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GST Offenses and Prosecution


GST Offenses and Prosecution

As per Section 73 and 74 of the CGST Act, any non-payment, short payment of taxes, improper availment, or utilization of input tax credit or incorrect refund shall be considered as a major offense in GST law. As soon as the roll-out of the GST Act, the GST Council prescribed a list of offenses that can lead to criminal proceedings and prosecution. In this article, we look at some of the major GST offenses and prosecution in detail.

Offenses listed other than Section 73 and 74 of the CGST Act

Other than Section 73 and 74 of the CGST Act, Section 122(1) of the CGST Act also covers the following offenses. When a taxpayer commits any one of the following offenses, an authorized departmental authority can impose the penalty for the offense committed. The following are the offenses as per Section 122(1):

  • When a supplier provides any goods or services or both without an invoice or issues an incorrect or false invoice related to the each supply
  • Issues an invoice or bill but without providing the supply of goods or services or both
  • A person who has authorized to collect any amount of tax but fails to pay the tax amount collected to the government beyond a period of three months from the date, the person collected tax
  • A person who has authorized to collect any amount of tax but fails to deduct the tax as per Section 51(1). The Section shall also apply where if the person deducts the amount less than the required as to be paid to the government
  • The concerned person collects the amount less than the required amount as per Section 52(1) and also fails to pay to the government.
  • The taxpayer takes or utilizes the input credit tax without original receipt of goods or service or both either fully or part of the goods or services
  • Any person authorized to collect the tax but commits fraud and obtains the refund
  • A person who is authorized to collect tax obtains the tax but distributes in violation of Section 20 or any of the rules of the Act

Documents or Documentation

  • The taxpayer falsifies or substitutes the financial records or produces a fake account or documents or produces any false information with an intention to evade payment of the tax which is due
  • The concerned individual fails to obtain registration
  • The registered person furnishes false information with regard to the registration information, either at the time of applying for registration or at any time during the registration process
  • If the person objects, obstructs or prevents the authorized officer in the discharge of duties
  • If the supplier transports any taxable goods without any proper documents as required during inter-state or intra-state supplies
  • Hiding the details of the tax deliberately to evade tax
  • If the taxpayer fails to furnish the details of this supply or maintain the records or retain the information and other related documents of the supply in the books
  • If the registered person transports, stores or supplies any goods that are liable to confiscation
  • Issues any invoice or document by using the registration number of another registered person
  • Any registered person tampers the documents or information of the supply or disposes of the said documents

Penalty for Offenses caused as per Section 122(1)

Any person found guilty by the authorized officer for any of the above-mentioned offense shall be liable to pay a penalty of Rs.10,000 or amount equivalent to the tax evaded or tax not deducted as per Section 51.

Any person found guilty by the authorized officer for any of the above-mentioned offense shall be liable to pay a penalty of Rs.10,000 or amount equivalent for failure to collect tax, deducted the tax but not paid to the government or short deducted as per Section 52.

Penalty of Rs.10,000 shall apply for persons who availed input tax credit but failed to distribute regularly or claimed refund fraudulently

Offenses Leading to Prosecution

  • One must not supply goods or services(barring a few exemptions) without a proper GST invoice, which acts as a document or a record. Not issuing the invoice or issuing a dubious one will pave the way for a taxpayer to be prosecuted.
  • Issuing of invoices where supply didn’t take place.
  • Tax collections unpaid for a period extending to more than three months.
  • Availing/utilizing credit of input tax without actual receipt of goods/ services.
  • Availing any fraudulent GST refund.
  • Evasion of tax, fraudulently availing Input Tax Credit.
  • Any fraudulent measures to evade tax like furnishing of false information, manipulating the financial records, or furnishing of fake accounts.
  • Obstructing or preventing any official in the discharge of his duty.
  • Dealing with goods liable to confiscation.
  • Receiving/dealing with the supply of services which is contradictory to the law of good faith.
  • Material evidence or documents being tampered with.
  • Failing to provide the required information or giving the wrong information.
  • Attempting to commit or abetting the commission of any of the offenses

 Punishment for the GST Offenses

Given below are the rules related to punishment under GST:

  1. Tax evasion exceeding rupees 5 crore- Five years of imprisonment and fine
  2. Repeated offence of 250 lakh rupees- Five years of imprisonment and fine
  3. Tax evasion between 2 crores and five crores- Three years of imprisonment and fine
  4. Tax evasion between 1 crore and two crores- 1 year  of imprisonment and fine
  5. False records- 6 months of imprisonment
  6. Obstructing officer- 6 months of imprisonment
  7. Tamper records- 6 months of imprisonment

Note: A person is only subject to prosecution after the prior approval of the commissioner.

Cognizable and non-cognizable offense

Offenses, in any circumstances, are of two kinds, cognizable and non-cognizable, which means identifiable and non-identifiable offenses, respectively. This factor of identification helps in the candidate being allowed to be bailed out or otherwise. Under the Indian taxation laws, the following is applicable:

  • Offenses ranging below five crores shall be non-cognizable and bailable.
  • Offenses above the range of 5 crores shall be cognizable and non-bailable.

Compounding Fee for the GST Offenses

A compounding fee is allowed in the provisions of GST Law- in certain cases alone, which can help avoid litigation. The fee may range anywhere between 10,000 and 30,000 rupees.

The below-mentioned offenses can’t be solved by a mere compounding fee:

  • Repeated offenders are not permissible of this privilege.
  • When the assessee has already availed this benefit, for breaches ranging above one crore rupees.
  • Any person who has been tried under Acts such as narcotics, FEMA, etc.
  • Any person convicted by a court under any ACT of GST
  • Offenses of the likes of providing false information during proceedings, preventing an officer from performing his duties or tampering with evidence.

Culpable State of Mind

The word culpable means to deserve blame, which makes it clear that here in the realms of taxation, an assessee must be culpable in order to be prosecuted. So, how does the law perceive culpability?

  • An intentional act is a culpable act.
  • The acts and its consequences are understood and controllable.
  • The defaulter is not coerced.
  • The person believes or has reasons to believe that the Act is contrary to law.

Proceedings with Regards to Companies

Any person who was in charge of the company’s affairs and any act of offense under his influence, consent, or negligence, will lead to actions executed against the company as well as the person involved like Directors and Officers.

Aiding or Decreasing Offense or Contravening Provisions

As per Section 122(3) of the CGST Act, the following shall apply:

  • Hides or encourages any of the offenses as specified in Sections (I) to (xxi) of Section 122(1)
  • If the registration acquires possession or transports, removes, deposits, keeps, conceals, supplies, purchases any goods that are liable to confiscation as per the Act
  • If the person receives or any way concerned with the supply of goods or supplies goods that are liable to confiscation as per the Act
  • Fails to appear before the officer of the Central Tax, when issued with a summon for appearance to give evidence or produce a document in an enquiry
  • When the registered person fails to issue an invoice as per the provision the Act or Rules
  • When the registered person fails to account for an invoice in a book

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