Q 1. What are the prescribed offences under MGL?
Ans. The Model GST Law codifies the offences and penalties in
Chapter XVI. The Act lists 21 offences in section 66, apart from the penalty
prescribed under section 8 for availing compounding by a taxable person who is
not eligible for it. The said offences are as follows:-
1) Making a supply without invoice or with false/ incorrect
invoice;
2) Issuing an invoice without making supply;
3) Not paying tax collected for a period exceeding three
months;
4) Not paying tax collected in contravention of the MGL for
a period exceeding 3 months;
5) Non deduction or lower deduction of tax deducted at
source or not depositing tax deducted at source under section 37;
6) Non collection or lower collection of or nonpayment of
tax collectible at source under section 43C;
7) Availing/utilizing input tax credit without actual
receipt of goods and/or services;
8) Fraudulently obtaining any refund;
9) Availing/distributing input tax credit by an Input Service
Distributor in violation of Section 17;
10) Furnishing false information or falsification of financial
records or furnishing of fake accounts/ documents with intent to evade payment
of tax;
11) Failure to register despite being liable to pay tax;
12) Furnishing false information regarding mandatory fields
for registration;
13) Obstructing or preventing any official in discharge of
his duty;
14) Transporting goods without prescribed documents;
15) Suppressing turnover leading to tax evasion;
16) Failure to maintain accounts/documents in the manner
specified in the Act or failure to retain accounts/documents for the period
specified in the Act;
17) Failure to furnish information/documents required by an
officer in terms of the Act/Rules or furnishing false information/documents during
the course of any proceeding;
18) Supplying/transporting/storing any goods liable to
confiscation;
19) Issuing invoice or document using GSTIN of another
person;
20) Tampering/destroying any material evidence;
21) Disposing of /tampering with goods detained/ seized/attached
under the Act.
Q 2. What is meant by the term penalty?
Ans. The word “penalty” has not been defined in the MGL but
judicial pronouncements and principles of jurisprudence have laid down the
nature of a penalty as:
• a temporary punishment or a sum of money imposed by
statute, to be paid as punishment for the commission of a certain offence;
• a punishment imposed by law or contract for doing or
failing to do something that was the duty of a party to do.
Q 3. What are the general disciplines to be followed while
imposing penalties?
Ans. The levy of penalty is subject to a certain
disciplinary regime which is based on jurisprudence, principles of natural
justice and principles governing international trade and agreements. Such
general discipline is enshrined in section 68 of the Act. Accordingly—
• no penalty is to be imposed without issuance of a show
cause notice and proper hearing in the matter, affording an opportunity to the
person proceeded against to rebut the allegations levelled against him,
• the penalty is to depend on the totality of the facts and
circumstances of the case,
• the penalty imposed is to be commensurate with the degree
and severity of breach of the provisions of the law or the rules alleged,
• the nature of the breach is to be specified clearly in the
order imposing the penalty,
• the provisions of the law under which the penalty has been
imposed is to be specified.
Section 68 further specifies that, in particular, no substantial
penalty is to be imposed for —
• any minor breach (minor breach has been defined as a
violation of the provisions in a case where the tax involved is less than
Rs.5000), or
• a procedural requirement of the law, or
• an easily rectifiable mistake/omission in documents
(explained in the law as an error apparent on record) that has been made
without fraudulent intent or gross negligence.
Further, wherever penalty of a fixed amount or a fixed percentage
has been provided in the MGL, the same shall apply.
Q 4. What is the quantum of penalty provided for in the MGL?
Ans. Section 66(1) provides that any taxable person who has
committed any of the offences mentioned in section 66 shall be punished with a
penalty that shall be higher of the following amounts:
• The amount of tax evaded, fraudulently obtained as refund,
availed as credit, or not deducted or collected or short deducted or short
collected, or
• A sum of Rs.10, 000/-.
Further Section 66(2) provides that any registered taxable person
who repeatedly makes a short payment of tax shall be a liable to penalty which
will be the higher of :
• 10% of the tax short paid, or
• Rs.10, 000.
Q 5. What will be considered as ‘repeated short payments’
for the purpose of levy of penalty?
Ans. Section 66(2) explains that three short payment in respect
of three returns during any six consecutive tax periods shall be considered as
repeated short payment for the purpose of levy of penalty.
Q 6. Is any penalty prescribed for any person other than the
taxable person?
Ans. Yes. Section 66(3) provides for levy of penalty extending
to Rs.25,000/- for any person who-
• aids or abets any of the 21 offences,
• deals in any way (whether receiving, supplying, storing or
transporting) with goods that are liable to confiscation,
• receives or deals with supply of services in contravention
of the Act,
• fails to appear before an authority who has issued a
summon,
• fails to issue any invoice for a supply or account for any
invoice required to be issued under law.
