CGST Rules: Chapter 19 – Offences and Penalties

Goods and Services Tax (GST) is an indirect tax levied on the supply of goods and services in India. The GST has been implemented to replace multiple indirect taxes, such as excise duty, VAT, and service tax, with a single tax system. The GST has brought several changes in the tax laws and procedures, and it is essential for businesses to comply with the GST laws to avoid penalties and fines. This article discusses the CGST Rules regarding offences and penalties, and the procedure for compounding of offences.

Offences under CGST Rules

The Central Goods and Services Tax (CGST) Rules provide a list of offences that can be committed by a person or a business. The offences are divided into two categories:

Offences that attract penalty under Section 122 of the CGST Act, 2017
Offences that attract prosecution under Section 132 of the CGST Act, 2017

Penalty under Section 122 of the CGST Act, 2017 is levied for minor offences that can be rectified without any major harm to the revenue. Prosecution under Section 132 of the CGST Act, 2017 is initiated for serious offences that involve fraud, evasion, or wilful misstatement.

Some of the common offences under CGST Rules that attract penalty are:

Failure to obtain registration within the specified time
Failure to furnish information or documents on time
Failure to issue invoice or incorrect invoice
Failure to pay tax or short payment of tax
Wrongful claim of input tax credit
Obstruction of an officer in the discharge of his duties

Offences under CGST Rules that attract prosecution are:

Supplying goods or services without an invoice or with a false invoice
Fraudulently availing input tax credit
Issuing an invoice without supplying goods or services
Obstructing an officer in the discharge of his duties
Failing to supply goods or services after receiving payment
Supplying goods or services in contravention of the provisions of the Act

The penalties or prosecution for the above offences can be avoided by compounding the offence.

Compounding of Offences under CGST Rules

The CGST Rules provide for the compounding of certain offences under Section 138 of the CGST Act, 2017. Compounding means the settlement of an offence by paying a specified amount of money to the government. The compounding of an offence is allowed if the amount involved in the offence is less than Rs. 2 crores.

The offence can be compounded only after the payment of tax, interest, and penalty. The person or business that has committed the offence has to apply for compounding in the prescribed form within a specified time. The application for compounding has to be made before the initiation of any proceedings by the tax authorities.

The compounding authority will examine the application and may ask for additional information or documents. The compounding authority will then pass an order determining the amount to be paid for compounding the offence. The amount so determined is to be paid within 30 days from the date of the order.

Compounding of an offence is considered as a closure of the proceedings against the person or business for the offence. The person or business that has compounded the offence cannot be prosecuted or subjected to any penalty for the same offence.

Conclusion

The CGST Rules regarding offences and penalties are essential for businesses to comply with the GST laws. The penalties and prosecution for the offences can be avoided by compounding the offence. The procedure for compounding of offences is straightforward, and the compounding authority will pass an order determining the amount to be paid for compounding the offence. The compounding of an offence is considered as a closure of the proceedings against the person or business for the offence.

It is advisable for businesses to take the necessary precautions to comply with the GST laws to avoid any penalties or fines.