Impact of GST on Tourism industry

Tourism represents world’s third largest export avenue in terms of global earnings after fuel and chemicals. Modern tourism is closely linked to socio- economic development. Tourism is responsible for one out of 11 jobs and 10% of the world’s economic output. Apart from providing employment, income and foreign exchange for the country, the trade in the tourism sector has an economically positive impact on other associated industries such as food manufacturing, services, construction, agriculture, handicrafts etc.

Hospitality is not only a high foreign exchange grosser, it is also among the largest tax generators. There are multiple taxes charged on the same Service/ Product offering by the Central as well as State Governments. It is an understanding that the Taxes levied on Inbound Tourism is amongst the highest in the country, and this is one of the major reasons for India losing Foreign Tourists to competing South East Asian Countries.

HIGHLIGHTS OF NEW GST RATES:

• Restaurants with a turnover of less than Rs 50 lakh will be levied a tax rate of 5 percent.
• Non-AC restaurants will have a 12% tax rate. AC restaurants will have to shell out 18% tax.
• Hotels, lodges with tariffs less than Rs 1,000 will be taxed at 0%.
• Hotel lodges with tariffs between Rs 1,000 – Rs 2,500 will be charged 12% tax
• Hotel lodges with tariffs between Rs 2,500 – Rs 7,500 will be charged 18% tax
•  Hotel lodges with tariffs above Rs 7,500 will be charged 28% tax

GST IMPACT: Tourism sector shall be impacted both positively and negatively under the GST regime.

Positive

1. Uniformity in Taxes

The multiple taxes would be replaced by one single tax, the rate of which is likely to be between 16%-18%. The sector may benefit in the form of lower tax rates which should help in attracting more tourists in India.

2. Increased Revenue for State Government

i. Under GST the place of supply is shifted to the place where immovable property is situated in case of Hotels, Restaurant & Monuments for sightseeing. This will increase the revenue of such states where immovable property is located. Currently, on such income, States charges local Luxury Tax on hotel stay and VAT on food supplied. While Union Government gets revenue from Service Tax on such services. Because of GST, the States having maximum tourist places, hotels or restaurants for tourist shall earn the maximum revenue by way of SGST which will be equivalent to CGST.

ii. In the case of Passenger traveling, the state with the maximum outbound journey shall earn the highest revenue so the station or the port having highest outbound flights, train journey or local cab journey shall earn substantial revenue.

3. Saving in Food and Beverage operations

Companies specializing in food and beverages operations could be the biggest beneficiaries of GST within the hospitality sector. Food and beverages bills have multiple components which inflate the bills by 30- 35%. It is expected that GST to result in savings of 10-15% on the overall bill.

Negative

1. Multiple Registration

Service providers having centralized registration will have to get registered in each state from where they provide services. Although Government has been claiming “One Nation One Tax”, practically it is not going to be so. Service providers will have an option to take different registration for separate business verticals which need to be examined on a case by case basis.  Every state has been constitutionally granted right to collect GST on services.

2. Increased Compliance Burden

The procedure for all the invoices/receipts towards inward and outward supplies will become cumbersome as each one of them will have to be uploaded in the system. The concept of credit matching under GST would be very difficult to handle and would lead to increase in working capital requirements. The frequency and number of returns to be filed will go up. In place of a half yearly service tax return, under GST law, one will be required to file state wise monthly three GST returns along with an annual return will also be required to be filed.

3. No Credit on Work Contract Services

The hotel industry spends a lot of money on construction and renovation. The money paid as taxes on the works contract services when supplied for construction of an immovable property is not allowed for this sector when such services are not used for the further supply of works contract service. This would have a negative cascading effect despite strong promises being made by the government in this regard. Any proposal to make supplier of goods or services liable to pay tax under reverse charge when receiving supply from an unregistered supplier can increase burden in case of B2B transactions on registered assessee.

4. Liquor not included

Liquor should have been included in GST to ensure the seamless credit for the tourism industry. Exclusion of liquor from GST regime defeats the very purpose of bringing in a uniform tax structure across the nation.

