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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Procedural Compliance under GST

An officer proposes a penalty on Sharma Enterprises for a documentation mistake that is an error apparent on the face of record, made without fraudulent intent or gross negligence. The tax involved is Rs 4,800. The penalty provision is not a fixed sum or fixed percentage. Under Section 126 of the CGST Act, 2017, what is the position?

No penalty can be imposed. The tax involved of Rs 4,800 is below Rs 5,000, so it is a minor breach. The error is apparent on the face of record and so easily rectifiable, and there was no fraud or gross negligence.

  1. APenalty may be imposed, as Section 126 only requires a hearing
  2. BPenalty may be imposed at half the usual rate because the amount is small
  3. CNo penalty may be imposed, as it is a minor breach that is easily rectifiableCorrect
  4. DPenalty may be imposed only if the person has not voluntarily disclosed the breach

Explanation

Under Section 126 a breach is minor if the tax involved is below Rs 5,000, and Rs 4,800 qualifies. An error apparent on the face of record is easily rectifiable. With no fraud or gross negligence, no penalty may be imposed. Voluntary disclosure is only a mitigating factor under Section 126(5) and is not a condition here.

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