GST Compliance, Offences and their Penalties

Introduction:

“One nation, one tax” is the motto of the introduction of GST in India. It came into effect from July 1st, 2017 and subsumed 17 other indirect taxes levied by the Central and State/UT Governments.

The main aim of GST is to bring the uniformity in indirect taxation process across India and to allow centralised registration. Further, its introduction has removed the cascading effect of VAT. It also provides a lesser number of compliances for small businesses and makes procedures simple and easy.

Here, we are to discuss some major compliances to be complied with by suppliers of goods and/or services and penalties for non-compliance.

Compliances under CGST Act,2017

• Registration

Every person who is dealing in taxable goods or services or both shall be liable to get registered under CGST Act where his turnover exceeds-

• • Rs.20 lacs in case of the exclusive supply of taxable services

• • Rs.40 lacs in all other cases

 However, the limits shall be Rs. 10 lacs in the states of Manipur, Mizoram, Nagaland and Tripura.

• Raising Invoices

Every GST registered person shall raise a GST invoice to its customers in respect of the sale of goods or provision of services and such invoice must contain the following details:

• • Name, address & GSTIN of supplier        

• • Invoice number and date of its issue

• • Name, address & GSTIN of the recipient (if registered), in case of unregistered recipients invoice, shall have the name and the  address of the recipient if the taxable value is Rs.50,000 or more

• • Shipping and billing address

• • Place of supply

• • HSN code/ SAC code

• • Item details i.e. description, quantity (number), unit (meter, kg etc.), total value

• • Taxable value and discounts, if any

• • Rate and amount of taxes i.e. CGST/ SGST/ IGST

• • Whether GST is payable on a reverse charge basis

• • Signature or digital signature of the supplier or his authorized representative

• Filing Returns

Returns to be filed under GST:

Returns	Description	Frequency	Due Date
GSTR-1	Details of outward supplies	Monthly	11th of next month
		Quarterly	13th of next quarter
GSTR-3B	Return of outward supplies and input tax credit claimed	Monthly	20th of next month
		Quarterly	22nd/24th of next quarter
GSTR-4	Return for a taxpayer registered under the composition scheme	Annually	30th April
GSTR-5	Return to be filed by a non-resident taxable person.	Monthly	20th of next month
GSTR-5A	Filed by non-resident OIDAR service providers	Monthly	20th of next month
GSTR-6	Return for an input service distributor to distribute the eligible input tax credit to its branches.	Monthly	13th of next month
GSTR-7	Return to be filed by registered persons deducting tax at source (TDS).	Monthly	10th of next month
GSTR-9	Annual return by a regular taxpayer	Annually	31st December
GSTR-9C	Self-certified reconciliation statement.	Annually	31st December
GSTR-10	Final return to be filed by a taxpayer whose GST registration is cancelled	Once	Within three months of the date of cancellation or date of cancellation order, whichever is later
GSTR-11	Details of inward supplies to be furnished by a person having UIN and claiming a refund	Monthly	28th of next month

• Payment of Taxes

Every GST-registered person has to pay the net output tax liability payable after claiming the input tax credit on or before the due dates.

• Availing Eligible ITC

The registered person should claim eligible ITC in accordance with Sec 16 of the Act.

 Any ineligible or blocked ITC taken should be reversed.

• TDS/TCS Liability

Central and State Governments, Local authorities, governmental agencies or any person as may  be prescribed shall be liable to deduct tax @1% if the total value of the supply exceeds Rs.2,50,000 and such tax shall be deposited to the government within 10 days from the end of the month.

However, no TDS shall be deducted when the location of the supplier and place of supply is different from the state of registration of the recipient.