IMPACT ON CONSUMERS

In Pre GST era, there was a composite levy of both Service tax i.e 6%, as well as, Value Added Tax i.e 14.5% (Vary from State to State) on food and beverages served by hotels and restaurants which finally put the burden of 20.5% in the pocket of ultimate consumers. However, some relief was provided for Non-AC Restaurants supplying food and beverages as no service tax was levied on these restaurants.

Post GST, the scenario shall be completely different. As discussed above that supply of food and drinks in a restaurant shall be treated as a supply of services. Hence, only GST shall be levied on such services @ 18% which saves around 3% as compared to the previous regime.

Erstwhile, Non AC Restaurants were exempt from levy of Service Tax. But State vat was charged at 12%. In Present System, Restaurant not having the facility of air-conditioning or central heating at any time during the year and not having a licence to serve liquor is liable to tax at GST Rate of 12%. Overall things shall continue to remain status quo as far as pricing goes.

Further, staying in a good hotel is going to be very costlier as the rate of tax has been doubled from 9% to 18%. Even Luxury Hotels of 5 stars or above-rated charging room rent Rs. 7,500/- or above will attract 28% tax.

CONCLUSION:

GST is going to be an efficient and harmonized destination-based tax system and will remove the problems faced by the sector leading to cost optimization and a free flow of transactions.

GST is a glimmer of hope for the Hotel and Tourism Industry if we can keep the GST rate between 10 to 15%. GST might herald with its uniformity of tax rates, a better utilization of input credit which in turn benefits the end user in terms of affordability.

Impact of GST on Indian Economy

Impact of GST on Indian Economy, Impact of GST in India. Amidst economic crisis across the globe, India has posed as a beacon of hope with ambitious growth targets, supported by slew of strategic missions like ‘Make in India’, ‘Digital India’, etc. Goods and Services Tax (GST) is expected to provide the much needed stimulant for economic growth in India by transforming the existing basis of indirect taxation towards free flow of goods and services within the economy and also eliminating the cascading effect of tax on tax. In view of the important role that India is expected to play in the world economy in the years to come, the expectation of GST being introduced is high not only within the country, but also in neighboring countries and in developed economies of the world. check more details about “Impact of GST on Indian Economy” from below…..

GST Impact on India

(a) Increased FDI: The flow of Foreign Direct Investments may increase once GST is implemented as the present complicated/ multiple tax laws are one of the reasons foreign Companies are wary of coming to India in addition to widespread corruption.

(b) Growth in overall revenue: It is estimated that India could get revenue of $15 billion per annum by implementing the Goods and Services Tax as it would promote exports, raise employment and boost growth. Over a period, the dilution of the principles may see that only part of this is accruing.

(c) Single point taxation: Uniformity in tax laws will lead to single point taxation for supply of goods or services all over India. This increases the tax compliance and more assesses will come into tax net.

(d) Simplified tax laws: This reduces litigation and waste of time of the judiciary and the assessee due to frivolous proceedings at various levels of adjudication and appellate authorities. Present law appears to be much worse and an amalgam of the bad parts of VAT/ ST/ CE.

(e) Increase in exports and employment- GST could also result in increased employment, promotion of exports and consequently a significant boost to overall economic growth and factors of production -land labour and capital.

Impact of GST on Indian Economy

• Reduce tax burden on producers and foster growth through more production. This double taxation prevents manufacturers from producing to their optimum capacity and retards growth. GST would take care of this problem by providing tax credit to the manufacturer.
• Various tax barriers such as check posts and toll plazas lead to a lot of wastage for perishable items being transported, a loss that translated into major costs through higher need of buffer stocks and warehousing costs as well. A single taxation system could eliminate this roadblock for them.
• A single taxation on producers would also translate into a lower final selling price for the consumer.
• Also, there will be more transparency in the system as the customers would know exactly how much taxes they are being charged and on what base.
• GST would add to government revenues by widening the tax base.
• GST provides credits for the taxes paid by producers earlier in the goods/services chain. This would encourage these producers to buy raw material from different registered dealers and would bring in more and more vendors and suppliers under the purview of taxation.
• GST also removes the custom duties applicable on exports. Our competitiveness in foreign markets would increase on account of lower cost of transaction.
• The proposed GST regime, which will subsume most central and state-level taxes, is expected to have a single unified list of concessions/exemptions as against the current mammoth exemptions and concessions available across goods and services

