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Semester V

GOODS AND SERVICE TAX

Unit V: Returns and Refunds, Penalties and Offences: Returns – Introduction – Types of
Returns – Furnishing the details of outward supplies – Furnishing of Returns – Default in
Furnishing Returns. Offence – Types – Compounding of Offences – Penalty for Offences –
Inspection, Search and Seizure. Appeals – Types of Appeals.

RETURNS

A GST return is a document containing details of all income/sales and/or

expenses/purchases that a GST-registered taxpayer (every GSTIN) is required to file with the
tax administrative authorities. This is used by tax authorities to calculate net tax liability.

Under GST, a registered dealer has to file GST returns that broadly include:

• Purchases

• Sales

• Output GST (On sales)

• Input tax credit (GST paid on purchases)

Who should file GST Returns?

Under the GST regime, regular businesses having more than Rs.5 crore as annual
aggregate turnover (and taxpayers who have not opted for the QRMP scheme) have to file
two monthly returns and one annual return. This amounts to 25 returns each year.

• Taxpayers with a turnover of up to Rs.5 crore have the option to file returns under the
QRMP scheme.

• The number of GSTR filings for QRMP filers is 9 each year, which include 4 GSTR1
and GSTR-3B returns each and an annual return. Note that QRMP filers have to pay tax
on a monthly basis even though they are filing returns quarterly.

• There are also separate statements/returns required to be filed in special cases such as
composition dealers where the number of GSTR filings is 5 each year (4 statement-
cum-challans in CMP-08 and 1 annual return GSTR-4).
The entities that must file GST returns are:

1. A registered dealer must submit returns for purchases and sales, output GST (on
sales), and input tax credit (GST paid on purchases).
2. A trader with a yearly turnover of ₹1.5 Crores or less who has opted for the
composition scheme is required to file just one GST return in a financial year.
3. Entities with over ₹20 Lakhs in annual turnover must have a valid GST
registration and file returns. In certain states, the annual turnover limit is set at
₹10 Lakhs.

Details on various types of GST returns and which category of businesses are eligible to
file which type of returns:

GST
Return
Type Who Should File the Return?

GSTR-
1 All regular, GST-registered businesses

GSTR-
3B All regular, GST-registered businesses

GSTR-
4 Dealers who have opted for the composition scheme

GSTR-
5 Non-resident foreigners with businesses in India

GSTR- Non-resident OIDAR (Online Information and Database Access) service

5A providers

GSTR-
6 Input Service Distributors (ISD)

GSTR-
7 Businesses who deduct TDS

GSTR-
8 E-commerce operators
Return

Form Description Frequency Due Date

GST
Return
Type Who Should File the Return?

GSTR-
9 All regular, GST-registered businesses

GSTR-
9C All regular, GST-registered businesses

GSTR-
10 Businesses whose GST registration was cancelled or surrendered

GSTR-
11 Every registered business with a UIN

Types of Returns

• There are 13 returns under GST. They are the GSTR-1, GSTR-3B, GSTR-4, GSTR-5,
GSTR-5A, GSTR-6, GSTR-7, GSTR-8, GSTR-9, GSTR-10, GSTR-11, CMP-08, and ITC-
04. However, all returns do not apply to all taxpayers. Taxpayers file returns based on the
type of taxpayer/type of registration obtained.

• Eligible taxpayers, i.e. with a turnover exceeding Rs.5 crore are also required to also
file a self-certified reconciliation statement in Form GSTR-9C.

• Besides the GST returns that are required to be filed, there are statements of input tax
credit available to taxpayers, namely GSTR-2A (dynamic) and GSTR-2B (static). There is
also an Invoice Furnishing Facility (IFF) available to small taxpayers who are registered
under the QRMP scheme to furnish their Business to Business (B2B) sales for the first two
months of the quarter. These small taxpayers will still need to pay taxes on a monthly basis
using Form PMT-06.

Here is a list of all the returns to be filed as prescribed under the GST Law along with

the due dates.

GSTR-1 Details of outward supplies of Monthly 11th of the next
taxable goods and/or services month.
affected.

Quarterly (If 13th of the month

opted under the succeeding the
QRMP scheme) quarter.

IFF Details of B2B supplies of taxable Monthly (for the 13th of the next
(Optional by goods and/or services affected. first two months month.
taxpayers of the quarter)
under the
QRMP
scheme)

GSTR-3B Summary return of outward Monthly 20th of the next

supplies and input tax credit month.
claimed, along with payment of tax
by the taxpayer.
Quarterly (For 22nd or 24th of the
taxpayers under month succeeding the
the QRMP quarter***
scheme)

CMP-08 Statement-cum-challan to make a Quarterly 18th of the month

tax payment by a taxpayer succeeding the
registered under the composition quarter.
scheme under Section 10 of the
CGST Act.

