Offences, penalties and prosecution under gst

OBJECTIVE

To check if the levy and collection of GST is in order, there also needs to be monitoring of offences committed by any person in contravention to provisions of this Act. The GST Law imposes penalties and prosecution for offences depending on the intention of the person committing the offence. In this Webinar we will be learning about the provisions of the GST Act regarding the major offences, penalty leviable, prosecutions for sepcified offenses and general disciplines relating to penalty.

1. Offences, Penalties and Prosecution under GST CA Jugal Narendra Gala

2. Research Credits Gracelin Lita

3. Legends used in the Presentation GST Goods and Services Tax CGST Central Goods and Services Tax SGST State Goods and Services Tax UTGST Union Territory Goods and Services Tax CG Central Government SG State Government GSTR Goods and Services Tax Return GSTN Goods and Services Tax Network IT Information Technology VAT Value Added Tax UIN Unique Identification Number TDS Tax Deducted at Source LLP Limited Liability Partnership HUF Hindu Undivided Family

4. Presentation Schema

5. Introduction

6. Penalties for Offenses by any Taxable Person Section 122 of CGST Act

7. Penalty for Offenses Committed by Taxable Persons –Sec 122(1) * Sec 51(1) - A department of the CG/SG ,Local authority , Governmental agencies or other persons notified by the government shall deduct TDS at 1% from the payment made to supplier if the total value of such supply exceeds Rs.2,50,000 Penalty shall be leviable on a taxable person for the following offenses

8. Contd… * Sec 52(1) -Every Electronic Commerce Operator shall collect an amount not exceeding 1% of the net value of taxable supplies made through it by other suppliers where the consideration is collected by the operator ** Sec 20 – Manner of distribution of credit by Input Service Distributor

9. Contd…

10. Penalty for offences under Sec 122(1) Amount of penalty shall be higher of the following

11. Penalties for Offenses by any Registered Persons Section 122(2) of CGST Act

12. Penalty for Offences by any Registered Person – Sec 122(2) Any registered person who has made supply of goods or services or both on which Tax has not been paid or short-paid or erroneously refunded ITC has been wrongly availed or utilised Intention of Offense Penalty Other than fraud or wilful misstatement or suppression of facts to evade tax Higher of the following: Rs.10,000 or 10% of the tax due from such person Fraud or wilful misstatement or suppression of facts to evade tax Higher of the following : Rs.10,000 or Tax due from such person

13. Penalties for Offenses by Any Person Section 122(3) of CGST Act

14. Penalty for Offenses committed by Any Person - Sec 122(3) Penalty is leviable at amount which may extend up to Rs.25,000 for any of the following offenses committed by any person Aids or Abets any of the offenses specified under Sec 122(1) Acquires possession of or concerned with transporting, removing, depositing, keeping, concealing, supplying, or purchasing goods that are liable to confiscation Receives or concerned with the supply of services in contravention to provisions of GST Act Fails to appear before the Officer of Central Tax when issued with a summon for appearance to give evidence or produce a document in an inquiry Fails to issue Invoice as per the provisions concerned or fails to account for an invoice in his books of account

15. Penalty for Failure to Furnish Information Return – Sec 123 Where a person has not furnished information return under Sec 150* within the specified time**, the Commissioner may issue a notice to furnish the information return within a period not exceeding 90 days from the date of service of notice If the person still fails to furnis h the information return: A penalty of Rs.100/day (for the period during which the failure continues ) subject to a maximum amount of Rs.5,000 is payable by such person * Sec 150 – Information return is a return of the following details to be furnished by certain persons as notified by the Government : Record of registration Statement of accounts Periodic return of tax payment made Transactions of goods or services Transaction relating to bank account or consumption of electricity Transaction of purchase or sale

