GST Penalties in India: Late Fees, Tax Evasion & Compliance

Know GST penalties in India, including late fees, tax evasion fines & ITC misuse charges. Learn appeal processes & compliance tips to avoid penalties.

What Are GST Penalties?

The Goods and Services Tax (GST) system in India has defined penalties for non-compliance to ensure adherence to its provisions. Below are the key penalties applicable under GST:

Type of Non-Compliance	Penalty Details
Failure to Register for GST	10% of the tax due or ₹10,000, whichever is higher.
Non-Filing of GST Returns	₹50 per day (₹25 each for CGST & SGST), up to ₹5,000. For NIL returns, ₹20 per day.
Short Payment or Non-Payment of Tax	10% of the tax due (minimum ₹10,000), increasing to 100% for deliberate evasion.
Incorrect/Inaccurate Invoices	₹25,000 penalty for issuing incorrect or incomplete invoices.
Fraudulent Activities	100% of the tax amount or ₹10,000 (whichever is higher), with possible imprisonment.
Late Payment of Tax	Interest at 18% per annum on the unpaid tax amount.
Input Tax Credit (ITC) Misuse	Penalty equal to the wrongful claim amount, with potential legal action.

What Is the Interest on GST Penalties?

GST penalties also include interest charges for delayed payments or incorrect tax filings.

Type of Delay	Applicable Interest Rate
Late GST Payment	18% per annum on the outstanding tax amount.
Wrongful ITC Claim	Up to 24% per annum on misused credits.

What Are the Penalties for Eway Bill Violations?

Under Section 129 of the CGST Act, businesses must generate an e-way bill for goods transported above ₹50,000. Failure to comply attracts severe penalties:

• For Taxable Goods: 100% of the tax amount due or equal to the value of goods, whichever is higher.
• For Exempt Goods: 2% of the value of goods or ₹25,000, whichever is lower.
• Vehicle & Goods Seizure: Authorities may detain goods and the vehicle until penalties are paid.

Example: If goods worth ₹1,00,000 are transported without an e-way bill, the penalty would be:
₹1,00,000 (100% of taxable value).

How Can Businesses Appeal GST Penalties?

Businesses or individuals penalized under the GST Act have the right to appeal. Appeals can be filed before the Appellate Authority, provided they meet the procedural requirements outlined in the Act.

Responsibility for paying GST penalties typically falls on the defaulting taxpayer, whether an individual or an organization. Ensuring compliance with GST regulations is key to avoiding unnecessary fines and ensuring smooth business operations.

By understanding the nature of GST penalties and taking steps to ensure compliance, businesses can avoid potential disruptions and financial liabilities. This blog provides a comprehensive guide to GST penalties, helping businesses operate confidently within the legal framework.

Why Is Understanding GST Penalties Crucial for Compliance?

• Understanding GST penalties helps businesses ensure GST compliance and avoid legal issues.
• The aversion of such negative tendencies as fraud and non-compliance with taxation within the country is the significance of the GST penalties. 
• Awareness of the overview of GST penalty helps the business firm in internalising the time for submissions as well as record keeping accurately. 
• Being aware of GST penalties allows businesses to avoid costly fines and legal complications.
• Staying informed about GST penalties ensures smooth operations within the framework of the GST Act.

What Is the Penalty for Late Filing of GST? – GST Late Payment Interest

Late GST return filing attracts daily penalties until the return is submitted.

Condition	GST Late Fee (₹ per day)	Maximum Cap
Late Filing with Tax Liability	₹50 per day (₹25 CGST + ₹25 SGST)	₹5,000
Late Filing with NIL Return	₹20 per day (₹10 CGST + ₹10 SGST)	₹500
IGST Late Filing	₹100 per day	No cap

 

What Happens If You Don’t Pay GST on Time?

An offending taxpayer who does not pay tax or pays tax short will incur a 10% penalty on the tax amount payable subject to a minimum penalty of ₹10,000. Where there is an intent to deceive or evade payment of tax, the penalty may amount to 100% of the tax liability.