GSTR-4 Return for a taxpayer registered Annually 30th of the month

under the composition scheme succeeding a financial
under Section 10 of the CGST Act. year.

GSTR-5 Return to be filed by a non-resident Monthly 20th of the next

taxable person. month.
(Amended to 13th by
Budget 2022; yet to
be notified by CBIC.)

GSTR-5A Return to be filed by non-resident Monthly 20th of the next

 OIDAR service providers. month.

GSTR-6 Return for an input service Monthly 13th of the next

distributor to distribute the eligible month.
input tax credit to its branches.

GSTR-7 Return to be filed by registered Monthly 10th of the next

persons deducting tax at source month.
(TDS).

GSTR-8 Return to be filed by e-commerce Monthly 10th of the next

operators containing details of month.
supplies effected and the amount of
tax collected at source by them.

GSTR-9 Annual return by a regular Annually 31st December of the

taxpayer. next financial year.

GSTR-9C Self-certified reconciliation Annually 31st December of the

statement. next financial year.

GSTR-10 Final return to be filed by a Once, when the Within three months
taxpayer whose GST registration is GST registration of the date of
cancelled. is cancelled or cancellation or date of
surrendered. cancellation order,
whichever is later.

GSTR-11 Details of inward supplies to be Monthly 28th of the month

furnished by a person having UIN following the month
and claiming a refund for which statement is
filed.
ITC-04 Statement to be filed by a Annually 25th April where
principal/job-worker about details (for AATO up to AATO is up to Rs.5
of goods sent to/received from a Rs.5 crore) crore.
job-worker

Half-yearly
(for AATO > 25th October and 25th
Rs.5 crore) April where AATO
exceeds Rs.5 crore.

(AATO = Annual
aggregate turnover)

How to File GST Returns Online?

One can easily file GST returns online on the GST portal with the following steps:

 Step 1: Visit the official GST portal at www.gst.gov.in and log in with your
credentials
 Step 2: Wait to get redirected to the ―Dashboard‖ and click on ―Continue to
Dashboard‖
 Step 3: View your ledger balance, if any, and click on ―File Returns‖
 Step 4: Fill in the financial year, the return filing period in the designated space, and
click on ―Search‖
 Step 5: Select the type of return, GSTR - 1 or 3B, you wish to file and click on
―Prepare Online‖
 Step 6: Based on your tax liability, pick the appropriate choice. If you have no
liability, click on the ―File Nil GSTR‖ option and click on ―File Statement‖
 Step 7: Confirm the check box in this part of the GST return filing process and select
the authorised signatory, from the dropdown menu
 Step 8: Select the ―File with EVC‖ option, and provide the OTP you receive on your
registered mobile

How to File GST Returns with GSTN?

The Goods and Service Tax Network (GSTN) stores information about all GST-
registered sellers and buyers to ensure a streamlined and straightforward process. The
data is then combined and maintained for future reference. Business entities can
download the excel workbook available on the common GST portal free of charge. In
addition, the template can be used to collate all the necessary information offline. Once
done, the file must be uploaded to the GST portal. This way, one can file your final return
under GST using GSTN.

How to Download GST Returns

One can download the GST return filing form from the official GST portal by following
the steps given below:

 Step 1: Log in to the GST portal, i.e. www.gst.gov.in

 Step 2: Click on the ‗Services‘ tab in the top menu
 Step 3: Choose the ‗Refunds Dashboard‘ under the ‗Refunds‘ option
 Step 4: Select the financial year and the return filing period from the respective
drop-down boxes on the next page
 Step 5: Click on the ‗Search‘ tab before selecting the GSTR you wish to download
 Step 6: Click on the ‗Prepare Offline‘ button under the selected GSTR
 Step 7: Select the ‗Generate File‘ option under ‗Download‘
A download link will be generated once your file is prepared. Then, select the ‗Click
Here‘ button and download the ZIP file to view your GST returns.

Important Invoices When Filing the GST Return

When the business is registered with GST, it must provide certain invoices to the
clients for the sale of goods and services. All GST-listed merchants will issue a buying
invoice compliant with GST. The company may personalise this invoice with the
company logo. Hence, a tax invoice is essential when filing GST returns. Ideally, GST
return filing invoice must include the following particulars:

 Invoice date
 Title of the customer
 Area of supply
 Billing and transportation location
 Your and your client‘s GSTIN
 Details of the item
 Taxable value and discounts
 Volume and rate of taxes
 Supplier‘s signature
 If GST is paid on a reverse charge basis
 SAC/HSN code

Essential Documents Required for GST Return Filing

Remember that the following documents are crucial when filing GST returns.