The introduction of Goods and Services Tax would be a very noteworthy step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would alleviate cascading or double taxation in a major way and pave the way for a common national market. From the consumer point of view, the biggest advantage would be in terms of reduction in the overall tax burden on goods and services. Introduction of GST would also make Indian products competitive in the domestic and international markets. Last but not the least, this tax, because of its transparent character, would be easier to administer. However, once implemented, the system holds great promise in terms of sustaining growth for the Indian economy.

Exemption under GST

The GST Council in its meeting on 19th May 2017 broadly approved the list of services exempted from levy of Goods and Services Tax (GST). In principle, existing (under service tax law) list of exempt services (by mega exemption notification or specific exemption) coupled with negative list of services as per Section 66D of Finance Act, 1994 forms ingredient to exemption list of services under GST.

Key services on which exemption under GST continue are:

1. Services by way of renting of residential dwelling for use as residence (non-commercial renting services)

2. Services provided to the United Nations or a specified international organization.

3. Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities

4. Services provided by educational institutions

5. Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii)dance, or (iii)theatre

6. Services by an organiser to any person in respect of a business exhibition held outside India

7. Services provided by a tour operator to a foreign tourist in relation to a tour conducted wholly outside India.

8. Healthcare services

9. Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo;

10. Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India;

The decisions of the GST Council are being communicated for general information and will be given effect to through gazette notifications which shall have force of law.

Impact of GST on Wholesalers and Retailers

Under the current law, wholesalers and retailers escape the tax liability as there is no mechanism to trace it, but this will change under GST.

Industry Getting Ready For GST Implementation

Goods and Services Tax bill has reached its final stage of implementation and has already been passed by the Lok Sabha. The government has received industry specific requests to address some of the issues as they are finding it difficult to deal with the changes proposed under the new indirect tax regime. Some trade bodies are also lobbying for a further delay in GST rollout as Small and Medium Businesses (SMBs) are yet to adopt the changes required for a smooth transition.

While this transition will not pose a big challenge for manufacturers, as they are already tightly regulated by the excise law, wholesalers and retailers in the country may face some heat.

Wholesalers and Retailers Outside Tax Bracket

Under the current indirect tax regime, wholesalers and retailers usually escape the tax liability as there is no mechanism by which their actual purchase and sale can be traced. Most of their transactions are done in black, meaning no invoice is issued to the buyer, and eventually no entry is posted in the books for such sales.
These taxpayers usually leverage the tax liability evaded and undercut the market to gain in volume. Their margin of profit remains as low as 1 percent. Since under the GST regime, every invoice pertaining to taxable supply has to be uploaded on GSTN’s common portal and has to be accepted by the buyer, wholesalers and retailers will now be unable to escape their tax liability. The only possibility for tax evasion would arise if the  entire supply chain is outside the tax network and did not file a return under GST law, which is very unlikely.

Impact During Demonetization

During demonetization, wholesalers and retailers had gone into a panic mode. Many wholesalers, distributors, and retailers had to de-stock the inventory  and reduce the volume of goods.This destocking was triggered largely due to a steep fall in demand from the consumers. Sales of some of the FMCG companies in Q3 FY17 dropped more than 44% as compared to Q3 FY16, According to the data from Care Ratings report dated March 15, 2017.

Many of these FMCG companies had lamented that while the fall in consumer demand was limited, sales were severely impacted due to limited stock availability at retailer’s end.

