December 26, 2022

GST: Penalties & Appeals

The GST law clearly defines offences and the penalties imposed in each scenario. This is critical information for all business owners, CPAs, and tax professionals because an unintentional error can have serious consequences.

Due to late filing.

Late filing incurs a penalty known as a late fee. According to the Act, the late fee is Rs. 100 per day. As a result, it is 100 under CGST and 100 under SGST. The total cost per day will be Rs. 200*. The maximum amount is Rs. 5,000. In the event of a late filing, there is no late fee on IGST.

In addition to the late fee, interest at the rate of 18 per cent per year must be paid. It must be calculated by the taxpayer based on the amount of tax to be paid. The time period will run from the day after filing to the date of payment.

For failing to file

If you do not file a GST return, you will be unable to file subsequent returns. For example, if the August GSTR-2 return is not filed, the September GSTR-3 and subsequent returns cannot be filed. As a result, late filing of GST returns will have a cascading effect, resulting in heavy fines and penalties.

For the 21 offences committed with no intent to commit fraud or tax evasion.

An offender who fails to pay tax or makes insufficient payments must pay a penalty of 10% of the tax due, subject to a minimum of Rs. 10,000.

Consider this: if tax is not paid or is paid in part, a minimum penalty of Rs 10,000 must be paid. The maximum penalty is 10% of the unpaid tax.

For the 21 offences committed with the intent to commit fraud or tax evasion

An offender must pay a penalty equal to the amount of tax evaded/short deducted, i.e., a 100 per cent penalty, with a minimum of Rs. 10,000. Additional penalties include the following:

Tax amount involved100-200 lakhs200-500 lakhs Above 500 lakhs Jail term Up to 1 year Up to 3 years Up to 5 year Fine In all three cases

GST Inspection Form

The Joint Commissioner of SGST/CGST (or a higher officer) may have reason to believe that a person suppressed any transaction or claimed an excess input tax credit in order to evade tax. The Joint Commissioner may then (in writing) authorise any other CGST/SGST officer to inspect the suspected evader's place of business.

GST Search and Seizure

A search can be ordered by the Joint Commissioner of SGST/CGST. If he has reason to believe, he will order a search based on the results of the inspection (or other reason).

There are some items that may be confiscated.

Any documents, books, or other items that have been hidden somewhere. These items can be useful during the proceedings.

Such incriminating items and documents can be confiscated.

Transported Goods

The person in charge of a vehicle transporting goods worth more than Rs. 50,000 must carry the following documents:

1. Invoice, supply bill, or delivery challan

2. e-way bill copy (hard copy or via RFID)

3. The appropriate officer has the authority to intercept goods in transit and inspect the goods as well as the documents.

4. If the goods violate the GST Act, the goods, related documents, and the vehicle transporting them will be seized. Only after payment of the tax and penalty will the goods be released.

5. Before confiscating the goods, the tax officer must give the taxpayer the option of paying a fine rather than confiscation.

GST penalties

Compounding of Offences Under GST

Compounding offences is a quick way to avoid litigation. In the event of a criminal prosecution, the accused must appear before the Magistrate through an advocate at each hearing. This becomes costly and time-consuming.

In compounding, the accused is not required to appear in person and can be discharged upon payment of a compounding fee that cannot exceed the maximum fine under GST.

Compounding saves both time and money. Compounding under GST, on the other hand, is not available in cases where the value involved exceeds one crore.

Prosecution Under GST

The prosecution is pursuing legal action against someone on a criminal charge.

A person who commits an offence with the deliberate intent to defraud is subject to GST prosecution, i.e., criminal charges. Here are a few examples of these offences:

Issuing an invoice without supplying any goods/services, thereby obtaining input credit or a refund through fraud

Obtaining a CGST/SGST refund through deception

Submitting false financial records/documents/files and false tax returns in order to avoid paying taxes

assisting another person to commit GST fraud.

Arrest Under GST

If the Commissioner of CGST/SGST believes a person has committed a specific offence, any authorised CGST/SGST officer may arrest him under GST (click here for the list of offences for which one can be arrested).

The arrestee will be informed of the reason for his detention. In the case of a cognizable offence, he will appear before the magistrate within 24 hours. (Cognizable offences are those in which the police can arrest a person without a warrant.) They are serious offences (for example, murder, robbery, and counterfeiting).


A person who is dissatisfied with a decision or order made against him under GST may file an appeal.

The First Appellate Authority hears the first appeal from an adjudicating authority's order.

If the taxpayer is dissatisfied with the First Appellate Authority's decision, he or she may appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.

A taxpayer may request an advance ruling under GST to avoid the lengthy process of appeal and litigation. Before beginning the proposed activity, the taxpayer seeks clarification from GST authorities on GST treatment. The tax authority issues a written decision (called an advance ruling) on the query to the applicant.


Read More: Types of GST, Prerequisites of GST, UTGST.

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