 GSTIN of the customer

  Complete invoice list, including B2C and B2B services
 Invoice type
 Place of supply
 Applicable GST rate
 Invoice number
 Taxable value
 HSN-wise summary details
 Consolidated list of inter- and intra-state sales
 Summary of credit and debit notes
 Amount of applicable CGST, IGST, GST and SGST

Types of GST Return Filing Status

When one check GST return status on the official GST portal, may come across any of
the four following statuses for GST return:

1. To Be Filed: This status indicates that the return is due but has not been filed yet.
2. Submitted But Not Filed: This status means that return has been filed and
validated, but the same has not been updated in the GST records.
3. Filed-Valid: This status indicates that the return has been filed successfully, and
the tax has also been paid as per the filing.
4. Filed-Invalid: It means that the return has been filed but the tax has not been paid,
or there is a shortfall in the amount paid.

Upcoming Due Dates to file GST Returns

It is possible to extend the deadlines for submitting GST returns by issuing orders
or notices. The list of GST return deadlines for the financial year 2022–2023 is available
here.

GST
Return
Form Name Filing Period Due Date in 2023

Monthly
GSTR 07 (February 2023) March 10, 2023

Monthly
GSTR 08 (February 2023) March 10, 2023

GSTR 01 Monthly
(T.O. over (February 2023) March 11, 2023
 GST
Return
Form Name Filing Period Due Date in 2023

₹1.5
Crores)

GSTR 01
(T.O. up to Quarterly
₹1.5 (January 2023 to
Crores) March 2023) March 13, 2023

IFF Monthly
Optional (December 2022) March 13, 2023

Monthly
GSTR 06 (December 2022) March 13, 2023

Quarterly
(October 2022 to
CMP 08 December 2022) April 18, 2023

Annual turnover
of over ₹5
Crores in the
GSTR 3B previous financial
(over ₹5 year - December
Crores) 2022 March 20, 2023

Annual turnover
of up to ₹5
Crores in the
previous financial
GSTR 3B year monthly
(up to ₹5 filing - December
Crores) 2022 March 20, 2023

GSTR 5 Monthly March 20, 2023

 GST
Return
Form Name Filing Period Due Date in 2023

(February 2023)

Monthly
GSTR 5A (February 2023) March 20, 2023

Quarterly
GSTR 3B (January 2023 to
(G-1) March 2023) March 20, 2023

Quarterly
GSTR 3B (January 2023 to
(G-2) March 2023) March 20, 2023

GSTR 9 Financial Year

and 9C 2023-2024 December 31, 2023

GST RFD- At the end of 18 At the end of the applicable quarter's 18-month period,
10 Form months you will be able to request a GST refund.

GST RFD- Financial Year

11 Form 2022-2023 March 31, 2023

Disclaimer: The due dates mentioned in the table may change depending on the
concerned department.

Penalty for Late Filing of GST Returns

In case any company fails to file GST returns on time, it is liable to pay two types
of penalties:

 Late Fee: Fines applicable are ₹100 per day, after the due date. This is applicable
on late filing of CGST and SGST each (total of ₹200 per day), subject to a
maximum late fee of ₹5,000.
  Interest: The taxpayer is also liable to pay interest at 18% per annum on the total
amount of tax to be paid. This interest rate is applicable from the due date of filing
the return till the payment is made.


Taxpayer Category Late Fee Capped at

Ones who have a total amount of central tax payable amounting to

zero ₹250

Ones who have an annual aggregate turnover of up to ₹1.5 Crores

in the previous financial year ₹1,000

Ones who have an annual aggregate turnover of more than ₹1.5

Crores and up to ₹5 Crores in the previous financial year ₹2,500

Benefits of GST Return Filing

 Can avoid unnecessary interest levied on the outstanding tax amount.

 Can claim the input tax credit when filing returns promptly.
 Can file GST returns through a single form, making the process easy and simple.
 GST implementation helps provide higher threshold advantages to small-scale
businesses.
 Introduction of GST has eliminated the cascading effect of tax.
 Can follow a lesser number of compliances with the implementation of GST.

Modes of GST payment

• Internet banking through authorized banks

• Credit card or debit card through authorized banks
• NEFT or RTGS from any bank
REFUND

GST refund is a process in which, registered taxpayers can claim excess amount if
they paid more than the GST liability. They can claim after submitting a refund application
with the necessary details in the GST portal.

Refund has been discussed in section 54 of the CGST/TSGST Act. ―Refund‖ includes

(a) any balance amount in the electronic cash ledger so claimed in the returns,

(b) any unutilized input tax credit in respect of

(i) zero rated supplies made without payment of tax or,

(ii) where the credit has accumulated on account of rate of tax on inputs being higher
than the rate of tax on output supplies (other than nil rated or fully exempt supplies),

(c) tax paid by specialized agency of United Nations or any Multilateral Financial
Institution and Organization notified under the United Nations (Privileges and Immunities)
Act, 1947, Consulate or Embassy of foreign countries on any inward supply.

