Prosecution under GST

Apart from monetary fines and penalties, defaulters and repeat offenders can also face prosecution under GST.  Any person who commits the following offences (i.e., deliberate intention of fraud) is liable to prosecution. This means that they will face criminal charges.

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  1. Supplies any goods/services without an invoice to evade tax
  2. Issues invoice without supplying any goods/services- thus taking input credit or refund by fraud
  3. Collects any GST but does not submit it to the government within 3 months.
  4. Obtains refund of any CGST/SGST by fraud.
  5. Submits fake financial records/documents or files fake returns to evade tax
  6. Obstructs the proper officer during his duty (for example, he hinders the officer during the audit by tax authorities)
  7. Acquires/receives any goods/services with full knowledge that it is in violation of GST rules and is liable for confiscation
  8. Destroys any evidence
  9. Does not provide information/gives false information during proceedings
  10. Helps any person to commit fraud under GST

Arrest under GST

An offender can be prosecuted and also arrested under GST. If the Commissioner of CGST/SGST believes a person has committed an offence u/s 132, an authorized CGST/SGST officer can arrest the offender.

The officer will inform the offender of the grounds of his arrest. He will appear before the magistrate within 24 hours in case of cognizable offence.

The scheme of punishment provided in Section 132 (1) is as follows:

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Compounding of offences

Compounding of offenses is a way to avoid legal action. Court proceedings are time-consuming and expensive. In case of prosecution for, the accused has to appear before the Magistrate at every hearing through an advocate. 

When a defaulter opts for compounding of offenses, he doesn’t have to appear personally in the court. He can be discharged on payment of compounding fee. The fee cannot be more than the maximum fine levied under the relevant provisions.

GST Model Law allows for compounding of offenses.

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Compounding will not be available for any person

  • Who has already committed any of the offenses mentioned under prosecution above, i.e., second time offenders cannot compound.
  • Previously enjoying compounding for goods/services over Rs. 1 crore will not enjoy compounding a second time.
  • Being tried under other acts such as Narcotic Drugs Act, FEMA etc.
  • Convicted by a court under GST
  • Giving false information during proceedings, or preventing the officer from his duty
  • Destroying evidence

Compounding will be allowed only after payment of all tax, interest and penalty dues.

Amount payable for compounding:

The amount payable for compounding of offences shall be –

50% of the tax involved subject to a minimum Rs. 10,000.

Maximum amount for compounding is 150% of the tax OR Rs. 30,000 – whichever is higher.