What Is the ITC Reversal Penalty?

• • ITC claims which are fake or which have been fabricated are outreach to impose penalties for incorrect or fraudulent Input Tax Credit.
  •  In case of incorrect or fraudulent ITC claims, the interest chargeable to such a claim is 24% per annum.
  •  This kind of penalty is imposed so as to ensure that there is no mistake or fraud in the claim of GST ITC.

Read more: Input Tax Credit

What Are the Major GST Offences and Their Penalties?

GST violations attract severe penalties depending on the nature of the offense.

Offence	Penalty
Fraudulent Registration	₹10,000 or 100% of the tax amount, whichever is higher.
Issuing Fake Invoices	Same as fraudulent registration.
Failure to Issue Invoices	Penalty up to ₹10,000.
Obstructing GST Officers	Fine up to ₹25,000.

What Is the Reverse Charge Mechanism (RCM) Penalty?

• • Interest will be charged at 18% per annum from the due date until the tax is paid.
  • Penalties may be imposed under the GST Act for non-payment of tax.
  • The penalty amount can be as high as 100% of the tax due.

What Are the Categories of Offences Under GST?

This part defines the different classes of offences associated with GST and the legal implications resulting from those, assisting the business in knowing what it deems to be non-compliant behaviour under the provisions of GST Acts.

What Are Minor and Major Breaches Under GST?

• Minor Infractions occur when the value of tax is limited to a sum of ₹5,000 or less such occurrences are likely to be followed up with a mere reprimand rather than a penalty.
• Major Offences transcends the limits of a tag of ₹5,000 and may attract punitive measures or court action.
• In relation to this classification, the comparative factors between minor and major infringement are the tax sums involved and the degree of the infringement committed.

What Are the GST Offences Related to Invoicing and Documentation?

• Apart from the failure to issue invoices on the proper form in the case of taxable units where they should issue them, there are also offences related to issuance of incorrect invoices. 
• Making changes to fake invoices in order to reduce the amount of tax paid is a criminal offence under the GST Act and is punishable under law.
• The penalty for incorrect GST documents primarily comes into play when the total amount taxed which is shown on the invoice is less than what is specified resulting in risks of tax evasion.

What Are the GST Offences Related to Tax Evasion?

• Under GST, tax evasion can be defined as where the firm actively cuts down on sales or taps engaging in tax evasion practice. 
• Citing ITC without availing real goods or services or generating phantom invoices to obtain credits is tantamount to tax fraud under GST. 
• Sanctions for tax delinquency under GST are very harsh and may involve both monetary fines and imprisonment

Who is Liable for GST Penalties?

Every person or company that does not pay tax fully or at all pays 10% of the outstanding tax amount as penalty with a lower limit of 10,000. However, if the default is due to endorsement of fair frauds or impersonation, the penalty may even reach 100% of the amount of tax which is being evaded.

Who Is Responsible for GST Penalties in Different Business Structures?

• Companies: The responsibility lies with directors, secretaries, and managers for GST penalty responsibility.
• LLPs: In Limited Liability Partnerships (LLPs), the partners are liable for penalties.
• Hindu Undivided Family (HUF): The Karta (head of the family) holds responsibility for any GST-related penalties.
• Trusts: The managing trustee is accountable for penalties incurred under the GST law.

How to Calculate GST Penalties?

• An offender who fails to pay tax or makes short payments must pay a penalty of 10% of the tax due.
• The minimum penalty is ₹10,000, regardless of the tax amount.
• The maximum penalty is 10% of the unpaid tax.

How Does a GST Penalty Calculator Work?

• A GST fine calculator is an important web-based system which assists business concerns in determining GST penalties for things such as late filing, ITC reversal, non-payment, etc. 
• It is absolutely advisable that one resorts to available official sites which include the GST portal where one will get the required penalty calculator or look for a credible third party site which has an online tool for calculating GST penalties. 
• These systems make working out the GST fines much easier by mechanically incorporating appropriate penalty rates and penalty conditions.