A person claiming refund is required to file an application before the expiry of two
years from the ―relevant date‖ as given in the Explanation to section 54 of the CGST/TSGST
Act. No refund shall be granted if the amount is less than Rs.1000/-. [Sec.54 (14) of the
CGST/TSGST Act].

Refund Allowed in case of

 Zero rated supplies made without payment of tax

 Where refund is generated on account of rate of tax on inputs being higher than the
rate of tax on output supplies (other than nil rated or fully exempt supplies).
  Tax paid on a supply which is not provided, either wholly or partially, and for
which invoice has not been issued, or where a refund voucher has been issued.
 The tax and interest, if any, or any other amount paid by the applicant, if he had
not passed on the incidence of such tax and interest to any other person.
 Other conditions which the Government notifies.

Refund Not Allowed in case of

 In case of goods or services which are notified by council in this behalf.

 Refund of unutilized input tax credit in where the goods exported out of India are
subjected to export duty.
 Refund of unutilized input tax credit if the supplier of goods or services or both
avails of drawback in respect of central tax or claims refund of the integrated tax
paid on such supplies.

Application Procedure

The application is to be submitted along with the documents of

 Documents to establish that a refund is due.

 Documents to establish that the amount of tax and interest was collected from or
paid by applicant and incidence of tax and interest had not been passed to any
other person.
 Where the amount claimed as refund is less than Rs. 2 lakhs, the applicant may file
a declaration rather than the documentary or other evidence certifying that the
incidence of such tax and interest had not been passed on to any other person.
 A Certificate in Annexure 2 of FORM GST RFD-01 issued by a chartered
accountant or a cost accountant certifying that incidence of tax, interest or any
other amount claimed as refund has not been passed on to any other person, in a
case where the amount of refund claimed exceeds two lakh rupees.
Such declaration or certificate is not required when the amount of refund is related to

(a) refund of tax paid on zero-rated supplies of goods or services or both or on inputs or
input services used in making such zero-rated supplies.

(b) refund of unutilised input tax credit under sub-section (3).

(c) refund of tax paid on a supply which is not provided, either wholly or partially, and
for which invoice has not been issued, or where a refund voucher has been issued.

(d) refund of tax in pursuance of section 77.

Interest on Delayed Refund

 If the refund is not paid within sixty days from the receipt of application then interest
is payable to the applicant at the rate of 6% or lower (Rate yet not decided) from the date
immediately after the expiry of sixty days from the date of receipt of application till the date
of refund of such tax.Where refund arises from an order passed by an adjudicating authority
or Appellate Authority or Appellate Tribunal or court and which is not refunded within sixty
days from the date of receipt of application filed consequent to such order, interest at rate of
9% or lower (Rate not notified yet) is payable.

Withholding of Refund

Refund can be withhold by the officer if the applicant is defaulted in furnishing any
return or who is required to pay any tax, interest or penalty, which has not been stayed by any
court, Tribunal or Appellate Authority by the specified date. On clearing of such default the
officer has to issue the refund.Specified means the last date for filing an appeal under this
Act.Advance Tax paid by a casual taxable person or non resident taxable person shall not be
refunded until such person files all the returns for entire period for which he is granted
registration.

Forms for Refund

S No. Form Number Purpose

1 GST RFD-01 Refund Application form

–Annexure 1 Details of Goods
–Annexure 2 Certificate by CA

2 GST RFD-02 Acknowledgement

3 GST RFD-03 Notice of Deficiency on Application for Refund

4 GST RFD-04 Provisional Refund Sanction Order

5 GST RFD-05 Payment Advice to bank

6 GST RFD-06 Provisional Refund Sanction Order under section 54(5)

7 GST RFD-07 Refund adjusted against outstanding demand

8 GST RFD-08 Show cause notice for reject of refund application

9 GST RFD-09 Reply for form GST RFD-08

10 GST RFD-10 Refund Application under Section 55

OFFENCE

An offence is a breach of a law or rule, i.e., an illegal act. Similarly, an offence under
GST is a breach of the provisions of the GST Act and Rules. The provisions of offences and
penalties are dealt with from Section 122 to Section 128 of the CGST Act.

