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Faster, easier and secure gateway to e-file income tax return

GST Rules: Penalties and Appeals in India

All Under GST, the return can be filed both online and offline. Under this new tax reform, there is common e-return for Central Goods & Service Tax (CGST), State Goods & Service Tax (SGST), Integrated Goods & service Tax (IGST) and Additional tax. Under GST, a registered taxpayer shall file GST return at the GST common Portal either by himself/herself or through a representative.

Every individual registered under GST is required to file a return, irrespective of whether a sale or purchase has been carried out during the return period.

What is an appeal?

An appeal under any law is defined as an application to a higher court for reversing the decision of the lower court. An appeal is done only in cases of legal disputes. Appeals are made to dissolve disputes.

Procedure for Appealing Under GST

Level of Appeal Authority who Passes the Order Authority to whom Appeal is Made Section Under Uniform (Model) Law
1st Adjudicating Authority First Appellate Authority 71
2nd First Appellate Authority Appellate Tribunal 81, 82, 83, 84
3rd Appellate Tribunal High court 87
4th High court Supreme Court 88, 89

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Prescribed Rules for Filing GST Appeals

All Appeals must be made on prescribed forms along with the payment of required fees. Appeal fees will include

  • The full amount of tax.
  • Fine.
  • Interest.
  • Fee.
  • 10% of the amount disputed.
  • Any penalties which arise from the challenged order as admitted by the appellant.

For some serious case, the disputed amount is above Rs. 25 Crores. Tax authorities can demand a pre-deposit of up to 25% of the disputed amount.

No fees will be applicable if an officer or commissioner of GST is appealing.

Authorized Representative Appearing on Someone Else’s Behalf

Any person who is required to appear in front of GST officer or Appellate Tribunal or First Appellate authority can assign an authorized representative to appear on his/her behalf. This can be done if the individual is not required to appear personally. An authorized representative can be either of the following

  • A regular employee.
  • A relative.
  • Any lawyer who is practicing in any court in India.
  • Any tax return preparer.
  • Any retired officer from the tax department or excise department from any state whose rank is that of a Group-B gazetted officer or more.
  • Any cost Accountant, Chartered Accountant or Company Secretary with a valid certificate of practice.

Retired officers can only appear in place of the concerned person within 1 year of their retirement.

Cases in which Appeal cannot be Filed

On the recommendation of the council, the board or state government may fix monetary limits for appeal by GST officer to avoid unnecessary litigation expenses and to regulate the filing of the appeal.

Appeals cannot be made against the following decisions

  • An order to seize books of accounts and other documents.
  • An order which allows the payment of tax and another amount in installments.
  • Order for transferring the proceedings from one officer to another officer.
  • Under the act, ordering sanction for prosecution.

Individuals who are dissatisfied with the decision placed against them under the GST law can appeal to the first appellate authority.

Offenses and Penalties

GST offenses and penalties

To prevent corruption or evasion of taxes, various offenses and penalties have been listed under GST law. Apart from penalties, 21 offenses have been listed under GST. These offenses have been described as follows

  • If any taxable person sells or supplies something without any invoice or issues a false invoice.
  • If the taxable person issues the invoice using the identification number of another bonafide taxable person.
  • If the supplier issues invoice without supplying, selling goods or services in violation of the GST.
  • If the taxable individual doesn’t provide information or provide false information during proceedings.
  • If one submits false information while registering under GST.
  • Submission of fake documents to files fake returns for evading tax.
  • The GST is collected but is not deposited with the government within 3 months from the date of collection.
  • Obtaining of refund on CGST or SGST by way of fraud.
  • Non-submission of GST collected in contravention of provisions within 3 months from the day of collection.
  • Deliberately suppressing an amount of sales to evade tax.
  • If the taxable person takes or utilizes input tax credit without the actual receipts of goods and services.
  • Supply of goods without proper documents.
  • Seized goods which have been damaged or tampered.
  • Supply or transport of goods which are deemed as confiscated goods.
  • Suppliers who are not registered under GST.
  • If Tax Deducted at Source (TDS) isn’t made or less amount is deducted.
  • If TCS is not collected or less amount is collected.
  • If a person destroys any evidence.
  • Not maintaining all Books of Account, which are required to be maintained under law.
  • If someone obstructs the officer from performing his/her duty.
  • Being an input service distributor, the input tax credit is distributed in violation with the rules.

For offenses committed by the company both the officer in charge (the Director, Manager, and Secretary) as well as the company will be held liable. For LLPs, trust and partnership firms, the partner, managing trustee and Karta will be held liable.

Rules Regarding Penalty

There are some general rules regarding penalty which remain the same in all laws whether in tax laws or contract law. These rules are as follows

  • The tax authority will give an explanation regarding the reason for penalty and nature of the offense.
  • Every taxable person on whom the penalty is imposed will be given a show cause notice and will be given a reasonable opportunity of being heard.
  • When any person voluntarily discloses a breach of the law, in such case the tax authority may issue a warning.

This law is beneficial for businesses, SMEs (Small and Medium Sized Enterprises) who may make genuine mistakes after the implementation of GST.

Prosecution Under GST

Prosecution under GST is a legal proceeding conducted against someone for a criminal charge. When the following offenses are committed with the deliberate action to cause fraud it becomes liable for prosecution

  • Claiming a refund on CGST or SGST by fraudulent means.
  • Providing fake documents or financial records and fake returns for tax evasion.
  • Acting as an accomplice by helping another person commit fraud.
  • Selling or supplying goods or service without any invoice or by issuing a false invoice.

The Penalties Under GST

If an individual has committed any fraudulent activity intentionally, then with respect to the GST provisions the offender must pay 100% penalty amount (the amount equal to the amount of tax evaded or short deducted), subject to a minimum of Rs. 10,000. If there is no fraudulent intention, then the penalty will be 10% subject to the minimum of Rs. 10,000.

The Penalties Under GST

Some of the factors for liability of penalty are

  • Helping another person to commit fraud under GST.
  • Acquiring goods and services after knowing that they are in violation of GST rules.
  • Failing to issue an invoice for goods supplied according to GST rules.
  • Failing to mention any account appearing in the books of accounts.
  • Failing to appear before the relevant authority on the day of summoning.

The penalty amount could be as high as Rs. 25,000.

For cases of fraud, the additional penalties will be

Amount of tax Jail term Fine
Rs. 100-200 Lakhs Up to 1 year Applicable
Rs. 200-500 Lakhs Up to 3 years Applicable
Above Rs. 500 Lakhs Up to 5 years Applicable

Inspection and Seizure Under GST

On provision of sufficient reasons to the Joint Commissioner of CGST/SGST, that the taxable individual is deliberately suppressing the transaction to evade taxes, an officer of GST will be appointed to inspect the tax evader. Likewise, the Joint Commissioner can also order for search or seizure of the taxable evader if the evidence proves that the goods which are confiscated or the documents have been hidden.

Breaking Down Input Tax Credit

As per the GST law, return filed under the previous law for the period prior to July 1, 2017, can claim for Income Tax Credit. The amount claimed will be transferred to the Electronic Credit Ledger. Following conditions must be satisfied by the existing dealers for claiming CENVAT Credit for the input held in stock, semi-finished or finished goods

  • Inputs or goods must be used for making taxable supplies under GST.
  • The taxable individual should pass the benefits of credit by way of reduced prices of the recipients.
  • The taxable person should be eligible for input tax credit on inputs under GST.