Pre-Implementation Impact

We may witness a similar destocking activity during the transition phase. This will mainly be for easy availment of input tax credit. Wholesalers and retailers currently registered under state VAT law would have paid VAT on all the stock held at the sunset date of the current tax regime. Though provisions have been incorporated in the GST Bill wherein VAT paid under current regime will be allowed as input credit under the GST regime, however, the government has imposed certain conditions for availing this credit and thus wholesalers and retailers may lose some part of this credit under the new regime.
To avoid such scenarios, wholesalers and retailers are expected to de-stock the inventory during the transition phase and eventually re-stock under the new GST regime.

Post-Implementation Impact

Post GST implementation, these wholesalers and retailers will not be able to evade tax as the complete value chain will be tracked online. This may also result in a change in the modus operandi of the businesses working on thin margins. Also, we may observe a steep rise in demand for goods as a result of re-stocking by wholesalers and retailers.

impact of Gst on banking industry

The introduction of GST in India is a substantial shift from the current tax regime. It is expected that service sectors will have major impact of GST than the manufacturing or trading sector. Among the services provided by Banks and NBFCs, financial services such as fund based, fee-based and insurance services will see major shifts from the current scenario.

Owing to the nature and volume of operations provided by banks and NBFC vis a vis lease transactions, hire purchase, related to actionable claims, fund and non-fund based services etc., GST compliance will be quite difficult to implement in these sectors.

Under Model GST Law, the framework does not provide much benefits or consideration to banks and NBFCs on understanding of the type of transactions made by them on a consistent and voluminous basis.

Some of the issues and impacts pertaining to the provisions in the Model GST Law have been discussed below.

1. Widespread number of branches; registration a hassle

Currently, a NBFC, Banks with pan-India operations can discharge its service tax compliances through a single `centralized’ registration. However, under GST, such Banks/ NBFCs would need to obtain a separate registration for each state where they operate.

In addition to registration, compliance burden about filing of returns has also increased substantially -in terms of the periodicity of returns, number of return formats and level of details required in these returns.

2. Input Tax Credit leveraged and de-leveraged

Currently Banks and NBFCs majorly opt for the option of reversal of 50% of the CENVAT credit availed against inputs and input services whereas CENVAT credit on capital goods could be availed with no reversal conditions.

Under GST, 50% of the CENVAT credit availed against inputs, input services and capital goods is to be reversed which leaves them with a position of reduced credit of 50% on capital goods thereby increasing cost of capital.

3. Assessment and Adjudication made bothersome

Assessment would be done by the respective state regulators under which the respective branch is registered. Now, every registered branch of banks and NBFCs must justify    its position on chargeability in the  respective state and reason for utilizing input tax credit in different states.

As under GST more than one adjudicating authority will be involved, each authority may hold different opinion on the same underlying issue. This contradiction in opinion will prolong the adjudication process. Currently, a tax payer is adjudged by a single adjudicating authority on an issue involved. Under GST different adjudicating authority may take different view on the same issue. Clearing up and dealing with the difference of opinion provided by different adjudicating authority would be difficult.

Issues related to revenue recognition under GST

1. Account Linked Financial Services

The place of supply will be the location of the recipient of services on the records of the supplier of services.

In the digitized and centralized scenario prevailing in India identifying the state of location of service recipient will be quite difficult. In cases where the service recipients like professionals, manufacturers, traders and other workers often shift from one place to other in search of better opportunities, the service provider may have different address namely permanent address, current address, address of communication and KYC address

2. Non-Account Linked Financial Services

The place of supply of service here would be location of service provider. This will again hit such companies which are widespread in remote location to establish their presence but operate and transact from back office located in some other state.

3. Actionable Claims

Actionable claims do not constitute as a service under Service Tax, no tax is payable under current regime. Under GST actionable claims are now included in the definition of supply of goods. Services provided from bills discounted to securitization will now be taxed as an effect B2C and B2B majorly.

Conclusion

With the expectation of further details to emerge, financial sectors face a can of worms in terms of the manner of transacting business, customer profiles, services matrix, IT systems and operation to capture the data at both front and back end. IT systems will need to be more vigilant in terms of serving the purpose of solving the complexity related to GST compliance and procedures at a higher volume.