TYPES OF OFFENCES

There are 21 offences under GST. For easy understanding, these have been grouped
into heads as given below:

Fake or wrong invoices:

 A taxable person supplies any goods/services without any invoice or issues a false
invoice.
 He issues any invoice or bill without supply of goods/services in violation of the
provisions of GST
 He issues invoices using the identification number of another bonafide taxable person

Fraud:

 He fails to supply information that is required to be supplied under the Act or submits
false information
 He submits fake financial records/documents or files fake returns to evade tax
 Does not provide information/gives false information during proceedings

Tax evasion:

 He collects any GST but does not submit it to the government within 3 months
 Even if he collects any GST in contravention of provisions, he still has to deposit it to
the government within 3 months. Failure to do so will be an offence under GST.
 He obtains a refund of any CGST/SGST by fraud.
 He takes and/or utilizes input tax credit without actual receipt of goods and/or services
 He deliberately suppresses his sales to evade tax

Supply/transport of goods:

 He transports goods without proper documents

 Supplies/transports goods that he knows will be confiscated
 Destroys/tampers goods that have been seized

Others:

 He has not registered under GST although he is required to by law

 He does not deduct TDS or deducts less amount where applicable.
 He does not collect TCS or collects less amount where applicable.
 Being an Input Service Distributor, he takes or distributes input tax credit in violation
of the rules
 He obstructs the proper officer during his duty (for example, he hinders the officer
during the audit by tax authorities)
 He does not maintain all the books that he required to maintain by law
 He tampers with or destroys any material evidence

*In Budget 2023, it was proposed that these offences be removed/decriminalised from
the CGST Act. The same will come into force once notified by the CBIC.

For the 21 offences above, for fraud cases, penalty will be 100% (minimum Rs.
10,000). For cases mentioned in 1, 2 under fake invoicing and 4th under both tax evasion and
others heads, the penalty is equal to the tax evaded or ITC availed or passed on.

COMPOUNDING OF OFFENCES

Section 138 of the Central Goods and Service Tax Act, 2017 deals with the provisions
of compounding of offences under GST, whereas, rule 162 of the Central Goods and Service
Tax Rules, 2017 deals with the procedure to be followed for compounding of offences.

The word compounding has not to be defined specifically under GST. However,
taking the general meaning, Compounding means payment of monetary compensation / fine,
instead of suffering prosecution for an offence committed, which warrants such prosecution.
In nut-shell, Compounding is simply a compromise between the offender and the department
to avoid proceedings.
Section 138 of the CGST Act, 2017
Section 138 deals with the compounding of offences under GST and the provisions of the
same are summarized hereunder:

 Any offence under the Act can be compounded by the Commissioner.

 Compounding of offences can be done either before or after the institution of the
prosecution.
 Compounding of offences can be done only on payment of the compounding amount.
 Compounding of offences is not possible under circumstances –
o A second time offender wherein the earlier offence had been under any other
GST law in respect of supplies of value more than INR 1 Crore.
o A second time offender of Cognizable offences specified in sub-clause (a) to
(f) of section 132 (1).
o Any person who has been convicted for any offences under CGST Act by a
court.
o Any person who has been blamed of committing an offence under CGST Act
which is also an offence under any other law for the time being in force.
o Any person who has been blamed of committing an offence under sub-clause
(g) or (j) or (k) of section 132 (1).
o Any other prescribed class of persons or offences
 Compounding amount

Minimum amount payable under compounding of offence is higher of the following:


50% of the tax involved; or

INR 10,000
Maximum amount payable under compounding of offence is higher of the following:


150% of the tax involved; or

INR 30,000
Procedure for Compounding of Offence
Rule 162 prescribes the procedure to be followed for compounding of offence and the
same is summarized hereunder:

 An applicant can make an application for compounding of offence either before or

after the institution of prosecution.
 An applicant is required to make an application in FORM GST CPD-01 to the
Commissioner.
 For examination of the application so filed by the applicant, the Commissioner shall
call for a report from the concerned officer with reference to the particulars furnished
in the application or any other relevant information.
 If the commissioner is satisfied with the full and true disclosure, he may issue an
order in FORM GST CPD-02 allowing the application within a period of 90 days.
  If the commissioner is not satisfied, he may reject the application, however, before
rejecting the same he is required to give an opportunity of being heard to the
applicant.
 The applicant is required to pay the compounding amount as mentioned in the order
by the Commissioner within a period of 30 days.
 If the applicant fails to pay the compounding amount within time limit, the order
passed by the Commissioner in FORM GST CPD-02 shall be vitiated and be void.

PENALTIES UNDER GST

The word ―penalty‖ is not specifically defined in GST and so it takes the meaning
from various judicial pronouncements and principles of jurisprudence. A penalty is a
punishment imposed by law for committing an offence or failing to do something that was
the duty of a party to do. A penalty can be both corporal or pecuniary, civil or criminal. Both
corporal (jail) and pecuniary (monetary) penalties are applicable under GST.If any of the
offences are committed then a penalty will have to be paid under GST. The principles on
which these penalties are based are also mentioned by law.

