AUDIT,

OFFENCES &
PENALTIES
BY: APURVA DHAR
PRACHI CHAUHAN
AARADHANA BHANDARI
RIDA KHAN
NAAZ CHOUDHARY
 AUDIT Recent Updates on Audits under GST

Definition of the term “Audit” – Section 1st February 2021

2(13) of the CGST Act/SGST Act Union Budget 2021:
Audit under GST is the
• GST audit requirement by CAs and
process of examination of CMAs has been removed from the GST
records, returns and other law. ↓
(Sec 35 & 44 were
documents maintained by a amended)
taxable person.
• Only GSTR-9-annual returns on a
self-certification basis needs to be filed.
PURPOSE ↓
(removing the requirement for GSTR-9C –reconciliation statement.)
1. verify the correctness of turnover
declared, • The FY and date of applicability of
2. taxes paid, this removal are yet to be clarified by
the government.
3. refund claimed and input tax
credit availed, NOTE:
4. assess the compliance with the GSTR-9C submission for FY 2019-20
provisions of GST. remains unchanged.
 TYPES OF GST AUDIT
The GST Audit can be of the different types as depicted in the flowchart given below:

Audit under GST

Audit by CA/CMA Audit by the Tax Authorities

(if the threshold turnover is more

than Rs.2 Crore)

File audited GSTR-9 General Audit Special Audit by

(By 31st Dec of the next FY) CA nominated
(Order by Commissioner) by
+ Commissioner
Audited Accounts
(Copy) (Order by Deputy/ Assistant
+ Commissioner)

Certified reconciliation statement(GSTR-9C)

AT< Rs.5 crore, filing of GSTR-9C for FY 2018-19 and FY
2019-20 has been waived off.
 Audit by Tax Authorities
General Audit Special Audit
It is carried out after the
It is carried out after the
order is passed by the
order is passed by the
deputy or assistant
When? commissioner. However, it is
commissioner after the prior
important to give 15 days
approval of GST
prior notice
commissioner

Chartered Accountant (CA)

CGST or SGST
By commissioner or
or Cost and Work
Accountant (CWA)
any other person
Whom? authorized by them.
appointed by the
commissioner.

3 months from
Time Commencement
90 days from
commencement
(extension: 6
Limit months)
(extension: 90 days)

Borne by Tax
Expenses Authorities
Borne by Tax Authorities
OFFENCES
&
PENALTIES
Offences Under GST

What is an offence?
• Breach of a law or rule, i.e., an illegal act.

• Offence under GST is a breach of the provisions

of the GST Act and Rules.

• CGST Act.
 What does penalty mean?
• A penalty is a punishment imposed by
law for committing an offence.
 5 FAILURE TO FURNISH GENERAL DISCIPLINES: TO BE POWER TO WAIVE OFF
OFFENCES STATISTICS FOLLOWED BY OFFICERS FEE OR PENALTY
OR BOTH

122(1) 122(3) 124 126 129

128
21 127 DETENTION
SEIZURE
OFFENCES 123 125 &
122(2) RELEASE OF GOODS
&
CONVEYANCES
POWER TO IMPOSE IN TRANSIT
PENALTY IN CERTAIN
FAILURE TO GENERAL PENALTY
2 CASES
FURNISH
OFFENCES
INFORMATION
RETURN

CONFISCATION OF
COMPOUNDING GOODS OR
OF RELEVANCY OF COGNIZANCE OF 12 CONVEYANCE &
OFFENCES STATEMENTS OFFENCE OFFENCES LEVY OF PENALTY

138 136 134 130

132

137 135 133 131

CONFISCATION OR PENALTY NOT TO

CULPABLE OFFICERS & CERTAIN INTERFERE WITH OTHER
OFFENCES BY COMPANIES
MENTAL STATE OTHER PERSONS PUNISHMENTS
 a. Fake or wrong Invoices
1. Taxable person supplies any
goods/Services without Invoice/False
Invoice
Section -122(1)
2. Invoice /Bills without supply of goods/
Penalties for Services
offences 3. Issues Invoice using registration number
of another person

b. Fraud
(21 Offences)
1.He submits false info while registering
under GST
2.He submits fake Financial
records/documents or files fake return
3.Doesn’t provide info/ provides false info
during proceeding.
 c. Tax Evasion

