No Penalty

If the taxpayer pays all their dues within 30 days from the date of the
notice, then the penalty will not be applicable. All proceedings (excluding
proceedings u/s 132, i.e., prosecution) regarding the notice will be closed.

Penalty in Other Cases

The tax officer will consider the taxpayer’s representation and then calculate
interest and penalty. The penalty will be 10% of tax subject to a minimum of
Rs. 10,000. The tax officer will issue an order within three years from the due
date for filing of relevant annual return.

As per the 53rd GST Council meeting, the Council has recommended to
waive off the interest and penalties for demand notices issued u/s 73 of CGST
(applicable for fiscal years 17-18, 18-19 and 19-20) for cases not involving
fraud, suppression and misstatement. It is applicable to cases where the
taxpayer pays the full amount in the notice by 31st March 2025.(A new
Section 128A shall be notified)

Paid all dues Penalty amount

Before notice No penalty

 Within 30 days from notice No penalty

After 30 days from notice or issue A higher of 10% of the demanded tax or Rs.10,000, is
of order the penalty

Let us understand how the penalty works in non-fraud cases with this instance
of a taxpayer who did not deposit their tax for a particular month. For
example-

Action/Consequences Period/Date

Amount relates to October 2020, i.e., FY

Tax period when he did not deposit the tax
2020-21

Due date to file annual returns for the year to The last date of filing the annual return of
which the amount relates FY 2020-21 is 31st December 2021

The maximum time limit for an order is 3 years 3 years from the date given above falls on
from the due date of annual returns 31st December 2024

The last date for issuing is

Issue the order within three years
31st December 2024
 Issue the show cause notice at least 3 months The last date of issuing the show cause
before the time limit notice is 30th September 2024

Illustration for No Fraud Scenario

Mr Gnan received a notice of a shortfall in tax paid via GSTR-3B for January
2021 due to erroneous data entry in the GSTR-1. He received a show-cause
notice on 13th January 2022 as to why he should not be subject to tax on the
differential amount. The show-cause notice is issued within the given time limit
of three months before the expiry of three years from the due date of annual
returns filings.