The impact of GST on Banks and NBFCs will be such that operations, transactions, accounting and compliance will need to be reconsidered in its entirety.

GREAT RELIEF TO SMALL TRADERS AND RESTAURANTS IN GST

Under the Goods and Services Tax (GST), traders, manufacturers and restaurants or Dhabas, who are doing business up to Rs 75 lakh per annum, can avoid flat GSTs by making flat GST of 1 to 5 percent and offering long-range returns and books. In the 16th meeting of the GST Council , the scope of composition scheme has been increased from 50 lakh to 75 lakh rupees for such businessmen. At present, this scheme is applicable in the VAT regime, where the scheme utilizes turnover upto Rs 50 lakhs.

Twenty million rupees are exempted from the GST till turnover, in such a case, between 20 to 75 lakh annual turnover will be in its scope. Under the composition scheme, manufacturers will have to give a total of 2 percent GST, which will be 1 percent CGST and 1 percent SGST. The total rate for restaurant and dhaba will be 5 percent, of which 2.5 percent will be CGST and 2.5 percent SGST. The total rate for traders and other traders will be 1 percent, which will be 0.5 percent CGST and 0.5 percent SGST. They said that these businessmen can neither issue invoices nor receive input tax credit. Service providers have not been given place in this scheme.

The total supply of these businessmen will be GST from the same rate, regardless of the GST rate on their luggage.  If Net Tax Liability (after input credit) of 4-5 thousand rupees (after input credit) of a regular dealer with a 18 percent rate of sales of 1 lakh rupees, then the net liability of composition dealer with 1-2 percent rate is Rs 1000 to Rs 2,000. It just settles. In this case, this scheme is very beneficial for dealers with limited and fixed sales.

The composition scheme offers a flat lower rate to the business, while the Compliance releases many formalities in the Compliance. Composition Dealers will have to fill only quarterly returns in GST, while others will fill monthly returns. The need for account book and record maintenance also decreases to about quarter. The purpose of the scheme is to extend the extent to the small traders to one extent that they can focus on their business by leaving the concern of the tax compliance.

How GST will help Startups

We have been surrounded with a buzz on GST and its impact on various industries. Most of the discussions are happening around how GST will turn around the way India does business, how various industries are going to benefit from the shift in tax regime and how this will optimize the GDP of India.

Analysts are of the opinion that if GST is implemented correctly, India will gain a higher position in the ease of doing business index maintained by the World Bank and will boost foreign investments in India and into the startup ecosystem.

Large enterprises are preparing to accommodate their systems with GST. The government is also moving forward swiftly to meet its April 2017 deadline. And this is high time for startups and small businesses to prepare for the road ahead. Here are some of the business benefits of GST for startups. These are indeed reasons to cheer among the startups community:

• Increase in turnover limits for registration: Under the current tax laws, any business dealing in goods with turnover exceeding Rs 10 lakh is required to get registered with state tax authorities and obtain a tax identification number. Similarly, a service provider is required to obtain a registration as soon as his turnover exceeds Rs. 9 lakh. However, under the GST regime, this limit has been increased to Rs. 20 lakh. Thus startups that are at a nascent stage with turnover below Rs 20 lakh need not worry of compliance and can continue operations without registration.

• “Do it yourself” compliance model: One of the major benefit of the GST regime is the transparent taxation system. Most of the compliance procedures will be done through online mode only. These include taxpayer registration, return submission, tax payment and refund claims. Many of the startups lack resources to hire experts or deploy a dedicated resource to look after all of this compliance. However, under the GST law, all these compliance have been streamlined and made simple for the benefit of taxpayers. Thus, an entrepreneur can adhere to these compliance by himself under a “Do it Yourself’ model.

