Home
GST
GST Payment and Registration
GST Penalties: Offenses, Late Fees & Interest

GST Penalties: Offenses, Late Fees & Interest

Updated on: 12 Dec, 2024 12:00 PM

The Goods and Services Tax, GST, was launched in the year 2017 which eliminated almost all the forms of indirect taxation. Instead, a uniform tax, called GST, became applicable on all goods and services. Every type of business which is producing goods or services is required to follow the rules and regulations specified in the GST Act. If the business does not abide by the rules prescribed under the GST Act, it would be held responsible for a breach of law for which it would attract penalties.

There can be various conditions under which there might be a breach of the GST law. Thus, the GST Act has identified 21 possible scenarios of offences that can be done by businesses. Each of these offenses has its own penalties. This article sheds light on the 21 offenses identified under the GST law and the penalties in the form of late fees and interest.

Offences Under GST
Minor and Major Breach Under GST
Penalties for Offenses Under GST
GST Penalties for High-Value Frauds
Penalty for Aiding and Abetting GST Fraud
Offenses Without GST Penalties
Appeals Process Under the GST Act
Frequently Asked Questions

Offences Under GST

There are a total of 21 offences identified by the GST law. Given below is a list of these offenses -

Offences with regards to invoicing and documentation

Offences	Examples
Issuing a false or a wrong invoice or not issuing any invoice at all for any type of goods or services being supplied	M/S ABC Ltd. sold goods worth INR 50,000 to M/S XYZ Limited. However, they prepared an invoice of INR 40,000 only M/S ABC Ltd. did not sell any goods to M/S XYZ Ltd. but issued an invoice of INR 50,000 M/S ABC Ltd. sold goods worth INR 50,000 to M/S XYZ Limited but did not issue an invoice for the sale
Issuing the GST invoice without actually supplying the corresponding goods and services	M/S ABC Ltd. created a GST invoice for INR 10,000 for the month of July 2019 but they did not actually supply any goods or services in that month
Issuing an invoice or a document which contains the GSTIN (Goods and Services Tax Identification Number) of another individual or entity registered under GST	M/S ABC Ltd. supply goods worth INR 50,000 and the GSTIN quoted by them on their bills is the GSTIN of M/S XYZ Ltd.
If the taxpayer avails of Input Tax Credit using such fake invoice referred in the above point.	The GST invoice of Rs.10,000 issued is further used for claiming ITC benefit, when there has been no actual supply of goods.

Offences with an intention to defraud

Offences	Examples
Submitting incorrect information when registering for GST or at any other time	M/S ABC Ltd. provided the wrong address of their registered office when registering for GST
Availing GST refund by furnishing fraudulent information	M/S ABC Ltd. claim for GST refund on transactions which have not been done by them
Falsifying documents or records to furnish incorrect information to evade tax	M/S ABC Ltd. make false Profit and Loss Accounts to underreport their turnover so that they can save on GST payments
Not registering for GST	M/S ABC Ltd. should have a GST registration for their business but they do not register
Tampering with goods or disposing them off when they have been attached, detained or seized under the provisions of the GST Act	M/S ABC Ltd. try and auction off the stock which has been attached under GST Act.
Deliberate supply, transport or storage of goods which would be confiscated under the provisions of GST rules	M/S ABC Ltd. transport those goods which can be confiscated knowing about such possible confiscation