16. Persons required to Furnish Information Return Any Taxable Person A Local authority or other Public Authority or Association Any Authority of SG responsible for collection of VAT/ Sales Tax/ State Excise duty Any Authority of CG responsible for collection of Customs duty/Excise duty An Income Tax Authority A Banking Company A State Electricity Board or any electricity transmission board entrusted by CG/SG The Registrar or Sub-Registrar as per Registration Act A Registrar under Companies Act A registering authority empowered to register motor vehicles A collector referred in Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act A Recognised Stock Exchange A depository A RBI Officer The GST network UIN holder Any other person as may be specified by the Government

17. Fine for Failure to Furnish Statistics – Sec 124 If any person required to furnish any information under Sec 151 * Fails to furnish such information or return without reasonable cause Wilfully furnishes false information or return Fine which may extend up to Rs.10,000 In case of a continuing offence , further fine of Rs.100/day after the first day during which the offense continues subject to a maximum of Rs.25,000 * Sec 151 – The Commissioner, if he considers it necessary may call upon concerned persons to collect statistics relating to any matter dealt in connection with this Act Eg. Statistics relating to Total number of returns filed in a month, Total number of invoices uploaded in a quarter, etc.

18. Liability of Officers and Certain Other Persons – Sec 133 Any person engaged in collection of statistics under Sec 151 Any Officer of Central Tax having access to information under Sec 150 Any other person engaged in provision of service on the Common Portal or Agent of Common Portal Wilfully discloses any information or the contents of any return furnished otherwise than, In execution of his duties OR For the purposes of prosecution for an offence Punishment Imprisonment for a term extending up to 6 months or with a fine up to Rs.25,000 or with both In case of Government servant With previous sanction of Government In case a person other than Government servant* With previous sanction of Commissioner * Example: An authorised agent of the GSTN other than a Government employee who provides IT infrastructure and services to the CG/SG and tax payers

19. Detention, Seizure and Release of Goods and Conveyances in Transit – Sec 129 Where any person transports any goods, or stores any goods while they are in transit, in contravention of the provisions of this Act The following shall be liable to detention or seizure : All such goods and conveyance used to transport the said goods Documents relating to such goods and conveyance Such goods/conveyance shall be detained only by an Order of Detention/Seizure served on the person The Proper Officer shall issue a notice specifying the tax and penalty payable and pass an order for the same . The person concerned shall be given an opportunity of being heard before imposing any penalty In case of consignment If Specified document accompanied with consignment of goods Either the Consignor or Consignee should be deemed to be the owner If Specified document not accompanied with consignment of goods Proper Officer should determine who should be declared as the owner of goods

20. Release of Goods and Conveyances Where owner of the goods comes forward for payment of applicable tax and penalty Where owner of the goods does not come forward for payment of applicable tax and penalty Other than exempted goods On payment of applicable tax and penalty equal to 100% of the tax payable on such goods OR Furnishing a security equivalent to the amount payable Exempted goods 2% of value of goods or Rs.25,000 (Whichever is less) Furnishing a security equivalent to the amount payable The Goods/Conveyance after detention or seizure shall be released in the following manner Other than exempted goods On payment of applicable tax and penalty equal to 50% of the value of goods reduced by the tax amount paid thereon OR Furnishing a security equivalent to the amount payable Exempted goods 5% of value of goods or Rs.25,000 (Whichever is less) Furnishing a security equivalent to the amount payable

21. Contd… ** Sec 130 – Confiscation of goods or conveyances and levy of penalty * Sec 67(6) – Powers of Inspection, Search and Seizure

22. Confiscation of Goods or Conveyances and Levy of Penalty – Sec 130 If any person commit any of the following offenses , all goods and conveyances shall be liable to confiscation * and he shall be liable to penalty under Sec 122** Supplies or receives any goods in contravention of any provisions of the GST Act Does not account for any goods on which he is liable to pay GST Supplies any goods liable to GST without applying for registration Contravenes any provisions with a motive to evade tax Uses any conveyance to transport goods in contravention to GST Act (Except when the owner of the conveyance proves that it was used without his knowledge or assistance) * Confiscation is a legal form of seizure by the Government or other Public authority. It means transfer of the title to the goods to the Government ** Sec 122 – Penalty for certain offenses committed by a taxable person, a registered person or any other person (discussed before)

