GST Penalties and Appeals

By Registrationwala

25th April 2017


Goods and service tax will bring in “One nation one tax” to unite backhanded taxes under one umbrella and encourage Indian business to be comprehensively aggressive globally. The Indian GST is structured for efficient tax collection, reduction and diminution of corruption, simple inter-state movement of goods etc.To prevent tax evasion and corruption, GST has brought in strict provisions for offenders regarding penalties, prosecution and arrest.

The expressions “penalty” need not been characterized in the CGST/SGST enactment. However Legal pronouncements and standards about law have laid down those ways of a punishment as: An transitory discipline or an whole forced toward statute, to be paid as punishment for the commission of a certain offence; a punishment imposed by law or contract for doing or failing to do something that was the duty of a party to do. The GST Act codifies the offences and penalties in Chapter XVI.There are 21 offences recorded Previously, section 122, separated with the penalty endorsed under section 10 for profiting aggravating toward a taxable individual who will be not qualified to it.

Offences & Penalties


There are 21 offences under GST apart from the penalty under section 8 covering fake/wrong invoices, fraud, tax evasion and others.

The said offences are as follows: –

1. Making a supply without invoice or with false/ incorrect invoice;

2. Issuing an invoice without making supply;

3. Not paying tax collected for a period exceeding three months;

4. Not paying expense gathered for contradiction of the CGST/SGST Act to a period surpassing 3 months;

5. Non deduction or lower deduction of tax deducted or not depositing tax deducted at source under section 51;

6. Non collection or lower collection of or non- payment of tax collectible at source under section 52;

7. Availing input tax credit without actual receipt of goods or services;

8. Fraudulently obtaining any refund;

9) Distributing input tax credit by an Input Service Distributor in violation of Section 20;

10) Furnishing false information of financial records or of fake accounts/ documents with intent to evade payment of tax;

11. Failure to register despite being liable to pay tax;

12. Furnishing false information regarding registration particulars;

13. Obstructing or preventing any official in discharge of his duty;

14. Transporting goods without prescribed documents;

15. Suppressing turnover leading to tax evasion;

16. Failure to maintain accounts/documents in the manner specified in the Act or failure to retain the same;

 17. Failure to furnish information/documents required by an officer in terms of the Act or falsification of the same;

 18. Supplying/transporting/storing any goods liable to confiscation;

19. Issuing invoice or document using GSTIN of another person;

20. Tampering/destroying any material evidence;

21) Disposing of /tampering with goods detained/ seized/attached under the Act.

Offences under GST by Companies, LLPs, HUFs and others

For any offence committed by a company, both the officer in charge (such as director, manager, secretary) as well as the company will be held liable.For LLPs, HUFs, trust, the partner/ managing trustee will be held liable.


Any enlisted taxable person who over makes short installment for duty should make at risk to a punishment for Rs. 10,000 or 10% of the expense short paid, whichever may be higher. For the purposes for this sub-section, a taxable individual ought make short installments ‘repeatedly’, if there were short installments to three returns throughout whatever six successive duty periods.

General Disciplines to be Followed While Imposing Penalties

These rules of penalty are generally the same in all laws whether tax laws or contract or any other law.

  • Every taxable person, penalty payer, will be served with a show cause notice first and will have a reasonable opportunity of being heard.
  • The tax authority will be bound to give an explanation regarding the reason for penalty and the nature of offence.
  • Person voluntarily disclosing a breach of law, may be punished with lesser amount of penalty by the tax authority.

For cases with no intention of fraud or tax evasion

A wrongdoer not paying charge alternately making short installments need to pay penalty of 10% of the charge sum expected, subject should be base of Rs. 10,000. Therefore, the penalty will be high at 100% of the charge add up when the wrongdoer need evaded i. e. , the place there will be a planned cheating.

To different certified errors, that punishment may be 10% from claiming assessment. This will make useful with businesses, particularly SMEs, who might aggravate honest to goodness mistakes particularly in the beginning with couple months for GST execution.

Any offense under GST to which punishment may be not particularly specified will make at risk to a penalty extending Rs. 25,000.

For situations about cheating

Any wrongdoer need on pay a punishment measure of duty evaded/short deducted and so forth throughout this way, i. e. , 100% penalty, liable on a least from claiming Rs. 10,000. The punishment  might augment uptoRs. 25,000 not just on the taxable person be that onto any individual who-.