Q 7. What is the penalty provided for any contravention for
which no separate penalty has been prescribed under MGL?
Ans. Section 67 of the MGL provides that any person who contravenes
any provision of the Act or the rules made under this Act for which no separate
penalty has been prescribed shall be punishable with a penalty that may extend
to Rs.25,000/-
Q 8. What action can be taken for transportation of goods
without valid documents or attempted to be removed without proper record in
books?
Ans. If any person transports any goods or stores any such
goods while in transit without the documents prescribed under the Act (i.e.
invoice and a declaration) or supplies or stores any goods that have not been recorded
in the books or accounts maintained by him, then such goods shall be liable for
detention along with any vehicle on which they are being transported. Such
goods may be released only after payment of the applicable tax, interest and
penalty or upon furnishing of security equivalent to the said amount.
Q 9. What is the penalty prescribed for a person who opts
for composition scheme despite being ineligible for the said scheme?
Ans. Section 8(3) provides that if a person who has opted for
composition of his tax liability is found as not being eligible for compounding
then such person shall be liable to penalty to an amount equivalent to the tax
payable by him under the provisions of the Act i.e. as a normal taxable person
and that this penalty shall be in addition to the tax payable by him.
Q 10. What is meant by confiscation?
Ans. The word ‘confiscation’ has not been defined in the Act.
The concept is derived from Roman Law wherein it meant seizing or taking into
the hands of emperor, and transferring to Imperial “fiscus” or Treasury. The
word “confiscate” has been defined in Aiyar’s Law Lexicon as to “appropriate
(private property) to the public treasury by way of penalty; to deprive of
property as forfeited to the State.”
Q 11. Under which circumstances can goods be confiscated
under MGL?
Ans. Under Section 70 of the MGL, goods shall be liable to confiscation
if any person:
• supplies any goods in contravention of any provision of this
Act and such contravention results in evasion of tax payable under the Act, or
• does not account for any goods in the manner required
under the Act, or
• supplies goods that are liable to tax under the Act
without applying for registration, or
• contravenes any provision of the Act/Rules with the
intention of evading payment of tax.
Q 12. What happens to the goods upon confiscation of goods
by the proper officer?
Ans. Upon confiscation, the title in the confiscated goods shall
vest in the Government and every Police officer to whom the proper officer
makes a request in this behalf, shall assist in taking possession of the goods.
Q 13. After confiscation, is it required to give option to
the person to redeem the goods?
Ans. Yes. In terms of section 70(6), the Owner or the person
in-charge of the goods liable to confiscation is to be given the option for
fine (not exceeding market price of confiscated goods) in lieu of confiscation.
This fine shall be in addition to the tax and other charges payable in respect of
such goods.
Q 14. Can any conveyance carrying goods without cover of
prescribed documents be subject to confiscation?
Ans. Yes. Section 71 provides that any conveyance carrying goods
without the cover of any documents or declaration prescribed under the Act
shall be liable to confiscation. However, if the owner of the conveyance proves
that the goods were being transported without cover of the required documents/declarations
without his knowledge or connivance or without the knowledge or connivance of
his agent then the conveyance shall not be liable to confiscation as aforesaid.
If the conveyance is being used for carrying goods or passengers for hire then
the owner of such a conveyance may be provided an option to pay a fine
equivalent to the tax payable on the goods, in lieu of confiscation. Section 72
provides that the confiscation or penalty under section 70 or 71 shall be without
prejudice to any other punishment/action provided in the Act for the offence of
carrying goods without cover of the required documents/declaration.
Q 15. What is Prosecution?
Ans. Prosecution is the institution or commencement of legal
proceeding; the process of exhibiting formal charges against the offender.
Section 198 of the Criminal Procedure Code defines “prosecution” as the
institution and carrying on of the legal proceedings against a person.
Q 16. Which are the offences which warrant prosecution under
the MGL?
Ans. Section 73 of the MGL codifies the major offences under
the Act which warrant institution of criminal proceedings and prosecution. 12
such major offences have been listed as follows:
1) Making a supply without issuing an invoice or upon
issuance of a false/incorrect invoice;
2) Issuing an invoice without making supply;
3) Not paying tax collected for a period exceeding 3 months;
4) Not depositing any tax that has been collected in contravention
of the Act for a period exceeding 3 months;
5) Availing or utilizing credit of input tax without actual
receipt of goods and/or services;
6) Obtaining any fraudulent refund;
7) Furnishing false information or falsification of financial
records or furnishing of fake accounts/ documents with intent to evade payment
of tax;
8) Obstructing or preventing any official in the discharge
of his duty;
9) Dealing with goods liable to confiscation i.e. receipt,
supply, storage or transportation of goods liable to confiscation;
10) Receiving/dealing with supply of services in contravention
of the Act;
11) Failing to supply any information required of him under
the Act/Rules or supplying false information;
12) Attempting to commit or abetting the commission of any
of the above 11 offences.
