Goods and Services Tax

Offences, Penalties, Prosecution and Compounding

GST – GST FAQ 2nd Edition – June 2017 as Updated as on 1.1.2018 – 20 – Q 1. What are the prescribed offences under CGST/SGST Act? Ans. The CGST/SGST Act codifies the offences and penalties in Chapter XVI. The Act lists 21 offences in section 122, apart from the penalty prescribed under section 10 for availing compounding by a taxable person who is not eligible for it. The said offences are as follows: – 1) Making a supply without invoice or with false/ incorrect invoice; 2) Issuing an invoice without making supply; 3) Not paying tax collected for a period exceeding three months; 4) Not paying tax collected in contravention of the CGST/SGST Act for a period exceeding 3 months; 5) Non deduction or lower deduction of tax deducted at source or not depositing tax deducted at source under section 51; 6) Non collection or lower collection of or non- payment of tax collectible at source under section 52; 7) Availing/utilizing input tax credit without actual receipt of goods and/or services; 8

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ting/storing any goods liable to confiscation; 19) Issuing invoice or document using GSTIN of another person; 20) Tampering/destroying any material evidence; 21) Disposing of /tampering with goods detained/ seized/attached under the Act. Q 2. What is meant by the term penalty? Ans. The word penalty has not been defined in the CGST/SGST Act but judicial pronouncements and principles of jurisprudence have laid down the nature of a penalty as: a temporary punishment or a sum of money imposed by statute, to be paid as punishment for the commission of a certain offence; a punishment imposed by law or contract for doing or failing to do something that was the duty of a party to do. Q 3. What are the general disciplines to be followed while imposing penalties? Ans. The levy of penalty is subject to a certain disciplinary regime which is based on jurisprudence, principles of natural justice and principles governing international trade and agreements. Such general discipline is enshrined in sec

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pparent on record) that has been made without fraudulent intent or gross negligence. Further, wherever penalty of a fixed amount or a fixed percentage has been provided in the CGST/SGST Act, the same shall apply. Q 4. What is the quantum of penalty provided for in the CGST /SGST Act? Ans. Section 122(1) provides that any taxable person who has committed any of the offences mentioned in section 122 shall be punished with a penalty that shall be higher of the following amounts: The amount of tax evaded, fraudulently obtained as refund, availed as credit, or not deducted or collected or short deducted or short collected, or A sum of ₹ 10,000/-. Further Section 122(2) provides that any registered person who has not paid tax or makes a short payment of taxon supplies shall be a liable to penalty which will be the higher of: 10% of the tax not paid or short paid, or ₹ 10,000/- Q 5. Is any penalty prescribed for any person other than the taxable person? Ans. Yes. Section 122(3) pr

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on transports any goods or stores any such goods while in transit without the documents prescribed under the Act (i.e. invoice and a declaration) or supplies or stores any goods that have not been recorded in the books or accounts maintained by him, then such goods shall be liable for detention along with any vehicle on which they are being transported. Where owner comes forward: – Such goods shall be released on payment of the applicable tax and penalty equal to 100% tax or upon furnishing of security equivalent to the said amount. In case of exempted goods, penalty is 2% of value of goods or ₹ 25,000/- whichever is lesser. Where owner does not come forward: – Such goods shall be released on payment of the applicable tax and penalty equal to 50% of value of goods or upon furnishing of security equivalent to the said amount. In case of exempted goods, penalty is 5% of value of goods or ₹ 25,000/- whichever is lesser. Q 7. What is the penalty prescribed for a person who opts

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GST Act? Ans. Under Section 130 of the CGST Act, goods shall be liable to confiscation if any person: supplies or receives any goods in contravention of any provision of this Act and such contravention results in evasion of tax payable under the Act, or does not account for any goods in the manner required under the Act, or supplies goods that are liable to tax under the Act without applying for registration, or uses any conveyance as a means of transport for carriage of goods in contravention of the provisions of CGST/SGST Act (unless used without knowledge of owner) contravenes any provision of the Act/Rules with the intention of evading payment of tax. Q 10. What happens to the goods upon confiscation of goods by the proper officer? Ans. Upon confiscation, the title in the confiscated goods shall vest in the Government and every Police officer to whom the proper officer makes a request in this behalf, shall assist in taking possession of the goods. Q 11. After confiscation, is it re

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itution or commencement of legal proceeding; the process of exhibiting formal charges against the offender. Section 198 of the Criminal Procedure Code defines prosecution as the institution and carrying on of the legal proceedings against a person. Q 14. Which are the offences which warrant prosecution under the CGST/SGST Act? Ans. Section 132 of the CGST/SGST Act codifies the major offences under the Act which warrant institution of criminal proceedings and prosecution. 12 such major offences have been listed as follows: a) Making a supply without issuing an invoice or upon issuance of a false/incorrect invoice; b) Issuing an invoice without making supply; c) Not paying any amount collected as tax for a period exceeding 3 months; d) Availing or utilizing credit of input tax without actual receipt of goods and/or services; e) Obtaining any fraudulent refund) f) evades tax, fraudulently avails ITC or obtains refund by an offence not covered under clause (a) to (e); g) Furnishing false i

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rore and ₹ 5 crore 3 years and fine Tax evaded between ₹ 1 crore and ₹ 2 crore 1 years and fine False records Obstructing officer Tamper records 6 months Q 15. What are cognizable and non-cognizable offences under CGST/SGST Act? Ans. In terms of Section 132(4) and 132(5) of CGST/SGST Act all offences where the evasion of tax is less than ₹ 5 crores shall be non-cognizable and bailable, all offences where the evasion of tax exceeds ₹ 5 crores shall be cognizable and non- bailable. Q 16. Is prior sanction of competent authority mandatory for initiating prosecution? Ans. Yes. No person shall be prosecuted for any offence without the prior sanction of the designated authority. Q 17. Is mensrea or culpable mental state necessary for prosecution under CGST/SGST Act? Ans. Yes. However, Section 135 presumes the existence of a state of mind (i.e. culpable mental state or mensrea) required to commit an offence if it cannot be committed without such a state of mind Q

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deemed to be guilty of the said offence and liable to be proceeded against and punished accordingly. Q 20. What is meant by compounding of offences? Ans. Section 320 of the Code of Criminal Procedure defines compounding as to forbear from prosecution for consideration or any private motive. Q 21. Can offences under CGST/SGST Act be compounded? Ans. Yes. As per section 138 of the CGST/SGST Act, any offence, other than the following, may upon payment of the prescribed (compounding) amount be compounded and such compounding is permissible either before or after the institution of prosecution: Offences numbered 1 to 6 of the 12 major offences (outlined in Q. 16 above), if the person charged with the offence had compounded earlier in respect of any of the said offences; Aiding/abetting offences numbered 1 to 6 of the 12 major offences, if the person charged with the offence had compounded earlier in respect of any of the said offences; Any offence (other than the above offences) under any S

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