How to Manually Calculate GST Penalties?

• To manually calculate the GST penalties, it is important first to categorise the penalties (for example, whether it is for late filing, non-payment, etc.) 
• Late filing which is a common problem can be avoided by calculating the penalty according to the daily rate of ₹ 50 (inclusive of lethargy of both CGST and SGST) or ₹ 100 which is IGST inclusive and also subject to the maximum cap falling within those parameters. 
• Non-payment/short-payment attracts a penalty of 10% on the outstanding tax subject to a minimum of ten thousand rupees or xX, whichever is higher and threatens him with non-payment. 
• In the case of allowing a reversal of ITC or evasion during tax passing such as example inflicted on fraudulent ITC used a formula that incorporates a percentage penalty and they would be 24% interest correlated to the speculative claims.

How to Pay GST Penalties?

Businesses can pay GST penalties through the official GST portal.

Opting for The online payment method for the gst registration penalties helps to simplify the process and quickens it as well.

What Are the Alternative Payment Methods for GST Penalties?

• The offline payment methods for GST penalty include transactions using NEFT or RTGS services, or making the payments at the counter of authorised banks. 
• In case of any problem with the GST portal or its gross delay, the applicant should be directed to the GST helpline for support. 
• After payment is done using NEFT for GST penalties, it is advisable to provide the correct challan and reference number to prevent issues arising from it.

How to Appeal a GST Penalty?

Addressing disputes over GST penalties requires a structured appeal process. Below are steps and documentation needed for filing appeals effectively.

Documentation Required for GST Penalty Appeals

In order to properly support your case in respect of GST penalties, make sure that you have the following documentation available:

• Copies of GST Returns: Accurate and complete GST returns should be provided as proof of compliance.
• Tax Payment Proof: Reimbursed or unused tax payments receipts showing tax payments evidencing compliance should be submitted.
• Supporting Evidence: Attach any other useful documents for your case such as filled up invoices, audit sheets, communication letters, etc.

Conclusion on GST Penalties

GST penalties play a crucial role in ensuring compliance and deterring non-adherence under the GST framework. Key aspects include timely filing, accurate tax payments, and understanding the penalties for various offences like tax evasion and ITC misuse. The appeal process provides a structured way to address disputes, while tools like penalty calculators help businesses stay informed about potential liabilities. To manage penalties efficiently and maintain smooth operations, businesses should prioritise compliance and seek professional advice when needed. 

For expert guidance on GST compliance and penalty management, consult professionals who can streamline the process and offer solutions, ensuring smooth business operations within the GST framework. Reach out today to simplify GST compliance. 

FAQs on GST Penalties

What Is the Penalty for Not Paying GST

If an offender fails to pay GST or makes a short payment due to a genuine error (not fraud), they must pay a penalty of 10% of the tax amount due, subject to a minimum penalty of ₹10,000. For example, if the tax due is ₹50,000, the penalty would be ₹10,000 (since 10% of ₹50,000 is ₹5,000, which is below the minimum threshold). However, if the tax due is ₹2,00,000, the penalty would be ₹20,000 (10% of ₹2,00,000). In cases of willful fraud or tax evasion, the penalty can be 100% of the tax amount due, significantly increasing financial liabilities for businesses.

Can GST penalties be waived under special circumstances?

Yes, GST penalties may be waived under certain circumstances, such as technical glitches on the GST portal or if the government issues a notification granting relief.

What happens if a business repeatedly violates GST rules?

Repeated violations of GST rules can lead to higher penalties, cancellation of GST registration, or even prosecution, depending on the severity of the offence.

How is interest on delayed GST payments calculated?

Interest on delayed GST payments is calculated at 18% per annum on the unpaid tax amount, starting from the due date until the payment is made.

Is there a time limit for filing appeals against GST penalties?

Yes, appeals against GST penalties must generally be filed within three months from the date of communication of the order. Extensions may be granted under exceptional circumstances.