Failure obtaining GST registeration

[VIGNESH]

Sir. what will be the penalty in case of failure to register under GST even after crossing the threshold limit. will the same change if client voluntarily register now and pay taxes before receiving nay notices? kindly reply

[KASTURI SETHI]

Failure to obtain registration despite crossing threshold limit is a very very serious lapse. All transactions will be unauthorized. Multiple penalties can be imposed upon.The department can easily invoke Section 74 of CGST Act. If registration is obtained now (without detection by the department) and pay GST along with interest, the department may take lenient view and impose minimum penalty. Such voluntary deposit of tax along with interest will prove the assessee's bona fides. See Section 126(5) in this context.

Penalty of Rs.10,000/- under Section 122 (xi) for non-registration.

Just for knowledge sake, also go through Section 67 of CGST Act in this context.

[Amit Agrawal]

Please refer to sub-section (5) & (6) of Section 73 too.

[Shilpi Jain]

I am assuming that even though registered late, tax will be paid subsequently even for those transactions along with interest. In such a case for the period where registraiton was required but not taken penalty could be liable as per section 122(1)(xi) amounting to Rs. 10k each under SGST and CGST

"is liable to be registered under this Act but fails to obtain registration"

Once taxes are paid before issue of notice, no penalty would be liable.

[KASTURI SETHI]

I agree with Madam Shilpi Jain. Taxes along with interest are to be paid before issuance of notice in order to avoid penalty.

Section 73 (8) is also worth reading in this context.

"Section 73 (8) Where any person chargeable with tax under sub-section (1) or sub-section (3) pays the said tax along with interest payable under section 50 within thirty days of issue of show cause notice, no penalty shall be payable and all proceedings in respect of the said notice shall be deemed to be concluded."

[Ravinesh Sinha]

I agree with learned experts. However the loss of tax deposited but not collected from customer may be huge. In case u collected tax without registration but deposited after voluntary registeration the penalty may be huge u/s 76 and other section for unauthorised collection of taxes

[KASTURI SETHI]

SCN can be issued under Section 76 for imposition of penalty equal to the tax evaded, if mala fide intention is proved.

AI Summary

Failure to obtain GST registration may trigger penalties; voluntary registration and payment before notice can avoid penalties.
Failure to obtain GST registration after crossing the threshold renders transactions unauthorized and attracts tax, interest and penalties, including a fixed penalty for non-registration and possible duplicative state-level penalties. Voluntary registration with payment of tax plus interest before issuance of a show-cause notice can mitigate or avoid penalties under the payment-within-notice-period mechanism. Unauthorized collection of tax from customers creates separate exposure and can lead to penalties equal to tax collected or evaded where mala fides are alleged.