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

Sharma Metals Ltd contravenes a provision of the CGST Act for which the Act specifies a penalty of a fixed percentage of tax, say 10% of tax due. The tax involved is Rs 3,000 and the error is easily rectifiable and bona fide. Which statement is correct?

Section 126 does not apply where the Act specifies a penalty as a fixed sum or fixed percentage. Hence the minor breach protection cannot be claimed, even though the tax involved is below five thousand rupees and the error is bona fide.

  1. AThe Section 126 disciplines, including the minor breach protection, do not apply because the penalty is a fixed percentageCorrect
  2. BNo penalty can be levied because the tax is below Rs 5,000
  3. CPenalty is limited to Rs 25,000 under the general penalty
  4. DPenalty must be commensurate with severity, so it can be reduced to nil by the officer

Explanation

Section 126(6) says the section does not apply where the penalty specified is a fixed sum or a fixed percentage. So the minor breach protection in 126(1) is unavailable even though tax is below Rs 5,000. Option B ignores this carve-out.

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