AUDIT,

OFFENCES &
PENALTIES
BY: APURVA DHAR
PRACHI CHAUHAN
AARADHANA BHANDARI
RIDA KHAN
NAAZ CHOUDHARY
 AUDIT
Audit under GST is the Recent Updates on Audits under GST
process of examination
of records, returns and
1st February 2021
other documents Union Budget 2021:
maintained by a taxable
person. The purpose is • GST audit requirement by CAs and CMAs has
been removed from the GST law. Section 35 and 44
to verify the were amended for this.
correctness of turnover • As per the amendment, only GSTR-9-annual
declared, taxes paid, returns on a self-certification basis needs to be filed
refund claimed and on the GST portal by taxpayers, completely removing
the requirement for GSTR-9C -reconciliation
input tax credit availed, statement.
and to assess the • However, the financial year and date of
compliance with the applicability of this removal are yet to be clarified by
provisions of GST. the government. Note that GSTR-9C submission for
FY 2019-20 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

CA nominated
+ by
(Order by Commissioner)
Audited Accounts Commissioner
+
(Order by Deputy/ Assistant
Certified reconciliation statement Commissioner)
 Audit under GST by CA/CMA
Every GST registered taxable person whose
turnover during a financial year exceeds the
prescribed limit is subject to audit. As per the
current notified GST Rules, the turnover limit is
above Rs 2 crore. Such businesses must get their
books of accounts audited by a chartered
accountant or a cost accountant. Such taxpayer
shall electronically file:
1. An annual return using the Form GSTR 9 by
31st December of the next Financial Year
2. The audited copy of the annual accounts NOTE:
3. A certified reconciliation statement in the form For businesses with an
GSTR-9C, reconciling the value of supplies annual turnover of less
declared in the return with the audited annual than Rs.5 crore, filing
financial statement. of GSTR-9C for FY
2018-19 and FY 2019-
4. Any other particulars as prescribed. 20 has been waived off.
 Special Audit under GST
The Assistant Commissioner may initiate the special audit
When ? •considering the nature and complexity of the case and interest of revenue.
•If he is of the opinion during any stage of scrutiny/ inquiry/investigation that the
value has not been correctly declared or the wrong credit has been availed then a
special audit can be initiated.
•A special audit can be conducted even if the taxpayer’s books have already been
audited before. 

The taxable person will be given an opportunity of being heard in the

How? findings of the special audit. If the audit results in detection of unpaid/short
paid tax or wrong refund or input tax credit wrongly availed then demand
and recovery actions will be initiated.

The Assistant Commissioner (with the prior approval of the

Who? Commissioner) can order for special audit (in writing). The special audit
will be carried out by a chartered accountant or a cost accountant
nominated by the Commissioner.
OFFENCES
&
PENALTIES
Offences Under GST

What is an offence?
• An offence is a breach of a law or rule, i.e., an
illegal act.
• Similarly, an offence under GST is a breach of
the provisions of the GST Act and Rules.
• Offences under GST and respective applicable
penalties are enlisted under the CGST Act.
 What does penalty mean?
• A penalty is a punishment imposed by
law for committing an offence or failing
to do something that was the duty of a
party to do. 
 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

(21 Offences)
For any taxable person
b. Fraud
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
months.
Penalties for
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
Penalties for violation of rules.

offences
under Section
-122(1) General Penalty u/s 122(1)
shall be higher of:
(21 Offences) • Amount of tax evaded /
For any taxable person
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)
Penalties for to furnish information
failure to return within a period not
furnish exceeding 90 days from
information date 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 151-
Section(124) • without reasonable cause fails to furnish
Penalties for such information or return as may be
required under that section,
failure to
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 proper
TO BE
opportunity of being heard as
FOLLOWED
BY against the natural rule 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 penalty has
been imposed should be mentioned
TO BE specifically
FOLLOWED 6. No penalty should be imposed in case of
BY minor breach ( Tax involved < Rs.5,000/- )
OFFICERS 7. No penalty for any procedural lapse or
mistake easily rectifiable made without
8. fraudulent intent & which can be seen
apparently on the face of the record
 Where the proper officer is of the
view that a person is liable to a
Section 127 –
Power to penalty and the same is not

impose covered under any proceedings

penalty in under section 62 or section
certain cases   63 or section 64 or section
73 or section 74 or section
129 or section 130,
he may issue an order levying such
penalty after giving a reasonable
opportunity of being heard to such
person.
 The Government may, by notification,
Section 128 – waive in part or full, any penalty
Power to referred to in section 122 or section
waive penalty 123 or section 125 or any late fee
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
 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 registration.
CONFISCATION OF
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
goods/Services without any
(Sec 132) invoice/false Invoice.
Punishments for 2. Invoice/Bill without supply of
certain offences goods/services

b. Fraud
(12 Offences)
For any taxable person
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
government within 3 months
(Sec 132) 6. Obtains refund of CGST/SGST by
Punishments for fraud
certain offences 7. ITC without actual receipt of goods

d. Supply/ Transport
(12 Offences)
For any taxable person
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 for discharge of his duties
certain offences 11. Tampers/destroys
evidence/documents
(12 Offences)
12. Attempts to commit /abets
For any taxable person
commission of above
offences
 SEC 133 : OFFENCE &
PENALTY FOR
OFFICERS & CERTAIN
OTHER PERSONS

Upto 6 months
Compilation of
Where a statistically
person either data & other
information.
officer/ Wilfully discloses the
government Engaged in information other Fine Upto
servant or any 25,000/-
than in execution of
other person
Provision of his duty
or agent of
above persons service of
common
portal Both

•For government servant – sanction from government for initiating proceedings

•For non government servant - sanction from commissioner for initiating proceedings
 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 : • Any offence under this Act will be
PRESUMPTION presumed to be done in a culpable
OF CULPABLE mental state by the court.
MENTAL STATE • However, the accused can defend
himself by proving the fact that he
was not in such mental state.
• A fact is said to be proved only
when the court believes it to exist
beyond reasonable doubt.
 • The section provides for relevancy of
statements made & signed by person on
appearance in response to any summons.
SEC 136 : RELEVANCY
• When the person who made the
OF STATEMENTS
statement is :
UNDER CERTAIN
CIRCUMSTANCES Dead or cannot be found
Incapable of providing evidences
Restricted by the adverse party
Presence of the person requires time or
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
Every person who, at the
time the offence was
committed was in charge
of, and was responsible to,
Company the company for the
conduct of business of the
company, as well as the
company, shall be deemed
to be guilty
guilty
If person proves that the
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 / managing trustee shall be
LLP /HUF / Trust -----do-----
deemed to be guilty of
that offence
 • The section provides for compounding of
specified offences under the proposed act
either before or after the institution of
prosecution, by the commissioner on
SEC 138 : payment of prescribed compounding
COMPOUNDING OF amount.
OFFENCES • Compounding is permitted only after
payment of tax, interest & penalty and
compounding shall affect any proceedings
already instituted under any other law
• 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