Penalty for nonpayment of GST or Input Credit wrongly availed or utilized under GST by way of fraud or otherwise

1.0 Introduction

This is one of the most discussed penalties under the GST law because it shall be levied in every case where tax is not paid or short paid. Section 73 and section 74 of CGST act governs this penalty.

Further, the quantum of penalty also increases if the tax is not paid or short paid for the reason of fraud or any willful misstatement. Let us discuss the nature of this penalty in detail:

2.0 When the penalty can be levied under these sections

The penalty under these sections can be levied in the following cases:

• If the tax is not paid
• If the tax is short paid
• The tax has been erroneously refunded
• The ITC has been wrongly claimed or utilized

Further, if in any of the aforesaid cases, it is proved that it was done willfully, then the quantum of the penalty shall increase. Let us discuss the quantum of penalty that can be levied.

3.0 Quantum of Penalty in case OTHER THAN FRAUD OR WILLFUL MISSTATEMENT

The person liable to pay tax has not paid the tax or short paid or erroneously refunded or ITC has been wrongly claimed or utilized, for reason other than fraud or willful misstatement or suppression of facts, then the quantum of the penalty shall be as follows:

• Zero, if the amount due is paid with interest prior to within 30 days of issue of SCN.
• 10% of the amount due or Rs.10,000 whichever is greater in adjudication.
• 10% of the amount due or Rs.10,000 which is higher if self-assessed tax or self-amount collected as a tax not paid within 30 days from the due date.

4.0 Quantum of Penalty IN CASE OF FRAUD OR WILLFUL MISSTATEMENT

The person liable to pay tax has not paid the tax or short paid or erroneously refunded or ITC has been wrongly claimed or utilized, for reason other than fraud or willful misstatement or suppression of facts, then the quantum of the penalty shall be as follows:

• 15% of the amount due if the same is paid with interest on own ascertainment prior to the issue of Show Cause Notice (SCN).
• 25% of the amount due if the same is paid with interest within 30 days of issuance of the notice.
• 50% of the amount if the same is paid with interest within 30 days of adjudication.
• 100% of the amount due or Rs.10,000 whichever is higher.

5.0 Conclusion

In case of any doubt or problem, please email us at info@hubco.in.

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