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
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.
|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|
Latest Update for Late Fees on GST Retruns
CBEC withdraws the reduction in Late fees for GSTR-5A charged for delay in return filing with effect from 7th March 2018.
This means that the late fees to be paid by taxpayers for late-filing of GSTR-5A now stands at a total of Rs. 200 per day of delay (Rs. 100 per day of delay for NIL return) subject to the maximum cap in the late fees at Rs. 5,000
As on 7th March 2018, the reduced late fees for other returns such as GSTR-1, GSTR-3B(October 2017 onwards), GSTR-4, GSTR-5 & GSTR-6 continue to apply.
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
|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.