Comprehensive guide to GST offences, penalty amounts, prosecution provisions, compounding options, and post-decriminalization changes from the 49th Council Meeting.
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| Offence | Section | Penalty | Prosecution |
|---|---|---|---|
| Tax evasion / Wrong ITC | 122(1)(i)-(x) | ₹10,000 or tax amount (higher) | Above ₹2 Cr |
| Fake invoices (no supply) | 132(1)(b) | ₹10,000 + tax amount | Any amount (criminal) |
| Fraudulent refund | 132(1)(c) | Tax amount + interest | Any amount (criminal) |
| General non-compliance | 125 | Up to ₹25,000 | No |
| Aiding/abetting offence | 122(3) | ₹25,000 | Above ₹2 Cr |
| Failure to deduct TDS | 124 | ₹10,000 | No |
| Obstructing officer | 122(1)(xv) | ₹10,000 or tax (higher) | Above ₹2 Cr |
| Non-filing of returns | 122(1)(xi) | ₹10,000 or tax (higher) | No (late fee applies) |
GST offences are primarily defined in Sections 122-138 of the CGST Act 2017. They include: (1) Supply without registration; (2) Issuing invoices without actual supply (fake invoices); (3) Collecting GST but not remitting to government; (4) Taking ITC without receiving goods/services; (5) Fraudulently claiming refunds; (6) Suppression of turnover; (7) Failure to file returns; (8) Obstructing officers. The severity ranges from minor (₹10,000 penalty) to criminal prosecution with imprisonment up to 5 years.
After the 49th GST Council Meeting (February 2023) and subsequent CGST Amendment Act 2023: (1) Prosecution threshold raised from ₹1 Cr to ₹2 Cr — no criminal prosecution for tax evasion below ₹2 Cr; (2) EXCEPTIONS: Fake invoicing (Sec 132(1)(b)) and fraudulent refund claims (Sec 132(1)(c)) remain criminal regardless of amount; (3) Offences below ₹2 Cr are treated as civil matters — penalty/interest only, no imprisonment; (4) Compounding range reduced from 25-150% to 25-100% of tax involved.
Yes, but with strict conditions: (1) Cognizable arrest (without warrant): Only for offences where tax evasion exceeds ₹5 Crore; (2) Non-cognizable: Tax evasion ₹2-5 Cr requires arrest warrant from court; (3) Below ₹2 Cr: No arrest or prosecution (post-2023 amendment); (4) Commissioner's approval required for all arrests; (5) Person must be produced before magistrate within 24 hours; (6) Bail is generally available for non-cognizable offences. In practice, arrests are rare — primarily used for fake invoice rackets and large-scale evasion networks.
Compounding (Section 138) is a settlement mechanism where the accused pays a monetary amount to close the case without prosecution: (1) Amount: 25-100% of tax involved (post-49th Meeting reduction from 25-150%); (2) Who can apply: Accused must apply to Commissioner before prosecution proceedings begin; (3) Not available for: Repeat offenders, fraud/willful misstatement, fake invoices where prosecution already started; (4) Effect: Once compounded, no further criminal proceedings for that offence; (5) Doesn't affect civil liability — tax + interest must still be paid separately. It's essentially 'paying to avoid jail'.
Late filing penalties: (1) GSTR-3B/GSTR-1: ₹50/day (₹25 CGST + ₹25 SGST) with maximum cap of ₹5,000 per return period — reduced to ₹20/day for NIL returns; (2) Annual return GSTR-9: ₹200/day (₹100+₹100) up to 0.25% of turnover; (3) After cancellation: Continued non-filing leads to registration cancellation; (4) Under Section 122: Wilful non-filing for continuous period = separate offence with ₹10,000 or tax penalty; (5) Interest: 18% per annum on outstanding tax from due date. Note: Multiple amnesty schemes have been offered (48th, 49th Council Meetings) to bring non-filers back into compliance.
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