GST Compliance Requirements, Offenses, and Penalties under India’s GST Regime

Posted by Written by Naina Bhardwaj Reading Time: 7 minutes

We list the GST compliance requirements under the CGST Act, 2017, steps to ease the burden on taxpayers, and penalty provisions under the GST regime for non-compliance. Foreign investors should also pay attention to the provision of Advance Ruling, a mechanism introduced to bring in tax certainty.

Following the introduction of the Central Goods and Services (CGST) Act, 2017, India’s tax authorities have adopted various steps to facilitate and ease compliance among taxpayers.

At the same time, the CGST Act has also prescribed strict provisions to ensure compliance and enforcement across various areas of GST such as GST registration, filing GST returns, and correct entry of invoices.

GST Compliance Requirements

Registration compliance

It is a turnover based compliance wherein, any person who has a turnover exceeding INR 4 million in goods and INR 2 million in services in the previous financial year needs to get registered in the GST regime and thus, start following other compliances as a registered supplier.

Invoicing related compliance

Every registered dealer under GST needs to be compliant with certain details while issuing a tax invoice, which lists down as under:

– Invoice number and date;

– Customer name;

– Shipping and billing address;

– Customer and taxpayer’s GSTIN (if registered);

– Place of supply;

– HSN code/ SAC code;

– Item details i.e., description, quantity, unit, the total value;

– Taxable value and discounts;

– Rate and amount of taxes;

– Whether GST is payable on a reverse charge basis; and

– Signature of the supplier.

The above details are mandatory in a GST invoice to ensure compliance.

Returns related compliance

The filing of return is one of the most important things in compliance under the GST.

Other compliance

E-way bill: It is an Electronic Waybill for the movement of goods. A GST registered person cannot transport goods in a vehicle whose value exceeds INR 50,000 (Single Invoice) without the cover of an e-way bill.

Payment of taxes: A person who has a liability to pay tax on his outward supplies/sales needs to pay the taxes while filing the return GSTR-3B monthly or quarterly as applicable.

In case a taxpayer fails to fulfill these GST compliance requirements, they will be considered an offender under the Act and will be liable for penalty, as prescribed. 

Section 122 to section 128 and section 132 of the CGST Act enlist provisions for 21 such activities, which are classified as offenses under the Act, as well as the consequent penalties applicable in case of commission or omission of the given offenses.

Any registered taxable person who is involved in offenses specified under the Act will face punishment in the form of penalty, prosecution, and in certain cases, even arrest.

In case a taxpayer fails to fulfill these GST compliances, they will be considered an offender under the Act and will be liable for penalty, as prescribed. 

Section 122 to section 128 and section 132 of the CGST Act enlist provisions for 21 such activities, which are classified as offenses under the Act, as well as the consequent penalties applicable in case of commission or omission of the given offenses.

Any registered taxable person who is involved in offenses specified under the Act will face punishment in the form of penalty, prosecution, and in certain cases, even arrest.

Offenses and Penalties Under CGST Act, 2017

Section of GST Act

Categories

Offenses

Penalty

Section 122(1)

Fraud

  • Obtain refund of tax fraudulently with an intention to evade payment of tax.
  • Falsify or substitute financial records
  • Produce fake accounts or documents.
  • Furnish any false information or return.
  • Furnish false information with regards to registration particulars either at the time of registration or subsequently.

In case of these offenses, the offender shall be liable to pay a sum, whichever is higher:

  • A penalty of INR 10,000 (US$138.14); or
  • An amount equal to the amount of tax evaded.

 

Tax evasion

  • Collect tax but fail to deposit it to the government provided such a tax is not deposited for a period. exceeding 3 months from due date.
  • Suppress your turnover leading to evasion of tax.

Offenses related to TDS and TCS

  • Fails to deduct tax or deduct appropriate tax as per section 51.
  • Fails to deposit the deducted tax to the government.
  • Fails to collect tax or collect appropriate tax as per Section 52.
  • Fails to Deposit the collected tax to the government.

Offenses related to ITC

  • Utilize ITC without actual receipt of supply either fully or partially.
  • Distribute ITC in contravention of Section 20 or rules there under.

Offenses related to transportation and storage

  • Transport any taxable goods without the cover of specified documents.
  • Supply, transport or store any goods which one knows are liable to confiscation.

Failures

  • Are liable to be registered but fail to obtain registration.
  • Fail to keep, maintain, or retain books of accounts and other documents in the manner prescribed.
  • Either fail to furnish information or documents called for by an officer. Or furnish false information or documents during any proceedings.

Miscellaneous offenses

  • Obstruct or prevent any officer in discharge of his duties.
  • Tamper with or destroy any material document.
  • Dispose of or tamper with any goods that have been detained, seized, or attached under the Act.

Section 122(2)

Concerning supplier of goods and services

  • Any tax has not been paid.
  • Tax has been short-paid.
  • Any tax has been erroneously refunded.
  • ITC has been wrongly availed or utilized.