Offences with regards to tax evasion

Offences	Examples
Underreporting or hiding the correct amount of turnover for the year to evade GST	M/S ABC Ltd. had a turnover of INR 25 lakhs in the financial year 2018-19. However, for GST purposes, they showed a turnover of INR 15 lakhs
Non-payment of GST to the Government within 3 months of collecting the same from the buyer of goods and services	M/S ABC Ltd. sold goods on 1st May 2019 and collected GST on the same. However, the collected GST was not deposited within 31st July 2019
Non-payment of GST to the Government within 3 months of collecting the same from the buyer of goods and services when GST has been collected in contravention of the provisions of the GST Act	M/S ABC Ltd. sold goods on 1st April 2019 and collected GST on the same in contravention of the GST Act. However, the collected GST was not deposited within 30th June 2019
Availing Input Tax Credit or utilising it without actually supplying the relevant goods and services	M/S ABC Ltd. availed an Input Tax Credit of INR 10,000 but they did not sell any goods which qualified for availing the corresponding amount of Input Tax Credit
Failing to abide by the provisions of tax liability under Section 52 (2) of the GST Act. This section specifies the tax amount to be deducted or the tax amount payable to the Government for supplying goods and services	M/S ABC Ltd. was supposed to deduct tax @10% under Section 52 (2) of the GST Act on the goods and services that it supplied. However, it did not deduct the required tax.
Failing to abide by the provisions of tax liability under Section 52 (3) of the GST Act. This section specifies the tax amount to be deducted or the tax amount payable to the Government for supplying goods and services	M/S ABC Ltd. was supposed to deduct tax @10% under Section 52 (3) of the GST Act on the goods and services that it supplied. However, it did not deduct the required tax.
Availing Input Tax Credit which is in breach of Section 20 of the GST Act	M/S ABC Ltd. availed Input Tax Credit against the rules contained under Section 20 of the GST Act.

Miscellaneous Offences

Offences	Examples
Obstructing or not allowing an officer from doing his/her duties as specified under the GST Act	M/S ABC Ltd. did not allow an officer of the Government to investigate their financial statements to find out GST related discrepancies
Tampering with or destroying documents which serve as an evidence	M/S ABC Ltd. destroyed the original invoices which prove that the company evaded the applicable GST by under reporting their turnover
Providing incorrect documents or not providing the required documents to the officer authorised to act under the GST Act	M/S ABC Ltd. furnish fabricated invoices to the GST officer so that their GST evasion cannot be detected M/S ABC Ltd. do not provide the GST officer with the required invoices to estimate the extent of tax evasion done by them

Minor and Major Breach Under GST

The GST law categorizes the types of breaches under GST into two types -

Minor Breach - A minor breach under GST is a breach wherein the tax amount involved is less than Rs.5000. A minor breach also includes breaches that can be rectified easily, such as errors or omissions in the documentation. The GST officer cannot impose heavy penalties for minor breaches. Sometimes, it can even be settled by issuing just a warning.
Major Breach - If the tax amount exceeds Rs.5000, such breach is classified as a major breach. In such cases, penalties under the GST Act, including potential jail sentences, may be imposed based on the severity of the offense.

Penalties for Offenses Under GST

The table below summarizes the penalties for offenses applicable under GST -

Type of GST Offence	Applicable GST Penalty Amount
Delayed in filing GST Returns	Rs. 200 per day (Rs. 100 per day under CGST and an additional Rs. 100 per day under SGST) up to a maximum of Rs. 5000. Late fee not applicable to IGST unpaid by delayed filing
Non filing GST Returns	Higher of the following – Rs.10,000 or 10% of the GST due
Committing Fraud	Higher of the following - Rs.10,000 or 100% of the GST due (may include jail term for major breaches)
Aiding and Abetting Fraud	Rs. 25,000, irrespective of whether the offender is GST registered or not
Charging wrong GST rates (higher rate than actual)	Higher of the following – Rs.10,000 or 100% of the GST due (applicable only if excess tax is not deposited to the government)
Not issuing an invoice	Higher of the following – Rs.10,000 or 100% of the GST due
Not Registering Under GST (even though required by law)	Higher of the following – Rs.10,000 or 100% of the GST due
Issuing incorrect invoice	Rs. 25,000

GST Penalties for High-Value Frauds

High-value frauds under the GST Act involve cases where the unpaid tax amount exceeds ₹100 lakhs. These cases attract a monetary penalty of 10% of the unpaid tax (higher than ₹10,000) and may also lead to imprisonment.

