Offences, Penalties, Prosecution and Compounding
GST FAQ 3rd Edition – December, 2018 – GST Frequently Asked Questions (FAQs)
GST
19. Offences, Penalties, Prosecution and Compounding
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 c
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an officer in terms of the Act/Rules or furnishing false information/documents during the course of any proceeding;
18) Supplying/transporting/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 whic
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case where the tax involved is less than ₹ 5000), or
* a procedural requirement of the law, or
* an easily rectifiable mistake/omission in documents (explained in the law as an error apparent 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 l
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prescribed shall be punishable with a penalty that may extend to ₹ 25,000/-
Q 7. What action can be taken for transportation of goods without valid documents or attempted to be removed without proper record in books?
Ans. If any person 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
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riate (private property) to the public treasury by way of penalty; to deprive of property as forfeited to the State.”
In short in means transfer of the title to the goods to the Government.
Q 10. Under which circumstances can goods be confiscated under CGST/SGST 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 11. What happens to the goods upon confiscation of
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ere being transported without cover of the required documents/declarations without his knowledge or connivance or without the knowledge or connivance of his agent then the conveyance shall not be liable to confiscation as aforesaid.
Q 14. What is Prosecution?
Ans. Prosecution is the institution 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 15. 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
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prescribed on conviction of any offence under the CGST/SGST Act?
Ans. The scheme of punishment provided in section 132(1) is as follows:
Offence involving
Punishment (Imprisonment extending to)
Tax evaded exceeding ₹ 5 crore or repeat offender250 lakh
5 years and fine
Tax evaded between ₹ 2 crore 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 17. 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 18. Is prior sanction of competent authority mandatory for initiating prosecution?
Ans. Yes. No person shall be prosecuted
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of its business shall, along-with the company itself, be liable to be proceeded against and punished for an offence committed by the company while such person was in-charge of the affairs of the company. If any offence committed by the company-
* has been committed with the consent/connivance of, or
* is attributable to negligence of-
any officer of the company then such officer shall be deemed to be guilty of the said offence and liable to be proceeded against and punished accordingly.
Q 22. 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 23. 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:
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e greater of the following amounts: –
* 50% of tax involved, or
* ₹ 10,000.
The upper limit for compounding amount is to be greater of the following amounts: –
* 150% of tax involved or
* ₹ 30,000.
Q 25. What is the procedure for compounding of offences?
Ans. The applicant has to make an application in form GST CPD-01 to the Commissioner for compounding of an offence. The application is not allowed unless the tax, interest and penalty liable to be paid have been paid in the case for which the application has been made
On receipt of the application, the Commissioner shall call for a report from the concerned officer with reference to the particulars furnished in the application, or any other information, which may be considered relevant for the examination of such application.
The Commissioner, after taking into account the contents of the said application, may, by order in FORM GST CPD-02, on being satisfied that the applicant has cooperated in the proceedings
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