GST is feary, – a hideous enemy, we’re trying to come to terms with! And it punishes hapless subjects who don’t even have any teeth against it, – a draconian trait lifted directly into the most modern tax reform in the world. Hadn’t it been fair if the subjects would have had some retaliatory rights granted against any unjust enforcement of this piece of law! But that’s a different subject altogether that we’ll take up someday, next.
So, such an unfair a piece of legislation GST is..! No? Doesn’t it arrest and prosecute for even mistakes, which might have some gravity!
Yes; a No!
There are well defined set of offences as discussed below which attract cash penalties. Mistakes do not attract any penalty unless these are grave and not rectifiable. Of course there are offences which attract arrest and imprisonment. But these are also well defined ones as discussed below and attract different levels of imprisonment.
- Penalties imposed by the Department:
On a sincere note, it is hereby pointed out that GST has a set of defined actions qualifying as ‘offence’. These are either active actions by Taxpayers i.e. done knowingly viz. issuing of good-less invoices or supplying goods without invoices etc. and includes active failures e.g. in collecting of or deducting of tax or in paying the so collected/ deducted tax to the Government’s account [S.122(1)]. Such offences by a Taxpayer attract penalty ‘equivalent’ to applicable tax or at least Rs.10000/-.
Then there are offences by ‘registered persons’ (Taxpayers, broadly!) who may have availed inadmissible credit or supplied goods without payment of full amount of Tax, knowingly or unknowingly. Penalty is imposable at same rates as above in active offences or at 10% of the Tax where the offence is without any fraud or intent to evade Tax. Minimum in both cases is, again, Rs.10000/- [S.122(2)].
The third category of offences is by any person. These offences are: a. abetment of the ones defined under S.122(1) ibid. Or b., where one transports, stores or in any way deals with the supplies which he has reasons to believe are liable to confiscation (not Tax-paid, broadly.). Or c., receives or supplies services without properly followed procedures prescribed under the GST Acts/ Rules. Or d., where one doesn’t appear before a GST officer when issued with a Summon for appearance. Or e., where one issues Invoice not as per the relevant provisions (without containing all the prescribed particulars or without following the prescribed timeline etc. or doesn’t issue an Invoice at all). Such offences are punishable with a penalty of Rs.25000/- [S.122(3)].
Noteworthy is that the amount of penalty applicable here is under CGST Act. Therefore the penalty for the State G&S Tax component, equal penalty is payable additionally. The FORM GST PMT-06 (Challan meant for payment of GST Taxes and Interest and Penalties) separately provides columns for the amounts of Tax, Interest and Penalty applicable under the each Act.
A Public Authority, a Banking Company or a Government Department e.g. say Income Tax Department, where doesn’t provide the GST department any requested information, the penalty applicable is up to Rs.5000/- [S.123]. Where any other person doesn’t provide the GST department any requested information without any reasonable cause or furnishes false information, the penalty applicable is up to Rs.25000/- [S.124].
Where there is not penalty provided under above provisions but a contravention occurs, a penalty of up to Rs.25000/- is imposable [S.125]. (Isn’t this one so arbitrary?)
The Section 126 specifically provides that officer shall impose NO PENALTY for minor breaches viz. where tax implication is Rs.500/- or less; Or where the mistake is the one which is apparent on the face of record or is easily rectifiable and is without fraudulent intent or gross negligence.
Section 126 further provides that the penalty imposed under this Act shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach. Here the ‘equivalent’ penalty of Section 122(1) supra becomes relevant. It means that the penalty might hover near the equal of Tax in those active offences, but nonetheless will have to be decided by the relevant officer giving due import to the circumstances.
- Arrest; and punishment by imprisonment:
The department doesn’t award any imprisonment in any case. But it identifies the cases on well defined parameters as discussed below, and launches prosecution against the identified persons in these cases in the competent court demanding for imprisonment.
There are 11 such offences; including 4 cognizable/ non-bailable ones [S.132(5)]. Non-bailable here merely means that bail cannot be granted by a Departmental officer but the relevant person is arrested and is produced in the competent court which only can grant the bail. These 4 offences are i. supply of goods or services without issue of Invoice; ii. issue of Invoice without supply of Goods or Services; iii. Availing ITC (Input Tax Credit) on such Invoices and iv. Collecting Tax but not depositing the same with the Government beyond 3 months. Noteworthy is that these 4 offences are also not cognizable/ non-bailable as such but where the applicable tax component is Rs.5 Crores or more, then these offences committed are treatable as cognizable/ non-bailable [S.132(1); S.132(5)].
The quantum of imprisonment depends on the amount of Tax applicable in a case, where any or all of the 11 offences stand committed. The imprisonment may extend to 1 year in a case where Tax applicable is above Rs.1 Crore but is up to Rs.2 Crores; 3 years in a case where Tax applicable is above Rs.2 Crore but is up to Rs.5 Crores; 5 years in a case where Tax applicable is above Rs.5 Crores. Fine is also imposable in all these cases in addition to the imprisonment.
Arrest may be made in the cases involving Tax amount of Rs.2 Crores or above in the said 4 offences [S.69(1)]. An officer of the Commissioner’s rank can authorize any officer to make an Arrest.
The amount of ‘TAX’ for these purposes, is the TOTAL of all GST Taxes viz. the cGST, sGST and iGST leviable, respectively, under the Central GST Act, the State GST Act and the Integrated GST Acts of 2017.
Where a person falsifies or substitutes financial records or obstructs or prevents any officer in the discharge of his duties or tampers with or destroys any material evidence or documents he is punishable with an imprisonment up to 6 months or with fine or with both.
IT DOESN’T CONCLUDE HERE!
There are more types of offences and penalties prescribed for these in GST. And then there are the principles of Natural Justice e.g. granting of a Personal Hearing, which the GST makes mandatory for the officers to follow. On all these aspects we’ll cover someday, next!