23. Other Provisions relating to Confiscation

24. Punishments for Specified Offences Section 132 of CGST Act

25. Major Offenses under the GST Act CGST Act codifies the major offenses which warrant institution of criminal proceedings and prosecution . Whoever commits any of the following offenses shall be punishable with the sanction of Commissioner 1 Supply of goods or services without issue of any invoice with an intention to evade tax 2 Issue of invoice or bill without supply leading to wrong availment or utilisation of ITC or Refund of Tax 3 Wrong Availment or Utilisation of ITC by issue of invoice without any supply of goods or services 4 Failure to pay any amount collected as tax to the Government within 3 months from the date on which payment becomes due 5 Evasion of tax by fraudulent availment of ITC or refund of tax 6 Falsification of financial records or documents and information with an intention to evade tax 7 Obstructs or prevents any officer in the discharge of his duties 8 Acquires possession of or concerned with transporting, removing, depositing, keeping, concealing, supplying, or purchasing goods that are liable to confiscation 9 Receives or concerned with the supply of services in contravention to provisions of GST Act 10 Tampers or destroys any material evidence or documents 11 Failure to supply any information when required 12 Attempts to commit or abets the commission of any of the major offenses mentioned above

26. Punishment for the Major Offenses Offence Involved Amount involved (Rs.) Punishment (Imprisonment of minimum of 6 months* extending to ) Any offence where the amount of tax evaded or ITC wrongly availed or utilised or Refund wrongly taken More than 5 crores 5 years with fine Exceeds 2 crores but less than or equal to 5 crores 3 years with fine Exceeds 1 crore but less than or equal to 2 crores 1 year with fine Commits or abets the Falsification of records, Prevention of officer in doing his duties or is Concerned with goods liable to confiscation NA 6 months or with fine or both For second and every subsequent offence under Sec 132 No limit 5 years and fine *Imprisonment for minimum of 6 months shall be imposed in the absence of special and adequate reasons to the contrary to be recorded in the Court’s judgment Note: There is no separate punishment mentioned in the Act for offenses such as “Destroying material evidences” and “Failure to supply information return”. But they attract penalty under Sec 122(1) and 123 respectively

27. Non-Cognizable Vs. Cognizable Offense Points of Distinction Cognizable Offence Non-Cognizable Offense Meaning A serious category offence where an Officer, duly empowered, has authority to make an arrest without a warrant and to start an investigation with or without the permission of a Court A relatively less serious offence where there is no authority to make arrest without a warrant and no authority to start an investigation without a Court Order except under Special Legislation Classification Following offences where amount of tax evaded or ITC wrongly availed or Refund wrongly taken exceeds Rs.5 crores All major offenses under Sec 132 except cognizable and non-bailable offenses 1) Supply without issue of invoice 2) Issue of invoice without supply 3) Wrong availment of ITC by issue of invoice without supply 4) Failure to pay any amount collected as tax Bailable or Non-bailable Non-bailable offence Bailable offense

28. Presumption of Culpable Mental State – Sec 135 In any prosecution for an offence, the Court shall presume the existence of culpable mental state on the part of the accused Culpable state of mind is a state of mind wherein The act is intentional The act and its implications are understood and controllable The person committing the act was not coerced and even overcomes hurdles to the act committed The person believes or has reasons to believe that the act is contrary to law If the accused takes the above as a defense stating that he has no such mental state The fact will be proved only when the Court believes it to exist beyond reasonable doubt and not merely when its existence is established by a dominance of probability. Thus, for any offence, it will be assumed that the accused has culpable mental state, in case, contrary is proved by the accused

29. Offences by Companies Section 137 of CGST Act

30. Offence Committed by a Company Where an offense has been committed by a taxable person being a Company *Any person liable to punishment shall not be held liable if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence

31. Offence Committed by a Partnership Firm/ LLP/ HUF/ Trust Where an offense has been committed by a taxable person being a Partnership Firm/LLP/HUF/Trust *Any person liable to punishment shall not be held liable if he proves that the offence was committed without his knowledge or that he had exercised all due diligence to prevent the commission of such offence

32. General Disciplines Related to Penalty – Sec 126 The levy of penalty is subject to certain disciplinary regime as follows Non-applicability of Section 126 Sec 126 shall not apply when penalty is specified under this Act either as a fixed sum or expressed as a fixed percentage under other sections(discussed before). Thus, Sec 126 shall apply only when an officer himself imposes any penalty where he considers it necessary.