Common Offences under GST and their Penalties

Type of offence Amount of penalty

The late fee is Rs. 100 per day per Act. So it is 100 under
Penalty for delay in filing GSTR CGST & 100 under SGST. Total will be Rs. 200/day. The
maximum is Rs. 5,000. There is no late fee on IGST.

Penalty for not filing GSTR Penalty 10% of the tax due or Rs. 10,000 – whichever is higher

Penalty 100% of the tax due or Rs. 10,000 – whichever is

Penalty for committing a fraud
higher (High-value fraud cases also have jail term)

Penalty for helping a person to

Penalty extending up to Rs. 25,000
commit fraud

Penalty for opting for Demand & recovery provisions of sections 73 & 74 will apply.
composition scheme even though (i) Fraud case- Penalty 100% of the tax due or Rs. 10,000 –
he is not eligible whichever is higher
(ii) Non-fraud casePenalty 10% of the tax due or Rs. 10,000 –
whichever is higher

Penalty 100% of the tax due or Rs. 10,000 -whichever is

Penalty for wrongfully charging
higher (if the additional GST collected is not submitted with the
GST rate— charging a higher rate
govt)

Penalty 100% of the tax due or Rs. 10,000 – whichever is

Penalty for not issuing an invoice
higher

Penalty for not registering under Penalty 100% of the tax due or Rs. 10,000 – whichever is
GST higher

Penalty for incorrect invoicing A penalty of Rs. 25,000

Situations where there is no penalty (but interest may apply)

Type of offence Action

No penalty. Pay the correct GST and get a

Penalty for incorrect type of GST charged (IGST
refund of the wrong type of GST paid
instead of CGST/SGST)
earlier

No penalty. But interest @18% on shortfall

Penalty for incorrect filing of GST return
amount

ITC will be reversed if not paid within 6

Penalty for delay in payment of invoice.
months. No penalty as such

Penalty for wrongfully charging GST rate— charging

Interest @18% applicable on the shortfall
a lower rate
Penalty in cases of fraud

An offender has to pay a penalty amount of tax evaded/short deducted etc.,

i.e., 100% penalty, subject to a minimum of Rs. 10,000. For the 21 offences above, for fraud
cases, the penalty will be 100% (minimum Rs. 10,000).

Penalty for helping someone to commit fraud under GST?

Not only the taxable person but any person who does the following will have to pay a
penalty extending up to Rs. 25,000

 Helps any person to commit fraud under GST

 Acquires/receives any goods/services with full knowledge that it is in violation of
GST rules
 Fails to appear before the tax authority on receiving a summons
 Fails to issue an invoice according to GST rules
 Fails to account/vouch any invoice appearing in the books

Arrest

GST has corporal punishments (jail) for high-value fraud cases. These punishments
are applicable along with monetary penalty as follows-

Tax amount involved 100-200 lakhs 200-500 lakhs Above 500 lakhs

Jail term Up to 1 year Upto 3 years Upto 5 year

Fine In all three cases

Penalty for Other Cases (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.Therefore, the penalty will be high at

100% of the tax amount when the offender hasevaded i.e., where there is a deliberate fraud.

For other non-fraud cases, the penalty is10% of tax.

General Penalty

Any offence under GST for which penalty is not specifically mentioned will be liable
to a penalty extending Rs. 25,000.

Minor Breaches under GST

 Minor breaches (where tax amount is less than Rs.5000) or errors are easily
rectifiable and clearly made without any motive of fraud.
 There will not be substantial penalties for minor breaches
 The tax authority may issue a warning in such cases.

This will be beneficial to businesses, especially SMEs, who may make genuine
mistakes especially in the first few months of GST implementation. Being penalized for
genuine errors will be a hard blow to the SMEs who do not have as many resources as the
larger organizations to adapt to GST.

General Rules Regarding Penalty

These rules of penalty are generally the same in all laws whether tax laws or contract
law or any other law.

 Everytaxable person, on whom the penalty is imposed, will be served with a

show-cause notice first and will have a reasonable opportunity of being heard.
 The tax authority will give an explanation regarding the reason for the penalty
and the nature of the offence
  When any person voluntarily discloses a breach of law, the tax authority may use
this fact to reduce the penalty

INSPECTION, SEARCH AND SEIZURE

‗Inspection‘ is a new provision under the Act. It is a softer provision than search
to enable officers to access any place of business of a taxable person and also any place of
business of a person engaged in transporting goods or who is an owner or an operator of a
warehouse or godown.

A Joint Commissioner (or an officer of higher rank) may have ―reasons to believe‖ that
in order to evade tax, any person has done the following-

 Suppressed any transaction of supply

 Suppressed stock in hand
 Claimed input tax credit in excess
 Violated of any of the provisions
 Any transporter or owner/operator of a warehouse has kept goods that have
escaped tax payment or have kept accounts and/or goods in such a way as to
evade tax

Then he can authorise any officer in Form GST INS-01 to inspect places of businesses of:

 the taxable person or

 the transporter or
 owner/operator of warehouse
He can also examine any other place if he sees fit.

