Offences Penalties and Appeals under GST

 Offences Penalties and Appeals under GST

Scope and Classification

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The CGST Act’s Chapter XIX enumerates offences ranging from procedural lapses to outright fraud, ensuring the integrity of GST revenue. Broadly, offences include:

• Documentation Offences: Tampering, falsification or non‑maintenance of records, issuance of invoices without supply, and transport of goods without requisite documents.
• Tax‑Evasion Offences: Under‑reporting of taxable supplies, fraudulent refund claims, and wrongful availment or utilisation of Input Tax Credit (ITC) .
• Aiding and Abetting: Individuals assisting others in committing offences under Section 122 are equally liable.

Section 122: Penalty for Certain Offences

Section 122 empowers the proper officer to impose penalties for specified infractions, including:

• Sub‑section (1): Non‑payment or short‑payment of tax, excess refund claims, or wrongful ITC utilisation—penalty is 10% of the tax involved or ₹10,000, whichever is higher.
• Sub‑section (2): Other offences (e.g., document-related breaches) attract penalties up to ₹25,000.
• Sub‑section (3): Clarifies applicability and exceptions, including bona fide errors corrected before detection.

Sections 123 & 124: Failure to Furnish Returns and Statistics

• Section 123: Failure to furnish an information return under Section 150 within the specified period incurs ₹1,000 per day, capped at ₹5,000.
• Section 124: Failure to furnish statistics under Section 151 invites a fine up to ₹10,000, plus ₹100 per day of continued default, not exceeding ₹25,000 in total .

Section 125: General Penalty

When no specific penalty is prescribed, Section 125 allows imposition of a fine up to ₹25,000 for any contravention of the Act or rules, ensuring proportionality and adherence to natural justice principles .

 Section 132: Punishment for Fraud and Evasion

• Section 132 addresses serious offences committed with intent to evade tax, including issuing invoices without supply or suppression of details, prescribing:
• Imprisonment: Ranging from six months to five years based on the amount involved (e.g., >₹1 cr–₹2 cr: one year; >₹5 cr: five years).
• Fine: Apportioned according to tax evaded, beyond the custodial sentence.

2. Appeals Framework

Hierarchy of Appeals (Sections 107–118)

A structured, four‑tier appeals process allows review of orders:

Appeal Tier	Originating Authority	Appellate Authority	Act Sections
First Appeal	Adjudicating Authority	First Appellate Authority	Section 107
Second Appeal	First Appellate Authority	National Appellate Tribunal (NAA)	Sections 109–110
Third Appeal	NAA	High Court	Sections 111–116
Fourth Appeal	High Court	Supreme Court	Sections 117–118

Each appeal must be filed within three months from order communication, with a maximum one‑month condonation permitted for sufficient cause.

Procedural Formalities

• Forms: First Appeal in Form GST APL‑01; Second Appeal (Dept.) in Form GST APL‑03.
• Pre‑deposit Requirements: Initially 25% of the disputed amount, but reduced to 10% for penalty‑only appeals by the 55th GST Council meeting on 21 December 2024.
• Fees: Equal to the full amount of admitted tax, interest, fine, fees and penalties, with an additional 10% of the disputed amount (waived for Commissioner‑initiated appeals).

Withdrawal of Appeal (Rule 109C)

Rule 109C, notified by 26/2022–CT, allows appellants to withdraw appeals before issuance of show‑cause notices under Section 107(11) by filing Form GST APL‑01W/03W . If the final acknowledgment (Form GST APL‑02) has been issued, the appellate authority must decide withdrawal applications within seven days.

3. Consolidated Table of Sections and Rules

Section/Rule	Subject	Key Provisions
Section 122	Penalty for Certain Offences	10% of tax or ₹10,000 (higher) for major offences; up to ₹25,000 for others; clarifications for bona fide errors
Section 123	Penalty for Failure to Furnish Information Returns	₹1,000/day up to ₹5,000 for default in furnishing info returns under Section 150
Section 124	Fine for Failure to Furnish Statistics	Up to ₹10,000 plus ₹100/day (after first day) capped at ₹25,000 for default under Section 151 .
Section 125	General Penalty	Fine up to ₹25,000 for any contravention not otherwise penalised.
Section 132	Punishment for Fraud/Evasion	Imprisonment 6 months–5 years and fine, based on evaded amount; applies to fraudulent invoicing, evasion.
Section 107	First Appeal	Appeal to Appellate Authority within 3 months; condonation up to 1 month.
Section 109–110	Second Appeal	Appeal to NAA; Form GST APL‑03; pre‑deposit requirement.
Sections 111–116	Appeal to High Court	Jurisdiction over NAA orders; special leave .
Sections 117–118	Appeal to Supreme Court	Final appeal; limited to substantial questions of law.
Rule 109C	Withdrawal of Appeals	Withdrawal before show‑cause notice; Form APL‑01W/03W; appellate decision in 7 days .
55th Council Recs	Pre‑deposit Reduction	Pre‑deposit for penalty‑only appeals reduced to 10% (Sec 107 & 112).

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Through detailed comprehension of these provisions, practitioners can better navigate compliance, minimize litigation risks, and leverage the appeals mechanism effectively to safeguard taxpayer rights.

Read More: Reversal of ITC Wrongly Availed but Not Utilized under GST?