GST or Goods and Services Tax is a revolutionary indirect taxation regime, which came into force in July, 2017. Divided into 5 slabs, GST replaced several state and central taxes, excises duties across India, and enabled one single tax all across India. Since GST is a consumption-based tax, its USPs are multi-stage, destination-based taxation regimes, and simplifying many taxation-related activities for the businesses.
Every business with a turnover of more than Rs 40 lakh should register for GST and file its returns. However, this limit for services-based business is Rs 20 lakh, and Rs 10 Lakhs for NE States, J&K, Himachal Pradesh, and Uttarakhand.
To implement GST across India and make sure that businesses adhere to the GST rules, the Finance Ministry has introduced several penalties and regulations for late payments, which can be imposed on the offenders.
In this article, we will share the details about interest on late payment of GST and all the offenses and penalties under GST, which are applicable for businesses in India.
Offenses Under GST Regime
In total, the GST Authorities have created a set of 21 offenses under GST, which are applicable for all businesses in India.
These are:
#1: Eligible businesses not registering for GST
#2: Selling goods and services without any invoice and/or issuing an invoice which is false and fake
#3: Issuance of the invoice using GST number of any other business/person
#4: Submitting false and incorrect information while registering for GST
#5: Submitting false and fake records while filing for GST returns, intending to evade taxes
#6: Claiming GST refunds by sharing false data
#7: Not reporting exact sales figures to evade GST
#8: Claiming relief under Composite Scheme, even if the business is not eligible
#9: Collecting GST from customers, but not informing/submitting to the Govt within 3 months
#10: Collecting GST under pretense and fraud, but not informing or submitting to the Govt within 3 months
#11: Using benefits of input tax credit without any valid invoice
#12: Transportation of goods (inter-city, inter-state) without documents
#13: Supplying goods, even after knowing that the GST Authorities can seize the goods.
#14: Destroying or tampering with seized goods
#15: Not deducting GST TDS where applicable, or deducting less TDS
#16: Not collecting TCS where applicable, or collecting incorrect TCS
#17: Input Service Distributor taking or distributing input tax credit where it’s not applicable
#18: Obstructing any tax official or Govt official while performing his/her duty (for example, during tax audit)
#19: Not maintaining proper accounting books/standards as mandated by law
#20: Destroying any evidence
#21: Issuing invoice without delivering any service or goods
#22: Not paying GST on eligible GST supplies
As per the penalty section under GST, penalties will be 100% for these offenses, with a minimum penalty of Rs 10,000.
Penalties Under GST
Although GST Laws don’t define the meaning of the word ‘penalty’, we will take the liberty of understanding this term based on common usage, and previous Judicial verdicts.
Here, a penalty is a punishment as imposed by law for anyone not following the law and doing as per the mandated rules.
Some of the major penalties under the GST act are:
| GST Offense Type | GST Penalty |
| Delay in filing GSTR | Rs 100/day for CGST, Rs 100/day for SGST, Zero for IGST. Max is Rs 5000/day |
| Not filing GSTR | 10% of the total tax dues, or Rs 10,000 whichever is higher |
| Committing a fraud | 100% of tax dues, or Rs 10,000, whichever is higher. Imprisonment in case of large frauds |
| Helping a person commit a fraud | Upto Rs 25,000 |
| Wrongfully charging GST | 100% of tax dues or Rs 10,000, whichever is higher |
| Not issuing invoice | 100% of the tax dues or Rs 10,000, whichever is higher |
| Incorrect invoicing | Rs 25,000 |
| Not registering under GST | 100% of tax dues or Rs 10,000, whichever is higher |
Interest On Delayed Payment Under GST
As per Sec 50(1) of CGST Act 2017, tax defaulters are liable to pay upto 18% interest on delayed payments under GST. However, there is a controversy here: On which amount should the interest on late payment of GST should be applied? Gross or Net?
According to the original GST law, the tax on the delayed payment under GST should be levied on the gross amount that has been unpaid.
However, the 39th GST Council meeting declared that the interest on late payment of GST needs to be applied on net cash tax liability, and not gross (after deducting available input tax credits). This major change in Section 50(1) over interest on delayed payments under GST has been approved by the Govt.
Now, there is an ambiguity over the date from which this interest over late payment of GST needs to be levied. In 2019, this new rule for interest and late fees under GST, including interest, was applicable retrospectively, from July 1st, 2017. However in August, Govt informed that September 1st, 2020 is the date from which this interest will be levied.
Rs 500 is the maximum late fees to be imposed, per return.
The matter of interest on unpaid GST, and late fees for filing GST is actually pretty dynamic, and the rules are being modified frequently.
Being an entrepreneur, it’s imperative that you stay updated and informed of the new GST rules, and penalties, late fees, and more.
And this is where MSMEx can provide you expert help. We are a platform of business veterans, coaches, and experts who can provide you help and assistance whenever you need, wherever you need.
In case you have any questions over GST filing and GST rules, then book an appointment with our GST expert, and resolve all queries instantly.
Book your appointment here at MSMEx.
