The Goods and Services Tax (GST) is one of the most significant tax reforms in India. Introduced on 1st July 2017, GST has streamlined the indirect taxation system by subsuming various central and state-level taxes. While it has simplified tax compliance for many, it has also introduced stringent provisions related to defaults, penalties, and the powers of GST officers.
In this article, we will explore the structure of GST, common defaults, penalties under GST law, and the legal powers vested in GST officials to enforce compliance.
What is GST?
GST (Goods and Services Tax) is a destination-based, multi-stage, value-added tax levied on the supply of goods and services. It is categorized into:
- CGST – Central Goods and Services Tax
- SGST – State Goods and Services Tax
- IGST – Integrated Goods and Services Tax (on inter-state supplies)
- UTGST – Union Territory GST (for Union Territories)
GST is applicable at every step of the supply chain and allows input tax credit, making the entire tax structure more transparent and seamless.
Common GST Defaults
GST law imposes a duty on taxpayers to comply with various obligations. Non-compliance or failure leads to GST defaults, which include:
- Failure to register under GST when liable.
- Non-filing or late filing of GST returns.
- Incorrect invoicing or issuing invoices without actual supply.
- Mismatch in input tax credit (ITC) claims.
- Suppression of sales or turnover.
- Collecting tax but not depositing it to the government.
GST Penalties and Offences
Under the Central Goods and Services Tax Act, 2017, specific penalties are prescribed for different types of defaults:
1. Late Filing Penalty (Section 47)
- A late fee of ₹100 per day under CGST and ₹100 under SGST (total ₹200/day), up to a maximum of ₹5,000.
- For nil returns, the late fee is capped at ₹50 per day (₹25 CGST + ₹25 SGST).
2. Penalty for Not Registering (Section 122)
- ₹10,000 or the amount of tax evaded, whichever is higher.
3. Penalty for Incorrect Invoice or Fake ITC Claim
- ₹10,000 or the amount of tax involved, whichever is higher.
- Fake ITC claims can also lead to arrest and prosecution.
4. General Penalty (Section 125)
- If no specific penalty is provided, a general penalty of up to ₹25,000 may be imposed.
Arrest, Prosecution, and Imprisonment
Serious offences under GST (like fraud, suppression of facts, or issuance of fake invoices) can lead to:
- Arrest by GST Officers (Section 69).
- Prosecution for deliberate tax evasion exceeding ₹5 crore.
- Imprisonment ranging from 1 year to 5 years depending on the amount of tax evaded.
Powers of GST Officers
GST officers have been granted wide-ranging powers under the GST Act to ensure proper compliance. These include:
1. Power to Audit (Section 65)
Officers can conduct an audit of the registered taxpayer’s records and books.
2. Power of Inspection, Search, and Seizure (Section 67)
GST officers can:
- Inspect any place of business.
- Search premises with prior approval.
- Seize goods, documents, books, or things believed to be involved in tax evasion.
3. Power to Arrest (Section 69)
A GST officer (not below the rank of Joint Commissioner) can authorize arrest if he has reasons to believe that the person has committed certain cognizable offences.
4. Power to Issue Summons (Section 70)
Officers can summon any person whose attendance is considered necessary for giving evidence or producing documents.
5. Power to Demand and Recover Tax (Section 73 & 74)
If there is a short payment or non-payment of tax due to fraud or without fraud, the officer can issue a show-cause notice, followed by adjudication and recovery.
Defending GST Penalty Notices and Legal Recourse
If a business receives a GST penalty notice, it must:
- Respond timely with appropriate documentation.
- File objections and seek legal advice.
- Approach the Appellate Authority or High Court if required.
Proper representation and record-keeping can often help in resolving disputes and avoiding harsh penalties.
Conclusion
GST compliance is not just about filing returns—it requires a complete understanding of the law, timely action, and accurate reporting. While the system is designed to be fair and transparent, the powers vested in GST officers are considerable, and non-compliance can result in serious financial and legal consequences.
If you or your business are facing issues related to GST penalties, notices, or officer actions, seeking professional legal help is highly recommended.
Legal Support by B S Makar, Advocate
I am B S Makar, Advocate and Legal Consultant, practicing at the Punjab and Haryana High Court and Founder of B S Makar Advocates and Solicitors, Mohali. We provide professional legal assistance in GST matters, civil disputes, NRI cases, and cyber fraud.
B S Makar Advocate
📞 Contact: 9878131111
🌐 Website: www.makarlaws.com
🏛️ Firm: B S Makar Advocates and Solicitors,law Firm Mohali
