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

Sharma Traders, with a high published compliance rating, made a documentation error in an invoice involving tax of Rs 4,000, which is apparent on the face of record, without fraud or gross negligence. Which statement is correct under section 126?

No penalty can be imposed. The tax involved is Rs 4,000, below the Rs 5,000 limit for a minor breach, and the error is apparent on the face of record, made without fraud or gross negligence. The compliance rating is irrelevant to this protection.

  1. AA penalty must be imposed because the rating does not affect penalty provisions
  2. BNo penalty can be imposed by the officer, as it is a minor breach (tax below Rs 5,000) and an easily rectifiable errorCorrect
  3. CA penalty may be imposed only if the officer hears the person and the rating is below average
  4. DThe penalty is automatically fixed at Rs 4,000, equal to the tax involved

Explanation

Section 126(1) bars penalty for minor breaches, defined as tax involved below Rs 5,000, and for easily rectifiable errors apparent on the face of record made without fraud or gross negligence. Here tax is Rs 4,000 and both conditions hold. Rating is not a condition.

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