• Free flow of goods & services across the country: Another benefit area for startups will be the free flow of goods across the country without any check-post or entry tax. According to research ,a truck in India typically covers between 250-400 kms a day, compared to 700-800 kms in US and Europe. This is mainly due to the check posts and entry tax collection points on state borders. However, once GST sees the light of the day, India will become one single market, free from state entry levies wherein goods and services can flow freely. GST is expected to improve the efficiency of logistics in India and will directly contribute to the profitability of e-commerce and other nascent startups involved in supply of goods through transportation. Quick and timely delivery of goods ordered through online portals will further attract more consumers to explore the online marketplaces.

• High liquidity: Liquidity is one of the major challenges that startups face today. Most of these startups are bootstrapped and do not receive funding during the initial phase. In such a scenario, many times under the current tax regime, their working capital gets stuck with tax authorities as a refund claim. However, under the GST law, all of these refunds will be processed online and thus timely refund can be expected. Hence, it’ll boost the liquidity of small and medium businesses and startups.

Although we are at a very initial stage and various rules and procedures are yet to be finalized, we can safely believe that GST will also be supporting other initiatives of the government that include Digital India and Startup India. Thus, startups will have more opportunities to exploit and they can also accommodate the change in business model required under GST, being more flexible in carrying out their operations.

Impact of GST on Textile Industry

It is expected that the tax rate under GST would be higher than the current tax rate for the textile industry. Natural fibers (cotton, wool) which are currently exempt from tax, would be taxed under GST. Despite this, the textile industry as a whole would benefit from the introduction of GST due to following changes-:

Break in input credit chain

A significant portion of the textile industry in India operates under the unorganized sector or composition scheme, thus creating a gap in flow of input tax credit. Input tax credit is not allowed if the registered taxpayers procure the inputs from composition scheme taxpayers or the unorganized sector. GST would enable a smoother input credit system, which would shift the balance towards the organized sector.

Reduction in manufacturing costs

GST is also likely to subsume the various fringe taxes like Octroi, entry tax, luxury tax etc. which would help reduce costs for manufacturers in the textile industry.

Input credit allowed on capital goods

Currently, the import cost of procuring the latest technology for manufacturing textile goods is expensive as the excise duty paid is not allowed as input tax credit. Whereas under GST, there will be input tax credit available for the tax paid on capital goods.

Export of textile products to get a boost

GST would streamline the process of claiming input tax credit thus allowing the textile industry to be more competitive in the export market.

Currently, manufacturers/traders are not inclined towards exports due to the extensive procedure costs and delays made in the processing of duty drawback.

Under GST, the system of duty drawback will lose its significance. Input tax credit will be provided as a refund under GST instead of current duty drawback schemes. This would be a significant boost for promoting the export of textile products.

Export promotion capital goods scheme is available for all the cotton-based textile exporters. Under this scheme, exporters can claim the exemption for duty paid if they export six times the value of duty within a period of next six years. It is expected that this scheme would lose its significance under GST.

Conclusion

There may be a few drawbacks for the textile industry due to the higher tax rate and removal of benefits under cotton value chain, but it is safe to say that GST will help this industry in the long run by getting more registered taxpayers under a well-regulated system. It can also be hoped that GST will help the textile industry to get more competitive in both the global and domestic markets and create opportunities for sustainable, long-term growth.

Offences and Penalties under GST

Goods and service tax GST will bring in “One nation one tax “to unite indirect taxes under one umbrella and facilitate Indian businesses to be globally competitive. The Indian GST is structured for efficient tax collection, reduction in corruption, easy inter-state movement of goods etc.

To prevent tax evasion and corruption, the GST Law lists the offences and penalties. There are  21 offences under GST, apart from the penalty for availing compounding by a taxable person who is not eligible for it.

Offences under GST 

When has anyone committed an offence under GST?