Q 17. What is the punishment prescribed on conviction of any
offence under the MGL?
Ans. The scheme of punishment provided in section 73(1) is as
follows:
Offence involving--Punishment (Imprisonment extending to--)
Tax evaded exceeding Rs.250 lakh--5 years and fine
Tax evaded between Rs.50 lakh and Rs.250 lakh--3 years and
fine
Tax evaded between Rs.25 lakh and Rs.50 lakh--1 years and
fine
Section 73(2) provides that a second or any subsequent
conviction for an offence in this section shall be punishable with imprisonment
for a term that may extend to 5 years and a fine. However, no imprisonment for
any of the offences shall be for a period less than six months.
Q 18. What are cognizable and non-cognizable offences under
MGL?
Ans. In terms of Section 73(3) and 73(4) of MGL
• all offences where the evasion of tax is less than Rs.250
lakh shall be non-cognizable and bailable,
• all offences where the evasion of tax exceeds Rs.250 lakh
shall be cognizable and nonbailable.
Q 19. Is prior sanction of competent authority mandatory for
initiating prosecution?
Ans. Yes. No person shall be prosecuted for any offence without
the prior sanction of the designated authority.
Q 20. Is ‘mensrea’ or culpable mental state necessary for
prosecution under MGL?
Ans. Yes. However, Section 75 presumes the existence of a
state of mind (i.e. “culpable mental state” or mensrea) required to commit an
offence if it cannot be committed without such a state of mind
Q 21. What is a culpable state of mind?
Ans. While committing an act, a “culpable mental state” is a
state of mind wherein-
• the act is intentional;
• the act and its implications are understood and controllable;
• the person committing the act was not coerced and even
overcomes hurdles to the act committed;
• the person believes or has reasons to believe that the act
is contrary to law.
Q 22. Can a company be proceeded against or prosecuted for
any offence under the MGL?
Ans. Yes. Section 77 of the MGL provides that every person who
was in-charge of or responsible to a company for the conduct of its business
shall, along-with the company itself, be liable to be proceeded against and
punished for an offence committed by the company while such person was
in-charge of the affairs of the company. If any offence committed by the
company—
• has been committed with the consent/ connivance of, or
• is attributable to negligence of— any officer of the
company then such officer shall be deemed to be guilty of the said offence and
liable to be proceeded against and punished accordingly.
Q 23. What is meant by compounding of offences?
Ans. Section 320 of the Code of Criminal Procedure defines
“compounding” as to forbear from prosecution for consideration or any private
motive.
Q 24. Can offences under MGL be compounded?
Ans. Yes. As per section 78 of the MGL, any offence, other than
the following, may upon payment of the prescribed (compounding) amount be
compounded and such compounding is permissible either before or after the institution
of prosecution:
• Offences numbered 1 to 7 of the 12 major offences (outlined
in Q. 16 above), if the person charged with the offence had compounded earlier
in respect of any of the said offences;
• Aiding/abetting offences numbered 1 to 7 of the 12 major
offences, if the person charged with the offence had compounded earlier in
respect of any of the said offences;
• Any offence (other than the above offences)under any SGST
Act/IGST Act in respect of a supply with value exceeding Rs.1 crore, if the
person charged with the offence had compounded earlier in respect of any of the
said offences;
• Any offence which is also an offence under NDPSA or FEMA
or any other Act other than CGST/SGST;
• Any other class of offences or persons that may be
prescribed in this behalf. Compounding is to be permitted only after payment of
tax, interest and penalty and compounding shall not affect any proceeding
already instituted under any other law.
Q 25. Are there any monetary limits prescribed for compounding
of offence?
Ans. Yes. The lower limit for compounding amount is to be
the greater of the following amounts:-
• 50% of tax involved, or Rs.10,000.
The upper limit for compounding amount is to be greater of
the following amounts:-
• 150% of tax involved or Rs.30,000.
Q 26. What is the consequence of compounding of an offence
under MGL?
Ans. Sub-section (3) of section 77 provides that on payment
of compounding amount no further proceeding to be initiated under this Act and
criminal proceeding already initiated shall stand abated.