Consequences of non compliance in GST

If there is a GST non compliance then the tax law requires strict action against tax offenders. Such GST non compliance actions are very strict unlike the current tax laws.

The GST non compliance will lead to following:

  • Interest, (Yet to be notified)
  • Monetary penalties &
  • Prosecution.

Here we will examine some of the monetary penalties and prosecution provided under the CGST Act.

Late Fees

Offense Late fee
A person fails to furnish details of outward or inward supplies, monthly return or final return by the due date . Rs 100 per day while the failure continues, subject to a maximum of Rs 5,000 rupees.
A person fails to furnish the annual return by the due date (31st December of next FY) Rs 100 per day while the failure continues, subject to a maximum of quarter percent of the person’s turnover in the state where he/she is registered
Deductor fails to furnish TDS certificate to Deductee within 5 days of credit to govt. Rs 100 per day, subject to max of Rs 5,000

Offenses that may attract prosecution

1. Supplying goods and/or services without issuing an invoice or issuing an incorrect or false invoice
2. Issuing an invoice without supplying goods and/or services
3. Collecting tax  and Collecting tax in contravention (like unjust enrichment) of law but failing to remit it to the government within 3 months of the due date
4. Failing to deduct tax or deposit the tax with the government
5. Taking full or partial input tax credit without actual receipt of goods and/or services
6. Obtaining a refund of tax by fraud
7. Distributing an input tax credit other than in the manner prescribed
8. Falsifying or substituting financial records, producing fake accounts and/or documents, or furnishing a false return
9. Failing to obtain registration (if registration is required)
10. Furnishing false information during registration
11. Transporting taxable goods without documents (like e-way bills)
12. Suppressing turnover leading to evasion of tax
13. Failing to maintain books of accounts and documents
14. Failing to furnish information to CGST/SGST officers or furnishing false information
15. Supplying and/or storing goods which one has reason to believe are liable for confiscation
16. Issuing an invoice or document by using the identification number of another person
17. Tampering with material evidence
18. Tampering with any goods that have been detained, seized, or attached.
Rs 10000 or the amount of tax involved, whichever is greater.

In addition failure of an electronic commerce operator to furnish all required information could lead to penalties of up to 25,000 rupees.

The period of imprisonment of a prosecuted person will depend on the amount of tax evaded:

Type of Offence Amount of tax evaded/ ITC wrongly availed/utilized/refund wrongly taken Period of maximum imprisonment & fine
Certain offenses specified in the Act > 5 crore 5 yrs and fine (Non-bailable)
Certain offenses specified in the Act > 2 crore up to Rs 5 crore 3 yrs and fine
Any other offense > 1 crore up to Rs 2 crore 1 yr and fine
Commits/ assists in the commission of certain specified offenses 6 months and/or fine
Repetition of offense
(i.e. second & every subsequent offense)
5 yrs and fine

For cases where there is no intention of fraud or tax evasion,  An offender not paying tax or making short-payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000.

A penalty is also prescribed for offenses where the person is Indirectly involved in any evasion and party to evasion or fails to attend summons or produce necessary documents. In such cases, the penalty would be up to Rs.25,000

A penalty (Residuary penalty) of up to 25,000 rupees applies to any offense of the GST law that lacks a specifically prescribed penalty


Confiscation of goods or conveyance:

Certain offenses will lead to both a penalty and the confiscation of goods and/or conveyances. The penalty will be 10,000 rupees or an amount equal to the tax evaded, whichever is higher.

These GST non compliance are:
• Failing to account for the goods on which a person is liable to pay tax
• Supplying or receiving goods in contravention of any provisions or rules, with the intent to evade payment of tax
• Supplying any goods liable to tax without registering
• Using a conveyance to deliver taxable goods in breach of any provisions or rules

Conclusion for GST Non Compliance:

Various trade organizations argue that the government should tackle GST non compliance with soft hands initially, rather than with imprisonment, since non compliance could be erroneous rather than intentional. We believe & even GST has respected the thought, that if GST non compliance happens erroneously then this law has given ample room for minimal penalty.  Though the burden of proof always lies on the assesses.


Written by:

Poonam Kanwar

(GST Associate)