Electronic commerce Operators shall be liable to collect tax @1% of the net value of taxable supply and such tax shall be deposited to the government within 10 days from the end of the month

Offences and their Penalty under GST Act

CGST Act describes various offences and penalties thereon which can be categorized broadly as under:-

• Offences related to Registration

OFFENCE	PENALTY	INTEREST	LATE FEE
Failing to obtain registration	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Submits false information while registering	Upto Rs. 10,000	–	–

• Offences Related to Invoices & Books /Records:

OFFENCE	PENALTY	INTEREST	LATE FEE
Taxable person supplying any goods/services without any invoice	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Issues any invoice or bill without supply of goods/services in violation of the provisions of GST	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Issues invoices using the identification number of another bonafide taxable person	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Penalty for incorrect invoicing	Upto Rs.25,000	–	–
Submits fake financial records/documents or files fake returns to evade tax	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Deliberately suppresses his sales to evade tax	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Does not maintain all the books that he required to maintain by law	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Penalty for wrongfully charging GST rate	100% of the tax due or Rs. 10,000 – whichever is higher	18% p.a. on the shortfall	–
Fails to account/vouch for any invoice appearing in the books	Upto Rs.25,000	–	–

• Offences related to returns:

OFFENCE	PENALTY	INTEREST	LATE FEE
Penalty for delay in filing GSTR	–	–	Rs.50 per day(in case of tax liability)/ Rs.20 per day(in case of nil liability) or Rs. 5000 Whichever is lower
Penalty for not filing GSTR	10% of the tax due Or Rs. 10,000 Whichever is higher	–	–
Penalty for incorrect filing of GST return	–	18% p.a. on short payment	–

• Offences related to Payment of Taxes

 10% of tax unpaid or Rs. 10,000, whichever is higher.

• Offences related to ITC

OFFENCE	PENALTY	INTEREST	LATE FEE
Availing of Input Tax Credit based on the wrong Invoice	Rs. 10,000 or 100% of ITC wrongly availed,  whichever is higher	24% Interest from the date of availing to the date of reversal	–
Takes and/or utilizes ITC without actual receipt of goods and/or services	Rs. 10,000 or 100% of ITC wrongly availed,  whichever is higher	–	–
Being an Input Service Distributor, he takes or distributes input tax credits in violation of the rules	Rs. 10,000 or 100% of ITC wrongly availed,  whichever is higher	–	–

• Offences related to TDS/TCS:

OFFENCE	PENALTY	INTEREST	LATE FEE
Not deduct TDS or deducts less amount where applicable.	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Not collect TCS or collects less amount where applicable	100% of the tax due or Rs. 10,000 – whichever is higher	–	–
Late filing of TDS return	–	18% p.a.	Rs.100 per day per Act. So total Rs.200 per day or Rs. 5000 Whichever is lower
TDS deducted but not paid to govt	–	18% p.a. u/s 50 of the CGST Act	–

NOTES:

• A general penalty extending up to Rs. 25,000 can be applied on any offence made under CGST Act if no specified penalty is provided under the Act.

• Human errors are natural. So, to protect taxpayers from genuine mistakes, govt has classified certain minor breaches-

           Minor breaches (where the tax amount is less than Rs.5000) or errors are easily rectifiable                   and clearly made without any motive of fraud. There will not be substantial penalties for minor             breaches.

           The tax authority may issue a warning in such cases.

•  General Rules Regarding Penalty-

• • Every taxable person, on whom the penalty is imposed, will be served with a show-cause notice first and will have a reasonable opportunity of being heard.

• • The tax authority will give an explanation regarding the reason for the penalty and the nature of the offence

• • When any person voluntarily discloses a breach of law, the tax authority may use this fact to reduce the penalty.

• The prosecution can be made in high-value fraud cases-

Tax Amount	Term of Imprisonment
100-200 lacs	Upto 1 year
200-500 lacs	Upto 3 years
More than 500 lacs	Upto 5 years

The penalty shall be –

                     100% of the tax due

                                Or

                         Rs. 10,000

                    Whichever is higher

• Persons other than registered taxpayers can be a defaulter and a penalty of upto Rs. 25,000 shall be levied in the following cases:

• • Helps any person to commit fraud under GST.

• • Acquires/receives any goods/services with full knowledge that it is in violation of GST rules.

• • Fails to appear before the tax authority on receiving a summons

• • Fails to issue an invoice according to GST rules.

• • Fails to account/vouch for any invoice appearing in the books.

• For any offence committed by a company, both the officer in charge (such as the director, manager, and secretary) as well as the company will be held liable.

     For LLPs, HUFs, trusts, the partner/Karta/managing trustee will be held liable.