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Consequences of Non-compliance under GST

July 4th, 2017

Intech Systems

GST Law and ERP, Microsoft Dynamics

GST is not an unknown topic now. GST made its way into Indian Economy from July 1, 2017. The implementation of GST is a huge step in the indirect taxation reform. However, it’s vital to not only implement any tax law smoothly across the nation but also to take steps against tax offenders. Therefore, the government has laid down various measures to check noncompliance under GST. These vary based on the severity of the offense. To encourage compliance with India’s new GST tax regime, the government has come up with a three-pronged approach: interest, monetary penalties, and prosecution.

1. Late fee

Offense

A person fails to furnish details of outward or inward supplies, monthly return or final return by the due date
A person fails to furnish the annual return by the due date
Deductor fails to furnish TDS certificate to Deductee within 5 days of credit to govt.

Late fee

₹ 100 for every day during which the failure continues, subject to a maximum of ₹ 5000
₹ 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
₹ 100 per day, subject to max of ₹ 5,000

2. Interest (Rates yet to be fixed)

Offense

A person fails to pay tax despite being liable to pay tax
A person commits any fraud activity related to input tax credit or output tax liability
A recipient of a service fails to pay to the service’s supplier the amount of service value, along with tax payable thereon, within 3 months from the date of issue of invoice by the supplie

Interest

Interest on the tax due will be calculated from the first day on which the tax was due to be paid
Interest on the undue excess claim or undue or excess reduction
Interest on the amount due will be added to the recipient’s liability

3. Cancellation of Registration

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

Not furnishing returns for consecutive 6 months despite having a regular transaction
Not furnishing returns for 3 quarters
Failing to commence business within 6 months from the date of voluntary registration
Obtaining registration by fraud or by wilful misstatement or suppression of facts

4. Penalty

Offense

Supplies goods and/or services without issuing or issuing incorrect or false invoice
Issues an invoice without supply of goods and/or services
Fails to pay the tax to government even after collecting the tax from the consumers
Fails to collect the tax or collects less tax as decided by the government.
Takes input tax credit without original receipt of goods and/or services either fully or partially
Obtains refund of tax by fraud
False financial accounts/ false return filing.
Fails to obtain registration despite being liable to be registered
Furnishes false information regarding registration
Transports taxable goods without documents
Hides the actual details of turnovers
Fails to maintain books of accounts and documents
Issues an invoice or document by using the identification number of another person
Aids or abets any of the offenses listed above
Any offense for which a penalty is not separately provided under the law

Penalty

10,000 or an amount equivalent to the tax evaded.
Penalty may extend to ₹ 25,000
Penalty may extend to ₹ 25,000

5. Confiscation of Goods and/or Conveyances and Penalty

Under GST, certain offenses will lead to confiscation of goods and/or conveyances and levy of penalty both. The amount of penalty will be ₹ 10,000 or an amount equal to the tax evaded will be levied under the conditions that a person:

is liable to pay the tax for the goods he/she is dealing with but hasn’t applied for registration
intents to evade tax by breaching any provisions while supplying or receiving goods
breaches any provisions by using a conveyance for carriage of taxable goods

6. Imprisonment and Fine

Offense

Troubling the officer in his/her duty and is trying to destroy any kind of witness
Failing to supply any information required of him under the law or supplying false information
Amount of tax evaded or wrong refund or input tax credit wrongly availed is between ₹ 50 lakhs to ₹ 1 crore
Amount of tax evaded or wrong refund or input tax credit wrongly availed is between ₹ 1 crore to ₹ 2.5 crores
Amount of tax evaded or wrong refund or input tax credit wrongly availed exceeds ₹ 2.5 crores

Penalty

Period of imprisonment
Imprisonment which may extend to 1 year with fine
Non-bailable imprisonment which may extend to 3 years with fine
Non-bailable imprisonment which may extend to 5 years with fine

Though the steps for noncompliance under GST are strict, they will avoid tax evasion and corruption in the country. Surely this new tax structure is alien to people and so, many organizations argue that the actions against non-compliance should be made lenient. Hence, Government has ensured that if noncompliance under GST happens erroneously, there is an ample room for minimal penalty. Though the burden of proof always lies on the assessee.
Check if you are ready for GST or not. If you have any queries regarding GST compliance, get in touch with GST experts of Intech.