33. Power to Impose Penalty in Certain Cases – Sec 127 Where the Proper Officer is of the view that a person is liable to a penalty and the same is not covered under any of the following proceedings , he may issue an order levying such penalty after giving a reasonable opportunity of being heard to such person* Sec 62 Assessment of non-filers of Returns Sec 63 Assessment of unregistered persons Sec 64 Summary Assessment Sec 73 Determination of : Tax not paid or short paid or erroneously refunded ITC wrongly availed or utilized for any reason other than fraud or willful misstatement or suppression of facts Sec 74 Determination of: Tax not paid or short paid or erroneously refunded ITC wrongly availed or utilized by reason of fraud or willful misstatement or suppression of facts Sec 129 Detention, Seizure and Release of Goods and Conveyances in transit Sec 130 Confiscation of goods or conveyances * A person covered under the proceedings mentioned above relate to offences already discussed. Sec 127 states that penalty can be imposed by Proper Officer even when there are no proceedings open with regard to assessment, adjudication, detention or confiscation

34. Additional Provisions Section Provision 125 General Penalty Any person who contravenes any provisions of the GST Act for which no penalty is separately provided , shall be liable to a penalty up to Rs.25,000 128 Power to Waive Penalty The Government may by notification waive either fully or partly on the recommendations of the Council Any penalty under Sec 122(Penalty for certain offences), Sec 123 (Penalty for failure to furnish information return) and Sec 125(General Penalty) Late fees under Sec 47( For delay in filing of return) 134 Cognizance of Offences No Court shall take cognizance* of any offence punishable under the GST Act except with the previous sanction of Commissioner and no Court inferior to a Magistrate of the First Class shall litigate a legal controversy of any such offense 136 Relevancy of Statements under certain circumstances A statement mad e and signed by a person in response to a summon issued under Sec 70 (Summon issued to give evidence and produce documents) shall be relevant in prosecution of any offense for proof of truth in the following circumstances When the person who made the statement is dead or cannot be found or is incapable of giving evidence or kept away by the adverse party When the person who made the statement is a witness in the case and the Court requires the statement as evidence for justice *Cognizance – take account of

35. Compounding of Offenses Section 138 of CGST Act

36. What is Compounding of Offenses ?

37. Restrictions on Compounding of Offences Compounding of Offences shall not apply to the following cases A person who has been allowed to compound once in respect of the following specified offenses under Sec 132 1) Supply without issue of Invoice 2) Issue of Invoice/Bill without Supply 3) Wrong availment of ITC using invoice issued without supply 4) Failure to pay any amount collected as tax to the Government 5) Fraudulently avails ITC/Refund of tax with the intention to evade tax 6) Falsification of financial records and documents with motive of tax evasion 7) Attempts to commit or abets the commission of the specified offenses mentioned above A person who has been allowed to compound once in respect of offences other than the specified offenses mentioned above , in respect of supplies of value exceeding Rs.1 crore A person who has been accused of committing an offence under GST Act which is also an offense under any other law in force

38. Contd… A person who has been accused of committing the following offenses 1) Obstructs or prevents an officer in doing his duties 2) Destroys any material evidence or documents 3) Fails to supply information when required A person who has been convicted for an offence under the GST Act by a Court Any other class of persons or offences as may be prescribed Any compounding allowed shall not affect the proceedings initiated under any other Law Compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences

39. Monetary Limit for Compounding of Offences Abatement of Proceedings On payment of compounding amount, no further proceedings shall be initiated and any criminal proceedings already initiated against such offence shall stand abated

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