What is meant by ‘reasons to believe’?

‗Reason to believe‘ means having knowledge of facts (although does not mean having
direct knowledge), that would make any reasonable person, knowing the same facts, to
reasonably conclude the same thing. As per the Indian Penal Code, 1860, ―A person is said to
have ‗reason to believe‘ a thing, if he has sufficient cause to believe that thing but not
otherwise.‖ Reason to believe is a determination based on intelligent examination and
evaluation. It is different from a purely subjective consideration, i.e., an opinion. It is based
on facts rather than an interpretation of facts. GST Act does not mention recording the
reasons to believe. In fact, Finance Act 2017 has amended Sec 132(1) & (1A) of Income Tax
Act retrospectively stating, that reason to believe, shall not be disclosed to any person or any
authority or the Appellate Tribunal.
Search under GST

‗Search‘ involves an attempt to find something. Search, in tax/legal parlance, is an

action of a government official (a tax officer or a police officer, depending on the case) to go
and look through or examine carefully a place, person, object etc. in order to find something
concealed or to discover evidence of a crime. The search can only be done under the proper
and valid authority of law.

‗Inspection‘ is the act of examining something, often closely. In tax/legal language,

it is a softer provision than search. It enables officers to access any place of business of a
taxable person and also any place of business of a person engaged in transporting goods or
who is an owner/operator of a warehouse or godown.

Who can order search under GST and when?

On the basis of results of inspection or any other reason, Joint Commissioner of

SGST/CGST or a superior officer can order for a search if he has ―reasons to believe‖ –

 There are goods which are liable for confiscation

 Any documents or books or other things which will be useful during
proceedings and are hidden somewhere

He can, on his own or through an authorized officer, search and seize the goods and
documents.

Seizure under GST

The term ‗seizure‘ has not been specifically defined in GST. In legal
parlance, seizure is the act of taking over something or someone by force through
legal process, such as the seizure of evidence found at the scene of a crime. It generally
implies taking possession forcibly against the wishes of the owner.Not allowing the owner
any access to the seized goods by a legal order/notice is called detention. However, the
ownership & possession of goods still lie with the owner. It is issued when it is suspected that
the goods are liable to confiscation. Seizure is taking over or actual possession of the goods
by the department. But the ownership is still with the owner. Seizure can be made only after
inquiry/investigation that the goods are liable to confiscation.

Procedure for seizure

 The proper officer will give an order of seizure in FORM GST INS-02.

What are the powers of the officer authorized to search?

The officer authorized to search will have the power to seal the door of the premises.
He can also break open the door of any premises if access is denied. He can also break open
any cupboard or box in which goods, books, documents etc. are suspected to be concealed.If
it is not practicable to seize the goods, the proper officer will order the owner not to remove
these goods without prior permission of the officer. The officer will issue an order of
prohibition in FORM GST INS-03.

How long will the books/documents remain with the officer?

The officer will keep the books and documents as long as it is necessary for
examination and inquiry. Other books which are not relevant to the issue of notice will be
returned within 30 days from the date of notice. The seized goods can be released on a
provisional basis against a bond for the value of the goods in FORM GST INS-04. The owner
must also furnish a security in the form of a bank guarantee for the amount due (applicable
tax, interest and penalty payable). If the owner fails to produce the provisionally released
goods at the appointed date and place then the security will be encashed and adjusted against
the amount due.

What happens after seizure?

 The person, whose documents are seized, can make copies only in the presence of an
officer.
 If notice is not issued within six months (extendable by 6 more months) of the seizing
the goods, they will be returned.
 The Government can issue a list of hazardous or perishable goods which can be
disposed off as soon as they are seized.
 All goods seized will be listed properly by the officer.

Does the Code of Criminal Procedure apply in such cases?

The provisions of the Code of Criminal Procedure will apply to search and seizure.

Other ways to check/inspect

The Commissioner or an authorized officer can purchase any goods and/or services
from a taxable person. This will be done to check the issue of tax invoices, whether they are
maintained correctly, and whether GST amount is clearly displayed. When the goods are
returned, the amount will have to be refunded by the taxable person and the sales invoice will
be cancelled.

Arrest under GST

If the Commissioner believes a person has committed an offence u/s 132, the offender
can be arrested under GST. Read our article to know more about arrest under GST. GST also
has provisions for interception and inspection of goods in transit.

APPEAL

Any appeal under any law is an application to a higher court for a reversal of the
decision of a lower court. Appeals arise when there are any legal disputes. A person unhappy
with any decision or order passed against him under GST by an adjudicating authority can
appeal to the First Appellate Authority. If they are not happy with the decision of the First
Appellate Authority they can appeal to the National Appellate Tribunal, then to High Court
and finally Supreme Court.

