Consequences of Non-compliance under GST

Various measures have been laid down to check non-compliance under GST. These vary based on the severity of the offence. Penalties have been made stricter for tax evaders under GST, when compared to the current regime. In the current regime, tax authorities can arrest a taxable person if the amount of tax evaded exceeds Rs 2 Crores under Excise and Service Tax. In VAT, barring Gujarat, no other state has the arrest clause.

Under GST, a tax evasion of Rs. 50 Lakhs can attract prison sentence of up to 1 year with fine. Non-bailable arrest, with imprisonment of up to five years and fine, could follow if the value of tax evasion exceeds Rs. 1 crore.

Let us understand the various penalties laid down for non-compliance under GST.

Late Fee

Offence Late Fee
A person fails to furnish details of outward or inward supplies, monthly return or final return by the due date Rs. 100 for every day during which the failure continues, subject to a maximum of Rs. 5,000
A person fails to furnish the annual return by the due date Rs. 100 for every day during which the failure continues, subject to a maximum of quarter percent of the person’s turnover in the state where he/she is registered

Interest

The rate of interest on the applicable offences is yet to be notified. The circumstances for levy of interest are:

Offence Interest
A person liable to pay tax fails to pay the tax Interest on the tax due will be calculated from the first day on which the tax was due to be paid
A person makes an undue or excess claim of input tax credit or undue or excess reduction in output tax liability Interest on the undue excess claim or undue or excess reduction
A recipient of a service fails to pay to the supplier of the service the amount towards the value of the service, along with tax payable thereon, within 3 months from the date of issue of invoice by the supplier Interest on the amount due will be added to the recipient’s liability

Cancellation of Registration

The circumstances under which a person’s registration will be cancelled are:

  • A regular dealer has not furnished returns for a continuous period of 6 months.
  • A composition dealer has not furnished returns for 3 quarters.
  • A person who has taken voluntary registration has not commenced business within 6 months from the date of registration.
  • Registration has been obtained by fraud, wilful misstatement or suppression of facts.

Penalty

Offences on which penalty will be levied have been specifically laid down under GST.

Offence Penalty
If a person:

  • Supplies goods and/or services without issuing an invoice or issues an incorrect or false invoice
  • Issues an invoice without supply of goods and/or services
  • Collects tax but fails to pay the same to the Government beyond a period of 3 months from the date on which the payment becomes due
  • Who is an e-commerce operator fails to collect tax or collects lesser than the amount required to be collected or fails to pay the tax to the Government
  • Takes input tax credit without actual receipt of goods and/or services either fully or partially
  • Obtains refund of tax by fraud
  • Falsifies or substitutes financial records or produces fake accounts and/or documents or furnishes a false return
  • Liable to be registered, but fails to obtain registration
  • Furnishes false information with regard to registration
  • Transports taxable goods without documents
  • Suppresses turnover leading to evasion of tax
  • Fails to maintain books of accounts and documents
  • Issues an invoice or document by using the identification number of another person
Rs. 10,000 or an amount equivalent to the tax evaded
A person who aids or abets any of the offences listed above Penalty may extend to Rs. 25,000
Any offence for which a penalty is not separately provided under the law Penalty may extend to Rs. 25,000

Confiscation of Goods and/or Conveyances and Penalty

Certain offences have been laid down which will lead to the confiscation of goods and/or conveyances and levy of penalty. The penalty will be Rs. 10,000 or an amount equal to the tax evaded. These offences are:

  • A person does not account for the goods on which he is liable to pay tax
  • A person supplies or receives goods in breach of any provisions or rules with the intent to evade payment of tax
  • A person supplies any goods liable to tax without having applied for registration
  • A person uses a conveyance for carriage of taxable goods in breach of any provisions or rules

Imprisonment and Fine

The circumstances under which imprisonment is applicable are:

Offence Imprisonment
Commits or abets the following:

  • Obstructing or preventing any officer in the discharge of his duties
  • Tampering with or destroying any evidence or documents

Failing to supply any information required of him under the law or supplying false information

6 months imprisonment with fine
Tax evaded or input tax credit wrongly availed or refund wrongly taken of an amount exceeding Rs. 50 Lakhs, but not exceeding Rs. 1 Crore Imprisonment which may extend to 1 year with fine
Tax evaded or input tax credit wrongly availed or refund wrongly taken of an amount exceeding Rs. 100 Lakhs, but not exceeding Rs. 2.5 Crores Non-bailable imprisonment which may extend to 3 years with fine
Tax evaded or input tax credit wrongly availed or refund wrongly taken of an amount exceeding Rs. 2.5 Crores Non-bailable imprisonment which may extend to 5 years with fine

As evident, non-compliance under GST will be treated strictly. However, various steps have been taken to facilitate and ease compliance for dealers. A notice in Form GSTR-3A is sent to every dealer who has not furnished the monthly return by the due date. Any mismatch between supplies reported by a supplier and the recipient are notified in Form GST ITC-1 every month. With invoice-wise matching and input tax credit of the recipient being dependent on the supplier’s compliance, the process of GST has an inbuilt check and balance to ensure that dealers can avoid the penalties of non-compliance. GST is also a technology based tax, by which compliance will become quicker and easier. Hence, businesses must leverage on the various facilities given and technology available to ensure compliance under GST.

 

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