If convicted of fraud, offender shall be liable to pay a penalty, whichever is higher:

  • A sum equal to INR 10,000; or
  • 100% of the tax due from such a person.

 

If other than fraud: offender shall be liable to pay a penalty, whichever is higher:

  • A sum equal to INR 10,000; or
  • 10% of the tax due from such a person.

Section 122(3)

Not directly involved in tax evasion but convicted of aiding and abetting it

  • Aiding or abetting any of the offenses specified in clauses (i) to (xxi) of sub-section (1).
  • Acquiring or concerning with goods which are liable to confiscation. It includes transporting, removing, depositing, keeping, concealing, supplying, purchasing or other ways of dealing with goods.
  • Failing to issue an invoice in accordance with the provisions of the Act or Rules. Or failing to account for an invoice in books of accounts.
  • Receiving or concerning the supply of services, which are in contravention of the provision of the Act or Rules. It also includes any other manner of dealing with such a supply of services.
  • Failing to appear before the designated officer if one is issued with summon for appearance in an inquiry, and/or one is supposed to give evidence or produce any document in such an inquiry.

Offenders committing these offenses shall be liable to pay a penalty which may extend to INR 25,000 (US$345.35).

 

Section 123

 

Failure to file information return (IR)

The stipulated period to file Information Return is 30 days from the date of issue of show cause notice.

In case of such failure, offender shall be liable to a penalty of INR 100 (US$1.38) each day for which the failure continues. Such a penalty cannot exceed INR 5,000 (US$65.07).

Section 124

Failure to furnish statistics

  • Failing to furnish such information or return without reasonable cause.
  • Willfully furnishing or causing to furnish any information or return which is known to be false.

Offender shall be liable to a fine of up to US$138.14 (INR 10,000). But where the offence is continuing, a further fine of INR 100 is levied each day for which the failure continues. However, such a penalty cannot exceed US$345.35 (INR 25,000).

Section 125

General penalty

Contravention or breach of:

  • Any of the provisions of the Act or Rules made there under.

Penalty for an amount up to INR 25,000 can be imposed.

Section 132

Offenses liable for prosecution

  • Supplying goods or services or both without the cover of invoice. Provided it is done with the intention of evading tax.
  • Issuing any invoice or bill without actual supply of goods or services or both. Provided such an act leads to wrongful input tax credit or refund of tax.
  • Availing ITC using invoice referred to in point (ii) above.
  • Collecting taxes without any payment to the government for a period exceeding 3 months from due date.
  • Evading tax, availing credit, or obtaining refund with the intent of fraud. Where such offence is not covered in clause (i) to (iv) above.
  • Falsifying financial records or producing false records/ accounts/ documents/ information – provided it is done with the intention of evading tax.
  • Obstructing or preventing any officer from doing his duties under the act.
  • Acquiring or transporting or in any manner dealing with goods liable for confiscation under this Act.
  • Receiving or dealing with supply of services which are in contravention of any provisions of this law.
  • Tampering or destroying any material evidence or documents.
  • Failing to supply information, which a person is required to supply under this law or supplying false information.
  • Attempting or abetting the commission of any of the offenses mentioned above.

Depending on each offence type, offender shall be liable to be punished with:

  • imprisonment for a term which may extend to six months; or
  • fine; or
  • both.

 

Appeal mechanism under GST

If a dealer or a taxpayer is not satisfied with the decision or an order passed against them by an adjudicating authority, regarding the offences prescribed under the GST act, they may appeal to the First Appellate. If still dissatisfied, they may appeal to the National Appellate Tribunal, and thereafter to the concerned High Court, and finally to the Supreme Court of India.

Appeal mechanism under CGST Act

However, a taxpayer may also request for Advance Ruling under GST, in order to avoid the long tedious process of appeals and litigation.

Advance ruling under GST

An advance ruling is a written interpretation of tax laws, issued by tax authorities to those corporations and individuals who request for clarification of certain tax matters before starting the proposed activity.

An advance ruling on a certain matter not only brings the much-required clarity and certainty, but also fosters a transparent regime, allowing taxpayers to resolve potential disputes in a timely and inexpensive manner instead of the arduous process of litigation. This mechanism is particularly favorable to foreign investors, who will gain a clearer picture of their future tax liability at the beginning itself.

The advance ruling can be requested from the officer concerned by making an application through Form GST ARA 01. The request can be made for seeking clarity in provisions relating to the following cases:

  • Classification of any goods and/or services under the CGST Act 
  • Applicability of a notification which affects the rate of tax 
  • Determination of time and value of supply of goods and/or services 
  • Whether input tax credit paid (or deemed to be paid) will be allowed 
  • Determination of the liability to pay tax on any goods and/or services  
  • Whether the applicant has to be registered under GST  
  • Whether any particular thing done by the applicant regarding goods or services will result in a supply

For more information on how the GST regime could impact your business and specialist tax advice, please feel free to send in your queries to our email at India@dezshira.com.


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India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.

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