Criminal Liability under Goods and Service Tax (GST) regime

Introduction:

GST return is a mechanism where a taxpayer registered under the Goods and Services Tax (GST) law has to file for each registration separately. Also, the number of GST returns to be filed will be based on the type of taxpayer, such as regular taxpayer, composition dealer, e-commerce operator, TDS deductor, non-resident taxpayer, Input Service Distributor (ISD) etc. Usually, a regular taxpayer has to file two returns per month (GSTR-1, GSTR-3B) and an annual return (GSTR-9/9C) for each GST registration separately.

Late Fee for delayed or non filing of GST Return

The GST late filing penalty has been specified as follows:

• A person fails to furnish details of outward or inward supplies, monthly return or final return by the due date – The GST penalty for late filing is INR 100 for every day during which the failure continues, subject to a maximum of INR 5,000
• A person fails to furnish the annual return by the due date – The GST late filing penalty is INR 100 for every day during which the failure continues, subject to a maximum of quarter percent of the person’s turnover in the state where he is registered

Interest for Late Payment of GST

While, the GST penalty interest rates on the applicable offences are yet to be notified, the GST late payment penalty has been specified as follows:

1. A person liable to pay tax fails to pay the tax – Interest on the tax due will be calculated from the first day on which the tax was due to be paid @ 18%
2. A person makes an undue or excess claim of input tax credit or undue or excess reduction in output tax liability – Interest @ 24% on the undue excess claim or undue or excess reduction
3. A recipient of a service fails to pay to the supplier of the service the amount towards the value of the service, along with tax payable thereon, within 180 days from the date of issue of invoice by the supplier –Interest @ 18% on the amount due will be added to the recipient’s liability.

Which are the offences which warrant prosecution under the CGST/SGST Act?

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:

• Making a supply without issuing an invoice or upon issuance of a false/incorrect invoice;
• Issuing an invoice without making supply;
• Not paying any amount collected as tax for a period exceeding 3 months;
• Availing or utilizing credit of input tax without actual receipt of goods and/or services;
• Obtaining any fraudulent refund
• Evades tax, fraudulently avails ITC or obtains refund by an offence not covered under clause (a) to (e);
• Furnishing false information or falsification of financial records or furnishing of fake accounts/ documents with intent to evade payment of tax;
• Obstructing or preventing any official in the discharge of his duty;
• Dealing with goods liable to confiscation i.e. receipt, supply, storage or transportation of goods liable to confiscation;
• Receiving/dealing with supply of services in contravention of the Act;
• Tampers with or destroys any material evidence or documents
• Failing to supply any information required of him under the Act/Rules or supplying false information;
• Attempting to commit or abetting for any commission of any of the offences at (a) to (l) above.

What is the punishment prescribed on conviction of any offence under the CGST/SGST Act?

The scheme of punishment provided in section 132(1) is as follows:

Offence involving	Punishment (Imprisonment extending to)
Tax evaded exceeding Rs. 5 crore or repeat offender  250 lakh	5 years and fine
Tax evaded between Rs. 2 crore and Rs.5 crore	3 years and fine
Tax evaded between Rs.1 crore and Rs.2 crore	1 years and fine
False recordsObstructing officerTamper records	6 months

What are cognizable and non-cognizable offences under CGST/SGST Act?

In terms of Section 132(4) and 132(5) of CGST/SGST Act all offences where the evasion of tax is less than Rs.5 crores shall be non-cognizable and bailable,  all offences where the evasion of tax exceeds Rs.5 crores shall be cognizable and non- bailable.

Can a company be proceeded against or prosecuted for any offence under the CGST/SGST Act?

Yes. Section 137 of the CGST/SGST ACT provides that every person who was in-charge of or responsible to a company for the conduct 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.

What are the powers of GST Authorities?

Goods and Services Tax (‘GST’) Authorities are empowered to arrest persons accused of offences specified under Section 132 of the CGST Act, 2017 (‘CGST Act’). The provisions of Section 132 provides that specified offences [falling under any of the clauses (a) to (d) of Section 132(1)] involving tax evasion in excess of INR 5 crores will be cognizable and non-bailable, and that officials can proceed with arrest as per the procedure laid out under Section 69 of the CGST Act. Other offences, provided under clauses (e) to (l) of Section 132(1) of the CGST Act, are bailable and non-cognizable. The specified offences are as follows:

1. supply of any goods or services or both without issue of any invoice, in violation of the provisions of the Act or the rules made thereunder, with the intention to evade tax;
2. issue of any invoice or bill without supply of goods or services or both in violation of the provisions of the Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax;
3. availment of input tax credit using such invoice or bill referred to in clause (b); collection of any amount as tax and failure to pay the same to the Government beyond a period of three months from the date on which such payment becomes due;

The GST law provides the circumstances and instances under which a person can be arrested but no guidelines have been provided in relation to the procedural aspect for arresting a person.

Amongst the offences listed above, the offences specified in (b) have gained much importance. In the past, several transactions were brought under the scanner wherein there was a supply of goods made without an actual movement of goods. This is commonly known as circular trading. The GST Authorities believe that such circular trading does not involve supply of goods even though applicable tax has been paid by each supplier in the chain. The Authorities had arrested many promoters for circular trading and escaping GST. The powers conferred upon GST Commissioners to make arrests in cases involving fake GST invoices cannot be disputed. However, the way these arrest provisions have been incorporated under the GST law is certainly amenable to a constitutional challenge.

What rights and remedies the company or alleged defaulter has?

GSTR 3A will be issued by the tax authorities to a person not filing GST return. On receiving notice in GSTR-3A Notice, the defaulter has to file the return within 15 days from the date of notice along with penalty and late fees. If the dealer still does not file return, provisions of Section 62 will apply. The proper officer will assess the tax according to his best judgment using the information available with the department. He will not issue any further notice before starting the assessment. The penalty will be Rs. 10,000 or 10% of the tax due, whichever is higher.

The defaulter shall furnish a valid return within thirty days of the service of assessment order in FORM GST ASMT-13, and thereby the said assessment order shall be deemed to have been withdrawn. But, the liability for payment of interest under section 50 or for payment of late fee under section 47 shall continue.