  • 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 any invoice appearing in the books

Additional penalties as follows

Cases of fraud also face penalties, prosecution and arrest.

Inspection under GST

The Indian GST is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc. keeping in mind the government’s anti-tax evasion scheme, GST also has strict provisions to inspect and search places of business for suspected tax evaders.

If Joint Commissioner of SGST/CGST (or a higher officer) “has reasons to believe” that is if he has knowledge of facts, that it would cause any reasonable person, to reasonably conclude the same thing,and that the suspected tax evaders-

In order to evade tax, a person has suppressed any transaction or claimed excess input tax credit etc., then he can authorize any other officer of CGST/SGST in writing to inspect places of business. He can also examine any other place if he sees fit.

Search & Seizure under GST

Seizure is the act from claiming assuming control over something, alternately, somebody, eventually perusing lawful methodology force, for example, those seizure for proof found during those scene of a wrongdoing. It for the most part intimates taking ownership forcibly against the wishes of the holder.

After making the inspection diligently, if the authority making it, feels that there exists necessity to do further search and make seizure then, the Joint Commissioner of SGST/CGST can order for a search on the basis of results of inspection or any other reason, if he has that –

  • There are goods which are liable for confiscation
  • Any documents or books or other things which will be useful during proceedings and are hidden somewhere,may take over the possession of such goods/books/documents for carrying further legal process.

Goods in transit 

GST has also made provisions for interception and inspection of goods in transit.The proper officer has the power to intercept goods in transit and inspect the goods and the prescribed documents.If the goods are in contravention to the GST Act then the goods, related documents, and the vehicle carrying them will be seized. The goods will be released only on payment of tax and penalty.

The person in charge of a vehicle carrying goods exceeding a specified value is required to carry certain prescribed documents.

Looking into interception, the documents what is more merchandise might be inspected eventually perusing those by legitimate officer.

When any individual transports whatever merchandise in contradiction of the GST demonstration that point the goods, related documents, and the vehicle carrying them will make seized. Those merchandise will make discharged just for installment of expense and punishment. These scenarios make two situations in this case-

  • If the owner of the goods comes forward — in this case, 100% penalty (equal to the amount of tax) will be charged 
  • If the owner does not come forward — 50% of the value of goods before tax will be charged as penalty

[For exempted goods- 2% or 5% (if owner does not come forward) of value of goods
or 25,000 — whichever is less]

The table below provides a clear example of the penalty process:

Compounding of offences under GST

Compounding about offences will be short reduction strategy to dodge prosecution. Since the body of evidence about arraignment for a offence to a criminal court, those denounced need will show up before the magistrate. In each listening through an advocate, devouring a considerable measure for time, aggravating will save chance Also cash. However compounding may be not accessible for cases the place the esteem included surpasses 1 crore. The measure payable to compounding of offences might t a chance to be half of the charge included liable will a base Rs. 10,000. Greatest amount to compounding may be 150% of the assessment or Rs. 30,000 -Whichever will be higher.

Prosecution under GST 

Prosecution is the conducting of legal proceedings against someone in respect of a criminal charge.

A person committing an offence with the deliberate intention of fraud, becomes liable to prosecution, i.e., face criminal charges. A few examples of these offences are-

  1. Issue of an invoice without supplying any goods/services- thus taking input credit or refund by fraud
  2. Obtaining refund of any CGST/SGST by fraud.
  3. Submitting fake money related records/documents or files, Furthermore fake returns to avoid charge.
  4. Helping another person to commit fraud under GST.

Arrest under GST

An offender not only faces prosecution but also arrest under GST.If the Commissioner of CGST/SGST believes a person has committed an offence u/s 92 above, he can be arrested by any authorized officer. The arrested person will be informed about the grounds of his arrest. He will appear before the magistrate within 24 hours in case of a cognizable offence.


A person unhappy with any decision or order passed against him under GST by an adjudicating authority can appeal to the First Appellate Authority

If they are not happy with the decision of the First Appellate Authority they can appeal to the National Appellate Tribunal, then to the High Court, and finally to the Supreme Court.

Steps of Appeals

All appeals must be made in prescribed forms along with the required fees.The Board or the State Government may, on the recommendation of the Council, fix monetary limits for appeals by the GST officer to regulate the filing of appeal and avoid unnecessary litigationexpenses.



GST Penalties and Appeals