Jail Sentences for High-Value Frauds:

Jail term of up to 1 year for unpaid tax between ₹100 lakhs and less than ₹200 lakhs
Jail term of up to 3 years for unpaid tax between ₹200 lakhs and less than ₹500 lakhs
Jail term of up to 5 years for unpaid tax of ₹500 lakhs or more.

Penalty for Aiding and Abetting GST Fraud

Under the GST Act, individuals or entities aiding in GST fraud, whether registered or unregistered, face a fixed penalty of ₹25,000. This penalty applies equally to all involved parties.

Actions Constituting Aiding and Abetting GST Fraud:

Assisting a GST-registered person/entity in committing fraud.
Acquiring goods or services while knowingly violating GST regulations.
Failing to justify or account for invoices listed in business records.
Issuing invoices that do not comply with GST rules.
Ignoring summons to appear before tax authorities for GST hearings.

Offenses Without GST Penalties

Certain GST offenses do not attract monetary penalties but are subject to interest at 18% annually on the tax amount.

Instances Where No Penalty is Applicable:

Incorrect GST Charged: Charging CGST/SGST instead of IGST (or vice versa). The business must pay the correct GST and claim a refund for the wrongly charged tax.
Incorrect GST Filing: Errors in GST return filing incur 18% interest on tax shortfalls but no penalty.
Delayed Invoice Payments: While delayed payments do not attract penalties, any claimed input tax credit (ITC) must be reversed if payments are delayed beyond six months.
Wrong GST Rate Charged: Charging a lower GST rate than applicable leads to interest at 18% annually on the tax shortfall but no penalty.

Appeals Process Under the GST Act

The GST Act provides an appeals process for registered individuals or entities dissatisfied with a penalty-related order or decision by a tax authority. This process applies uniformly, regardless of the type of offense or penalty.

Levels of Appeal:

First Appellate Authority
The first level of appeal allows individuals to challenge an order issued by the adjudicating authority.

Appellate Tribunal
The GST Appellate Tribunal, a quasi-judicial body, handles disputes and appeals against decisions made by the first appellate authority.

High Court
The State High Court serves as the next level of appeal for those contesting verdicts issued by the Appellate Tribunal.

Supreme Court
The Supreme Court, India’s apex judicial body, is the final authority for appealing decisions related to GST penalties or other tax-related matters. Its judgments are binding and final under current GST rules.

Don’t have time? Tax2win has your back! Our eCA service helps you file your GST returns so that you can focus on what matters to you. Register and file your GST returns seamlessly with Tax2Win's expert guidance, ensuring hassle-free compliance every step of the way. Book online eCA now!

Frequently Asked Questions (FAQs)

Q- What would be the penalty for an offence which is not particularly mentioned in the GST Act?

For any offence which is not mentioned individually, the penalty would extend up to INR 25,000

Q- What are the benefits of minor breaches?

SMEs and small scale industries can make minor mistakes when they start business operations. Since minor breaches do not impose monetary penalties, it would be beneficial for such budding businesses.

Q- Is there a penalty for aiding and abetting a GST offender?

Yes, any individual who aids and abets a GST related fraud would also incur penalties.

Q- What are the common penalties under GST?

Under GST law, common penalties include late fees and interest for delayed GST return filings. Tax evasion without fraudulent intent attracts a penalty of 10% of the due tax, with a minimum of Rs. 10,000. In cases involving fraudulent intent, the penalty equals the evaded tax, with a minimum of Rs. 10,000, and may also lead to imprisonment, depending on the tax amount. For offences not specifically covered under penalty provisions, a general penalty of Rs. 25,000 applies.

Q- What is the penalty for late filing of GST returns?

Under GST law, late filing of GST returns attracts a late fee of Rs. 50 per day (Rs. 25 each under CGST and SGST), capped at Rs. 5,000. Additionally, an interest rate of 18% per annum is charged on outstanding tax amounts. For nil returns, the late fee is reduced to Rs. 20 per day (Rs. 10 each under CGST and SGST).

Simplify Your GST Compliance with Expert Guidance!

Have queries? Talk to an expert

Thank You!