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2018

Penalties for non-compliance under GST

Penalties for non compliance under GST

One of the remarkable changes that GST brought with its implementation is greater emphasis on compliance on part of an assessee. GST Act prescribes several provisions related to interest, penalty, fees and even imprisonment in case of severe defaults. We all take care of the major compliance requirements like filing returns regularly, charging the right type of tax (i.e. CGST & SGST or IGST), charging appropriate rate of tax etc. However, we often ignore small rules and guidelines prescribed by GST Act thinking they are too sundry to follow and they hardly attract any penalty or fees. Notwithstanding the scale of compliance requirement, we must be aware that even the minor case of non-conformance may attract considerable penalty in monetary as well as non-monetary terms. Here is a list of such small non-conformance that all tax payers under GST must bear in mind.

Sr. No. Default related to Type of Default Description of Default Penalty
1 GSTIN
  • Fail to mention GSTIN on all name boards.
  • It is compulsory to mention GSTIN on all name boards of your business.
Up to Rs. 25,000
2 Composition Dealer
  • Fail to mention GSTIN and details of composition registration on all name boards.
  • It is mandatory for all composition dealers to mention “composition taxable person not eligible to collect tax on supplies” along with GSTIN.
Up to Rs. 25,000
3 GST Registration
  • Fail to display registration certificate at all places of business.
  • It is mandatory for every taxable person registered under GST to display certificate of registration at all places of business.
Up to Rs. 25,000
  • Fail to obtain registration within 30 days from the date on which liability  for registration  arises.
  • Section 22 of CGST Act 2017 mandates every person to register if the aggregate turnover exceeds Rs. 20 Lakhs.
  • There are two possible cases of non-compliance in this category.
  • An assessee do not obtain registration despite he is liable for the same.
  • Registration is obtained after the threshold limit of 30 days.

Rs. 10,000 + ITC during the period of delay is lost

4 Invoice
  • Fail to issue invoice despite effecting outward supply.
  • Invoice contains details of outward supply and GST charged on such supply.
  • The amount of ITC is also determined on the basis of Invoice.
  • If an assessee fails to issue invoice or issues a wrong invoice, such act may be treated as non conformance and subject to penalty.
  • This situation may lead to supply without recording it and also the buyer may lose ITC since he doesn’t possess proper invoice.
Rs. 10,000 or 100% of tax evaded, whichever is higher
  • Issuance of Invoice without actual supply of goods / services.
  • Every invoice issued must be correspond with actual supply of goods / services.
  • If an invoice is issued without actual supply of goods / services, it may be subject to penalties.
Rs. 10,000 or 100% of tax evaded , whichever is higher
  • Fail to Issue appropriate Invoice.
  • It is mandatory to issue Tax Invoice by every registered dealer u/s 9 of CGST Act.
  • Composite Dealers registered u/s 10 must issue Bill of Supply on all outward supplies.
  • GST Act also prescribes other documents like Receipt Vouchers, Refund Voucher etc.
  • Fail to issue appropriate invoice / document is an act of non-conformance under GST.
Up to Rs. 25,000
5 ITC
  • Availing Input Tax Credit on the basis of  wrong Invoice.
  • ITC can be taken only on the basis of valid invoices issued by registered dealers.
  • If any ITC is taken on the basis of a wrong invoice, such ITC is invalid and must be reversed along with interest and penalty.
Rs. 10,000 or 100% of ITC wrongly availed, whichever is higher + 24% Interest from date of availment to date of reversal
Payment of Tax 
  • Fail to deposit  GST to the credit of the Government collected during outward supplies.
  • GST collected at the time of outward supplies must be remitted to the credit of Government.
  • Not depositing GST in due date shall be treated as an instance of tax evasion which may result into stiff penalties under GST.

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

  • Payment of IGST instead of CGST/SGST.

Or

  • CGST instead of IGST/SGST.

Or

  • SGST instead of CGST/IGST.
  • IGST must be charged and remitted for all inter-state supplies.
  • CGST & SGST must be charged and remitted for all intra-state supplies.
  • GST charged under a given head must be remitted under the same head.
  • If GST is remitted under a different head, such amount would get transferred to the credit of respective government.
  • Hence, it is critical to deposit GST under appropriate head. 
Pay Tax under correct head with no interest and claim refund of tax paid under wrong head. 
 7 Stock Records 
  • Fail to maintain proper records of the Stocks. 
  •  as per Rule 56(2) of CGST Rules, 2017, it is mandatory for all registered dealers to maintain accurate stock record.
  • Failure to maintain stock records shall be treated as an instance of non-conformation and may attract penalties.

Up to Rs. 25,000 

 8 General Penalty 
  • For all non-specific defaults 
  • In case of any default in respect of which no provisions for penalty / interest etc is specific under GST, general provision for penalty shall apply. 
Up to Rs. 25,000

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