1. Collects GST but doesn’t

Section -122(1) submit to government within 3
Penalties for months.
2. Collection in contravention of
offences provisions, fails to pay to govt
within 3 months
3. Obtains refund of
(21 Offences) CGST/SGST by fraud
For any taxable person
4. ITC without actual receipt of
goods
5. Deliberately suppresses sales
to evade tax
 d. Supply/Transport of goods
1. Transports goods without proper
Section - documents
122(1) 2. Supplies/Transport goods with he
knows will be conflicted
Penalties for 3. Tampers/Destroy goods seized.
offences
e. Others
(21 Offences)
1. He doesn’t register even though
For any taxable person required to register by law.
2. He doesn't collect tax/ collects less
amount than required (TCS)
3. He doesn’t deduct tax/ deducts
less(TDS)
4. He destroys any evidence.
5. Obstruct officer during audit by tax
authorities.
 6. Does not maintain all BOA.
7. Bring an ISD, takes/ distributes ITC in
violation of rules.
Penalties for
offences under
Section -122(1)
General Penalty u/s 122(1)
shall be higher of:
(21 Offences)
For any taxable person
• Amount of tax evaded /
fraudulently obtained as refund /
availed as credit / not deducted
or collected / short deducted or
short collected
OR
• Rs.10,000/-
 1. Supplies goods /services or both for
which Tax not paid/short
paid/erroneously refunded .
Penalties for 2. Its wrongly availed /utilised
offences under
Section-122(2) A. Without fraud, willful misstatement,
Suppression of facts
Penalty u/s 122(2) shall be higher of:
•Rs.10000
(2 Offences)
For any taxable person OR
•10% of Tax due

B. For reason of fraud, wilful

misstatement, Suppression of facts
Penalty shall be higher of:
•Rs.10000
OR
•Tax due
 1. Aids in 21 offences under section
122(1) .
2. Fails to appear before officer when
summon issued/ produce document
Penalties for
3. Fails to issue invoice fails to account
offences under for invoice
section -122(3) 4. Receives/Supplies services that it’s
contravention of Provisions
5. Acquires possession/transport deposit
(5 Offences) supply or deal/purchases goods
knowing that liable for confiscation.

Amount of penalty
may extend to Rs.
25000/-
 Sec(123) • Notice is issued u/s 150(3) to
Penalties for furnish information return
failure to within a period not
furnish exceeding 90 days from date
information of service of notice.
return • Fails furnish within period

Penalty of 100/- per

day.
Maximum Rs.5000/-
 If any person required to furnish any
information or return under section
Section(124) 151-
• without reasonable cause fails to
Penalties for furnish such information or return as
failure to may be required under that section,
OR
furnish • wilfully furnishes or causes to furnish
statistics any information or return which he
knows to be false.

PENALTY will be:

•Upto Rs.10000

•If default continues then Rs.100/day

after the first day during which offence
continues
Maximum Rs 25000.
 Any person, who contravenes
any of the provisions of this Act
Section (125) or any rules made there under for
which no penalty is separately
General provided for in this Act, shall
penalty be liable to a penalty.

Punishable with a
penalty that may
extend to Rs. 25,000/-
 SEC 126 : GENERAL DECIPLINES RELATING TO
PENALTY
1. No penalty should be imposed
without issuance of SCN or
TO BE proper opportunity of being
FOLLOWED heard as against the natural rule
BY of justice
OFFICERS 2. No penalty should be imposed
without considering the totality
of the facts
3. The penalty imposed must be
commensurate with degree of
severity of offence
 4. Nature of breach is to be
mentioned clearly in the order of
penalty to be issued
5. The provisions under which the
TO BE penalty has been imposed should
FOLLOWED
be mentioned specifically
BY
OFFICERS 6. No penalty should be imposed in
case of minor breach
7. No penalty shall be charged for
minor mistake made without
the intention of fraud.
 Where the proper officer is of the
view that a person is liable to a
Section 127 –
penalty and the same is not
Power to
impose covered under any proceedings

penalty in (sec62/sec63/sec64/
certain cases sec73/sec74/
sec129/sec130)
He may issue an order levying such
penalty after giving a reasonable
opportunity of being heard to such
person.
 The Government may, by notification,
waive in part or full, any penalty
Section 128 –
referred to in section 122 or section
Power to
123 or section 125 or any late fee
waive penalty
or fee or both referred to in section 47 for such class
of taxpayers and under such mitigating
circumstances as may be specified
therein on the recommendations of the
Council.
 SEC 129 : DETENTION, SEIZURE &
RELEASE OF GOODS &
CONVEYANCES IN TRANSIT
The section provides for provision relating to
detention, seizure & release goods & conveyance in
transit & penalty payable thereon
If a person
• transports any goods or stores
any such goods while in transit
without prescribed documents or
• supplies or
• stores any goods
• that have not been recorded in
books of accounts maintained by
him,
then such goods shall be liable for
detention along with vehicle on
which they are being transported.
 If goods Tax + 100% of
taxable tax as penalty

Owner comes
forward. 2% of value of
goods or
If goods Rs.25,000/-
exempted Whichever is lower/
equivalent
Penalties for security
release of such
detained goods and
conveyance.
If goods Tax + 50% of value of
taxable goods as penalty