Fake/wrong invoices

1. A taxable person supplies any goods/services without any invoice or issues a false invoice.
2. He issues any invoice or bill without supply of goods/services in violation of the provisions of GST
3. He issues invoices using the identification number of another bonafide taxable person

Fraud

4. He submits false information while registering under GST
5. He submits fake financial records/documents or files fake returns to evade tax
6. Does not provide information/gives false information during proceedings

Tax evasion

7. He collects any GST but does not submit it to the government within 3 months
8. Even if he collects any GST in contravention of provisions, he still has to deposit it to the government within 3 months. Failure to do so will be an offence under GST.
9. He obtains refund of any CGST/SGST by fraud.
10. He takes and/or utilizes input tax credit without actual receipt of goods and/or services
11. He deliberately suppresses his sales to evade tax

Supply/transport of goods

12. He transports goods without proper documents
13. Supplies/transports goods which he knows will be confiscated
14. Destroys/tampers goods which have been seized

Others

15. He has not registered under GST although he is required to by law
16. He does not deduct TDS or deducts less amount where applicable.
17. He does not collect TCS or collects less amount where applicable.
18. Being an Input Service Distributor, he takes or distributes input tax credit in violation of the rules
19. He obstructs the proper officer during his duty (for example, he hinders the officer during the audit by tax authorities)
20. He does not maintain all the books that he required to maintain by law
21. He destroys any evidence

He has opted for composition scheme even though he is not eligible.

Offences under GST by Companies, LLPs, HUFs and others

For any offence committed by a company, both the officer in charge (such as director, manager, secretarty) as well as the company will be held liable.

For LLPs, HUFs, trust, the partner/karta/managing trustee will be held liable.

Penalties under GST

For fraud

An offender has to pay a penalty amount of tax evaded/short deducted etc., i.e., 100% penalty, subject to a minimum of Rs. 10,000.

Not only the taxable person but any person who-

• Helps any person to commit fraud under GST
• Acquires/receives any goods/services with full knowledge that it is in violation of GST rules
• Fails to appear before the tax authority on receiving a summons
• Fails to issue an invoice according to GST rules
• Fails to account/vouch any invoice appearing in the books

-Will have to pay a penalty extending upto Rs. 25,000

For cases of fraud, additional penalties as follows-

Tax amount involved	100-200 lakhs	200-500 lakhs	Above 500 lakhs
Jail term	Upto 1 year	Upto 3 years	Upto 5 year
Fine	In all three cases

For other cases (no intention of fraud or tax evasion)

An offender not paying tax or making short-payments has to pay a penalty of 10% of the tax amount due subject to a minimum of Rs.10,000.

Therefore, the penalty will be high at 100% of the tax amount when the offender has evaded i.e., where there is a deliberate fraud.

For other genuine errors, the penalty is 10% of tax.

General Penalty

Any offense under GST for which penalty is not specifically mentioned will be liable to a penalty extending Rs. 25,000.

General rules regarding penalty

These rules of penalty are generally the same in all laws whether tax laws or contract or any other law.

• Every taxable person, on whom the penalty is imposed, will be served with a show cause notice first and will have a reasonable opportunity of being heard.
• The tax authority will give an explanation regarding the reason for penalty and the nature of offense
• When any person who voluntarily discloses a breach of law, the tax authority may use this fact to reduce the penalty

Who all need to get GST registration?

Any person (individual or entity) that fulfils any of the following conditions needs to get GST Registration compulsorily:

 

•  Having an annual aggregate turnover from operations in a state which is above the threshold limit of Rs. 20 Lakhs (Rs. 10 Lakhs for North Eastern States).
• Currently registered under any of the existing indirect tax regimes (VAT, Excise Laws, Service Tax Laws) irrespective of the threshold limit.
• Having operations in multiple states .
• Having multiple business verticals in one state .
• Making any Inter-State supply of goods and/or services.
• Casual taxable persons & Non-resident taxable persons (occasionally make taxable supply of goods/services as a principal or agent or any other capacity, in a taxable territory, where GST applies but where you don’t have a fixed place of business).
• Required to pay tax under reverse charge mechanism.
• Required to deduct tax at source.
• Working as an E-Commerce Operator/ Aggregator.
• Person supplying through e-commerce Operator/ Aggregator.
• Engaged in supply as an agent on behalf of other registered taxable persons.
• Working as an Input service distributor.
• Supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person.