Proven Strategies To Minimize GST Penalties

With the introduction of the Goods and Services Tax (GST) through the GST Act in 2017, every form of indirect taxation was eliminated. All the products and services came under a single, uniform tax known as the GST. Get each and every details about how to register for GST and how to track the status of GST.

Every company that produces products or avails services has to comply with the rules and regulations outlined in the GST Act. The company would be held accountable for breaking the law and face penalties if it breaks the guidelines outlined in the GST Act.

What are GST Penalties?  

GST penalties are financial penalties imposed on businesses for non-compliance with the Goods and Services Tax (GST) rules and regulations in India.

Causes of GST Penalties:

• Late filing of GST returns
• Non-payment of GST
• Filing incorrect GST returns
• Failure to issue invoices

Get details of how to check and download GST Filing Status

Consequences of GST Fine:

• Financial burden on businesses
• Damage to business reputation
• Possibility of legal action

GST Penalty for Late Filing of Returns:

• Rs. 200 per day for CGST and Rs. 200 per day for SGST
• Maximum penalty of 0.25% of turnover of taxpayer in the state/UT
• Penalty applies for each return filed late

GST Penalty for Non-Payment of Tax:

• 18% interest per annum from the day after due date till payment date
• GST Penalty for Incorrect Return Filing: Rs. 10,000 or 10% of tax due, whichever is higher

• GST Penalty for Failure to Issue Invoices: Rs. 25,000 penalty

GST Penalty for Tax Evasion:

• 100% of the tax due or Rs. 10,000, whichever is higher
• Possibility of imprisonment and GST registration cancellation in severe cases

Understanding Late Fees And Penalty Structures Under GST Acts 

Under the CGST Act, for late payment of GST amount, there is a daily fine of Rs. 200. There is a 5,000 rupee limit charge, though. Know more about CGST.

The IGST Act does not specify a late charge. Additionally, the total late cost for GSTR-1 and GSTR-3B is now reduced to Rs. 50 per day (or Rs. 20 per day for Nil filing).

Also, take a look at the following table, which highlights the applicable GST Fine and late payment interest under various circumstances.

In order to minimize these penalties and to easily navigate through the complexities of GST, follow the below-mentioned strategies.

Causes of GST Penalties in India 

There are a number of causes for general penalty under GST, a few of which are listed below:-

1. Late filing of GST:  Late filing has a penalty of INR. 200 per day for CGST and INR. 200 per day for SGST, subject to a maximum of 0.25% of the taxpayer’s turnover in the state or union territory. 
2. Incorrect GST return filing:  10,000 or 10% of the tax due, whichever is higher.
3. Failure to issue an invoice: Penalty of INR. 25,000

Don’t worry too many numbers may get problematic for analysis but GST Prime software is the ultimate solution for all GST related analysis.

Also know:- What is the budget for GST in 2024?

Strategies to Minimize GST Penalties and GST Late Payment Interest 

1. Maintain the exact documentation: 

Maintaining documentation of every business transaction is important for abiding by the GST regulations. The record should include every transaction, expense, and associated GST amount received and paid by the business enterprise. 

1. Sales Transactions: Ensure that you accurately record every sale, including the date, the item(s) sold, the selling price, and the amount of GST that applies.
2. Purchase Deals: Keep track of all the purchases the company makes, together with the bills, receipts, and invoices. 
3. Costs: Maintain a record of every expense associated with your business, including rent, utilities, payroll, and office supplies. Make sure that every expense is appropriately classified and backed up by pertinent records.

A. Maintain correct documents:

1. Save information on each sale, including dates, what was sold, selling price and GST amount.
2. Record all purchases made, such as bills, receipts or invoices.
3. Keep records of business expenses supported by receipts, etc.

    B. Note GST Return Filing Timelines:

1. Note time restrictions set by tax authorities for filing GST returns.
2. The turnover, structure or frequency of filing may affect deadlines.
3. To avoid last-minute errors, which can result in penalties, file the returns in good time.
4. Give room for reviewing and confirming accuracy before submission.
5. Use online filing tools provided by the tax authorities.

C. Reconcile Financial Records and GST Returns Regularly:

1. At intervals, compare financial records like purchase/sales ledgers with filed GST returns.
2. Regular reconciliation should be scheduled to ensure accuracy and compliance.
3. If any differences are found between reporting periods, missing transactions or wrong amounts of GST; take note of them.

Offences Under GST

What is an offense?

An offense is when someone breaks a law or rule, which means they do something illegal. In the same way, an offense under GST is when someone breaks the rules of the GST Act and its guidelines.

What Are the Offenses Under GST?

When does someone commit an offense under GST?

There are 21 offenses under GST, grouped into simple categories:

Fake or Incorrect Invoices:

1. A person sells goods or services without issuing an invoice or issues a fake invoice.
2. A person issues an invoice or bill without actually supplying goods or services, breaking GST rules.
3. A person uses someone else’s identification number to issue invoices.

Taxpayer Due Dates

Here are the categories of taxpayers and the due dates for GST payments.
Taxpayer Type: General Citizen (due on the 20th of the next month).

Composition – 18th of the following month or quarter.

Non-resident – 20th of the next month

Input Service Distributor – 13th of next month

TDS Deductor – The Tenth of the Next Month

TCS Collector – The Tenth of the Next Month

Takeaway

Through the implementation of these strategies, businesses can avert needless expenses linked to penalties, preserve their good standing with tax authorities, guarantee optimal cash flow management, and curtail operational disruptions to the minimum, thereby cultivating a business environment that is both resilient and sustainable.

FAQs

1. What are the general guidelines for GST penalties?

Under Section 125 of the Central Goods and Services Tax (CGST) Act, there is no specific punishment for violating any of the provisions of the GST Act or the rules enacted thereunder; instead, there is a general penalty. The maximum fine that can be imposed in accordance with this article is Rs. 25,000. 

2. What are GST late payment interests, and what effect does it have on businesses?

The penalty levied on businesses for not remitting their Goods and Services Tax (GST) dues within the designated period is known as GST late payment interest. Businesses risk incurring interest on the amount owed when they neglect to submit their GST payments by the deadline. 

The financial pressure on businesses is exacerbated by this interest, which is accrued from the due date to the actual day of payment. Usually set by the tax authorities, the rate of interest for late GST payments varies based on the jurisdiction. 

3. How can I figure out my GST late payment interest amount? 

Interest will be computed from the June 20th deadline to the payment date if the company does not pay the GST amount by July 10th. Therefore, the interest for the 20-day delay would be Rs. 492 (Rs. 50,000 × 18% annually x 20 days / 365 days).