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Consequences of Non-compliance under GST

July 4th, 2017 Intech SystemIntech System 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 Late fee
A person fails to furnish details of outward or inward supplies, monthly return or final return by the due date ₹ 100 for every day during which the failure continues, subject to a maximum of ₹ 5000
A person fails to furnish the annual return by the due date ₹ 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
Deductor fails to furnish TDS certificate to Deductee within 5 days of credit to govt. ₹  100 per day, subject to max of ₹ 5,000
2. Interest (Rates yet to be fixed)

 

Offense Interest
A person fails to pay tax despite being liable to pay tax Interest on the tax due will be calculated from the first day on which the tax was due to be paid
A person commits any fraud activity related to input tax credit or output tax liability Interest on the undue excess claim or undue or excess reduction
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 supplier 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 Penalty
  1. Supplies goods and/or services without issuing or issuing incorrect or false invoice
  2. Issues an invoice without supply of goods and/or services
  3. Fails to pay the tax to government even after collecting the tax from the consumers
  4. Fails to collect the tax or collects less tax as decided by the government.
  5. Takes input tax credit without original receipt of goods and/or services either fully or partially
  6. Obtains refund of tax by fraud
  7. False financial accounts/ false return filing.
  8. Fails to obtain registration despite being liable to be registered
  9. Furnishes false information regarding registration
  10. Transports taxable goods without documents
  11. Hides the actual details of turnovers
  12. Fails to maintain books of accounts and documents
  13. Issues an invoice or document by using the identification number of another person
 10,000 or an amount equivalent to the tax evaded.
Aids or abets any of the offenses listed above Penalty may extend to ₹ 25,000
Any offense for which a penalty is not separately provided under the law 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 Period of imprisonment
  • 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
Imprisonment of 6 months with fine
 
Amount of tax evaded or wrong refund or input tax credit wrongly availed is between ₹ 50 lakhs to ₹ 1 crore Imprisonment which may extend to 1 year with fine
Amount of tax evaded or wrong refund or input tax credit wrongly availed is between ₹ 1 crore to ₹ 2.5 crores Non-bailable imprisonment which may extend to 3 years with fine
Amount of tax evaded or wrong refund or input tax credit wrongly availed exceeds ₹ 2.5 crores 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.

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