Owner does
not comes
forward 5% of value of
goods or
If goods Rs.25,000/- whichever
exempted is lower/equivalent
security
 1. Supplies/ receives goods in contravention to evade tax
2. Uses conveyance in contravention of rules unless owner
proves that it was used without knowledge of
owner/agent/in charge.
SEC 130 : 3. Contravention of provisions/ rules to evade tax
4. Doesn't account for goods
5. Supplies goods liable to tax without obtaining
CONFISCATION OF registration.
GOODS OR
CONVEYANCE & LEVY All such goods/ conveyance
OF PENALTY
liable to confiscation & penalty
u/s 122.
➢Owner of goods/conveyance given option to
5 cases pay fine in lieu of confiscation.

Goods
• Fine ≤ (MV of Goods- Tax
Confiscated)

Conveyance
• Fine = Tax payable on
good being transported.
 • This section provides that in addition
to confiscation of goods or penalty
already imposed, all/ any other
SEC 131 : CONFISCATION proceedings may also be initiated or
OR PENALTY NOT TO
INTERFERE WITH OTHER
continued under the GST law or any
PUNISHMENTS other law, as applicable. This could
be, arrest, cancellation of registration
etc.
• Therefore, for the same offence both
penalty and punishment can be
levied.
 a. Fake or Wrong Invoices
1. Taxable person supplies any
(Sec 132) goods/Services without any
invoice/false Invoice.
Punishments
2. Invoice/Bill without supply of
for certain
goods/services
offences
b. Fraud
(12 Offences)
3. He submits fake Financial

records/documents or
files fake return
4.Doesn’t provide info/ provides
false info during proceeding.
 c. Tax Evasion
5. Collects GST but doesn't submit it to
(Sec 132) government within 3 months
Punishments 6. Obtains refund of CGST/SGST by
fraud
for certain
7. ITC without actual receipt of goods
offences
d. Supply/ Transport
8.Receives/supplies services knowing
that it's in contravention of provisions

9. Acquires possession/transports,
deposits, supply or deal/purchases
goods knowing that liable for
confiscation
 e. Others

(Sec 132) 10. Obstruct officer during

Punishments discharge of his duties
for certain
offences 11. Tampers/destroys
evidence/documents
12. Encouraging some other
person to commit such
crimes.
 SEC 133 : OFFENCE &
PENALTY FOR
OFFICERS & CERTAIN
OTHER PERSONS

Upto 6 months
Compilation of
statistically
Where a data & other
person either information.
Wilfully discloses the
a government Fine Upto
servant or any Engaged in information other
than in execution of 25,000/-
other person
or agent of Provision of his duty
above persons service of
common
portal Both
 SEC 134 :
COGNIZANCE
OF OFFENCE • Court inferior than Magistrate of
the First Class shall not declare
the judgement for any offence
under this Act.
 SEC 135 :
PRESUMPTION • Presumed to be done in a
culpable mental.
OF CULPABLE
MENTAL STATE • The accused can defend himself.
• A fact is said to be proved only
when the court believes it to
exist beyond reasonable doubt.
 • When the person who made the
statement is :
✓ Dead or cannot be found
SEC 136 : RELEVANCY ✓ Incapable of providing evidences
OF STATEMENTS ✓ Restricted by the adverse party
UNDER CERTAIN ✓ Presence of the person requires time or
CIRCUMSTANCES expenses involved for presenting the
person is considered unreasonable by
the court
✓ When the person who made the
statement is considered as witness by
the court ,the statement should be
admitted as evidence in the interest of
justice
 SEC 137 : OFFENCES BY COMPANIES

SEC 137: OFFENCES Person not to be held

Offence Committed by Person to be held guilty
BY COMPANIES guilty

If person proves that the

Every person who, at the time
the offence was committed, was
in charge of and was responsible
Company for the conduct of business as
well as the company, shall be
deemed to be guilty
offence was committed
without his knowledge or
that he had exercised all
due diligence to prevent
the commission of such
offence.

The partner or Karta or

Partnership Firm / LLP managing trustee shall be
/HUF / Trust -----do-----
deemed to be guilty of
that offence
 • Payment of a sum of money in
monetary terms instead of undergoing
prosecution.

SEC 138 : • It will save time and money.

COMPOUNDING OF
OFFENCES • It is permitted only after payment of
tax, interest & penalty.

• Lower limit for compounding is 50%

of tax involved or Rs.10,000/- w.e.h.
• Upper limit for compounding is 150%
of tax involved or Rs.30,000/- w.e.h.

On payment of compounding amount,

no further proceedings to be initiated
under the act & criminal proceedings
shall stand abated
THANK YOU