A penalty simply refers to “a punishment imposed for breaking a law, rule, or contract”. The word “penalty” is not specifically defined in GST. Any taxpayer committing an offence will be subject to a penalty or punishment. The penalties under GST could include monetary fines or a jail term, depending on the severity of their offence.

General Rules Regarding Penalty

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Section 126 further specifies that, in particular, no substantial penalty is to be imposed for —

  • any minor breach (minor breach has been defined as a violation of the provisions in a case where the tax involved is less than Rs.5000), or
  • a procedural requirement of the law, or,
  • a mistake that can be easily corrected/ omission in documents (explained in the law as an error apparent on record) that has been made without fraudulent intent or gross negligence.

What are the penalties under GST?

If any of the offences are committed then a penalty will have to be paid under GST. The principles on which these penalties are based are also mentioned by law.

General Penalties under GST

Any offence under GST for which penalty is not specifically mentioned will be liable to a penalty extending Rs. 25,000.

Type of offence

Amount of penalty

Delay in filing GSTR Late fee is Rs. 100 per day per Act i.e. 100 under CGST & 100 under SGST. Total will be Rs. 200/day. Maximum is Rs. 5,000. No late fee on IGST.
Not filing GSTR 10% of tax due or Rs. 10,000 – whichever is higher
Committing a fraud

100% of tax due or Rs. 10,000 – whichever is higher

Minimum penalty shall be Rs.10, 000(High value fraud cases also have jail term)

Helping a person to commit fraud  Penalty extending up to Rs. 25,000
Opting for composition scheme even though he is not eligible

Demand & Recovery provisions of sections 73 & 74 will apply.

  • Fraud case: Penalty 100% of tax due or Rs. 10,000 – whichever is higher
  • Non-fraud case: Penalty 10% of tax due or Rs. 10,000 – whichever is higher
Wrongfully charging GST rate— charging higher rate

Penalty 100% of tax due or Rs. 10,000 – whichever is higher

(if the additional GST collected is not submitted with the govt)

Not issuing invoice Penalty 100% of tax due or Rs. 10,000 – whichever is higher
Not registering under GST Penalty 100% of tax due or Rs. 10,000 – whichever is higher
Incorrect invoicing Penalty of Rs. 25,000

 

A registered dealer under GST has to provide invoices or bills to his/her clients as per pre-defined formats. You can create GST compliant invoices with the Edge Billing and Inventory software.

Situations where there is no penalty (but interest may apply)

Type of offence

Action

Penalty for incorrect type of GST charged (IGST instead of CGST/SGST) No penalty. Pay the correct GST and get refund of the wrong type of GST paid earlier
Penalty for incorrect filing of GSTR No penalty. 18% Interest on shortfall amount
Penalty for delay in payment of invoice.

 

No penalty. ITC will be reversed if not paid within 6 months.
Penalty for wrongfully charging GST rate— charging lower rate 18% interest applicable on the shortfall

 

What are the penalties under GST for helping someone to commit fraud?

Not only the taxable person but any person who does the following will have to pay a penalty extending up to Rs. 25,000

  • Fails to appear before the tax authority on receiving a summons
  • Helps any person to commit fraud under GST
  • Fails to issue an invoice according to GST rules
  • Acquires/receives any goods/services with full knowledge that it is in violation of GST rules
  • Fails to account/vouch any invoice appearing in the books

Are there any jail punishments?

Yes, GST has corporal punishments (jail) for high value fraud cases as follows-

Tax amount involved   100-200 lakhs   200-500 lakhs   Above 500 lakhs  
Jail term Up to 1 year Up to 3 years Up to 5 year
Fine In all three cases

Penalty for Other Cases (no intention of fraud or tax evasion)

An offender not paying tax or making short-payments has to pay a penalty of 10% of the tax amount due, subject to a minimum of Rs.10, 000.

Therefore, the penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud.

For other non-fraud cases, the penalty is 10% of tax.