock Record
Under Rule 56(2) of the Central Goods and Services Tax Rules, 2017, stock record is among the compulsory records that must be maintained by all businesses registered under GST. All the operations of the business can be identified through the record. Failure to maintain this record properly can result in a fine of up to Rs.25,000.
Issuance of Invoice
Invoices are basically the documents that contain all the information regarding supply. It is also a crucial document for availing Input Tax Credit. All the information mentioned in the rules of GST will have to be mentioned on the invoice as well. Failure to do so will result in a fine of up to Rs.25,000.
Availing ITC based on Incorrect Invoice
ITC, or Input Tax Credit, is considered the backbone of the Goods and Services Tax regime(GST Regime). The right invoice must be furnished to avail ITC. Using an incorrect invoice can result in a fine of Rs.10,000 or 100% of the ITC that was availed incorrectly, whichever is more. In addition, an interest of 24% from the date on which ITC was availed to the date on which it was reversed will be charged.
Payment of Central GST instead of Integrated GST or State GST, or Payment of State GST instead of Central GST or Integrated GST, or Payment of Integrated GST instead of Central GST or State GST
Central GST and State GST must be paid for intra-state supplies while Integrated GST must be paid for inter-state supplies. The respective government will receive the taxes paid under each head. For instance, the state government will receive the taxes paid under State GST based on the place in which it was supplied. Therefore, payment of taxes under the incorrect heads will result in the tax being transferred to the wrong government, which in turn results in incorrect accounting. Therefore, the payment of GST under the right heads is crucial. The penalty for paying tax under the wrong head is that defaulters will have to pay tax under the right head with no interest along with claiming refund of the tax payment made under the incorrect head.
Failure to File GSTR-1 and GSTR-3B on or prior to the due date
Complying with the timings and due dates is essential to ensure the success of processing and matching GST returns. In order to ensure that businesses comply with the due dates, the penalty levied for late filing is Rs.20 (Rs.10 towards State GST and Rs.10 towards Central GST) per day of delay for nil returns, and Rs.50 (Rs.25 towards Central GST and Rs.25 towards State GST) per day of delay in other cases.
Failure to Obtain Registration Within 30 days
Under Section 22 of the Central GST Act, 2017, all persons are required to register under GST in case their aggregate turnover crosses Rs.20 lakh. Each registered entity will have to pay tax as well as file returns. Failure to register under GST will result in a fine of Rs.10,000. In addition, the Input Tax Credit during the delay period will be lost.
Invoice without Supply
In case invoices are given without supplies being made, it could lead to higher ITC being availed. In this case, the defaulter will have to pay a fine of Rs.10,000, or 100% of the tax evaded, whichever is more.
Collection of GST but Failure to Pay the Government Within Three Months from Due Date
So far as indirect taxes are concerned, the consumer pays the tax to the supplier and the supplier in turn pays it to the government. If a supplier collects tax from a consumer and does not forward it to the government, the file applicable to the supplier will be Rs.10,000 or 100% of the tax evaded, whichever is more.
General Penalty
In case there defaults to any of the provisions and no penalty has been specified in the GST rules, a general penalty will become applicable. This penalty could be up to Rs.25,000.
Jail punishments for frauds related to GST
Amount | Rs.1 crore to Rs.2 crore | Rs.2 crore to Rs.5 crore | Above Rs.5 crore |
Jail term | Up to 12 months | Up to 3 years | Up to 5 year |
Fine | Applicable in all the three cases | ||
FAQs on GST Regime
- Are there penalties for minor breaches under GST?
No, there are no penalties for minor breaches under GST.
- Will my penalty be reduced if I voluntarily disclose any breach of law?
Yes, the penalty can be lowered if you voluntarily disclose any breach of law.
- Is it punishable by law to tamper or destroy evidences?
Yes, it is punishable by law to tamper or destroy evidences.
- For offences committed by LLPs under GST, who will be held responsible?
The managing trustee will be held accountable for offences committed under GST by LLPs.
- For offences committed by companies under GST, who will be held responsible?
The company and the officer-in-charge will be held accountable for offences committed under GST by a company.
- How do I check my GST penalty?
Log in to your GST portal using your login ID and password where you can check any penalties levied by providing your CPIN.
- What is the mode of payments for payment of GST penalty?
You can pay your penalty via debit card, credit card, net banking, e-wallets, or UPI.
- Can penalty be waived under GST?
Penalty can be waived off partially or in full under GST.
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