What are disputes?

Tax laws (or any law) impose obligations. Such obligations are broadly of two kinds:
tax-related and procedure-related. The taxpayer‘s compliance with these obligations is
verified by the tax officer (through audit, anti-evasion, examining etc.). Sometimes there are
situations of actual or perceived non-compliance. If the difference in views persists, it results
into a dispute, which is then required to be resolved. The initial resolution of this dispute is
done by a departmental officer by a quasi-judicial process resulting into the issue of an initial
order known by various names -assessment order, adjudication order, order-in-original, etc.
GST Act defines the phrase ―adjudicating authority‖ as any authority competent to pass any
order or decision under this Act, but does not include the Board, the First Appellate Authority
and the Appellate Tribunal. Thus, in a way, any decision or order passed under the Act is an
act of ―adjudication‖. Some examples are:- cancellation of registration, best judgment
assessment, decision on a refund claim, imposition of a penalty.

Steps of appeals under GST

Sections
Appeal level Orders passed by…. Appeal to ——-
of Act
1st Adjudicating Authority First Appellate Authority 107

2nd First Appellate Authority Appellate Tribunal 109,110

3rd Appellate Tribunal High Court 111-116

4th High Court Supreme Court 117-118

Should every appeal be made to both CGST & SGST authorities?

As per the GST Act, CGST & SGST/UTGST officers are both empowered to pass
orders. As per the Act, an order passed under CGST will also be deemed to apply to SGST.
However, if an officer under CGST has passed an order, any appeal/review/
revision/rectification against the order will lie only with the officers of CGST. Similarly, for
SGST, for any order passed by the SGST officer the appeal/review/revision/rectification will
lie with the proper officer of SGST only.

Time limit for filing a GST appeal

An applicant can file an appeal before the Appellate Authority within three months
from the date of communication of the disputed order. Further, the Appellate Authority may
condone a delay of up to one month if they are satisfied that there was a sufficient cause for
such delay.

General rules for filing GST appeals

All appeals must be made in prescribed forms along with the required fees. Fee will
be – The full amount of tax, interest, fine, fee and penalty arising from the challenged order,
as admitted by appellant, and –10% of the disputed amount In cases where an officer or the
Commissioner of GST is appealing then fees will not be applicable.
Can an authorised representative appear in court?

Any person required to appear before a GST Officer/First Appellate Authority/Appellate

Tribunal can assign an authorised representative to appear on his behalf, unless he is required
by the Act to appear personally. An authorised representative can be-

 a relative
 a regular employee
 a lawyer practising in any court in India
 any chartered accountant/cost accountant/company secretary, with a valid
certificate of practice
 a retired officer of the Tax Department of any State Government or of the
Excise Dept. whose rank was minimum Group-B gazetted officer
 any tax return preparer

Retired officers cannot appear in place of the concerned person within one year from
the date of their retirement.

Appeal cannot be filed in certain cases

The Board or the State Government may, on the recommendation of the Council, fix
monetary limits for appeals by the GST officer to regulate the filing of appeal and avoid
unnecessary litigation expenses

Appeals cannot be made for the following decisions taken by a GST officer-

 An order to transfer the proceedings from one officer to another officer;

 An order to seize or retain books of account and other documents;
 An order sanctioning prosecution under the Act; or
 An order allowing payment of tax and other amount in installments

A person unhappy with any decision or order passed against him under GST by an
adjudicating authority can appeal to the First Appellate Authority. If they are not happy with
the decision of the First Appellate Authority they can appeal to the National
AppellateTribunal, then to High Court and finally Supreme Court.

Withdrawal of a GST appeal

 In the 48th GST Council meeting, it was decided to provide an option of withdrawal
of aGST appeal that has already been filed. This move was made with the intention of
reducingthe number of litigations that the appellate authorities have to deal with. In this
regard, a newRule 109C was inserted in the CGST Rules via Notification No.26/2022-
Central Tax.

Rule 109C states that the applicant can file an application for withdrawal of an appeal
at anytime before the show cause notice or order under Section 107(11) is issued, whichever
is earlier. This is in respect of any appeal filed in Form GST APL-01 or Form GST APL-03.
The application for withdrawal of the appeal will need to be submitted using the new
FormGST APL-01/03W.

It is important to note here that in cases where the final acknowledgment in Form
GST APL-02 has been issued, then the withdrawal of the said appeal will require the
approval of theappellate authority. The appellate authority must make a decision on the
application forwithdrawal of the appeal within seven days of the applicant filing the same.
Any fresh appealfiled by an appellant after such withdrawal should be within the time limits
specified underSection 107.