QUANTUM OF PENALTY UNDER THE IGST ACT

[Sadanand Bulbule]

Dear experts

1] In terms of 4^th proviso to Section 20 of the IGST Act, the amount of penalty to be quantified/levied is the sum total of the amount of penalty “payable “under the CGST Act plus the SGST Act or the UTGST Acts. As such there is no independent provision of its own under the IGST Act to quantify the amount of penalty. Rather it is working under the borrowed provisions of the CGST/SGST/UTGST Acts.

2] In this scenario, what emerges is that, the quantum of penalty under the IGST Act is entirely dependent upon the penalty “payable” under the CGST/SGST/UTGST Acts.

3] The real question that arises here is, assuming that if there is zero liability of penalty under the CGST/SGST/UTGST Acts, whether the penalty payable under the IGST Act should also be zero in view of the controlling penalty provisions of the CGST/SGST/UTGST Acts? Or else, what should be the quantum of penalty under the IGST Act under the circumstances that compel to levy it?

4] Whether the rate of penalty under Section 73/74 need to be reckoned for the purpose of penalty under the IGST Act also, despite there is no liability to pay penalty under Section 73/74?

5] The adjudicating authorities are standing at cross roads?

Experts to throw spotlight on this.

[Alkesh Jani]

Shri Sadanand Bulbule ji,

On raising the query at Issue ID = 119087, I was about to raise this query, but you have well drafted the query.

In this regard I am of the view that If IGST, CGST and SGST is to be recovered, than penalty will be total of CGST and SGST i.e. considering which ever is higher in CGST, here penalty will be IGST Rs.20,000/- +CGST Rs.10,000/- and SGST Rs.10,000/- but if the penalty is of IGST only than it will be 20,000/- as per section 20 of IGST Act.

The above is general view taken, but  I am of the view that penalty cannot go beyond the 100% of tax not paid or short paid.

Thanks

[Sadanand Bulbule]

Dear Sir ji

Thanks for your quick response. However I reproduce the 4th proviso to Section 20 of the IGST Act for effective clarification:

Provided also that in cases where the penalty is leviable under the Central Goods and Services Tax Act and the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act, the penalty leviable under this Act shall be the sum total of the said penalties.

What I understand is, the methodology of calculation of penalty under the IGST Act is the sum total of  the said of penalties payable under the CGST/SGST/UTGST Acts.

 Legal position being so, in case, there is no penalty payable under these Acts, what is remedy left under the IGST Act? To impose penalty or not under the IGST Act?

Plz throw extra light on this Sir.

[Alkesh Jani]

Shri Sadanand Bulbule ji,

The Supreme Court observed that “The Law with regard to provisos is well-settled and well-understood. As a general rule, a proviso is added to an enactment to qualify or create an exception to what is in the enactment and ordinarily, a proviso is not interpreted as stating a general rule.”

“Provision in a taxing statute granting incentives for promoting growth and development should be construed liberally; and since a provision for promoting economic growth has to be interpreted liberally the restriction on it too has to be construed so as to advance the objective of the provision and not to frustrate it”

Based on above, the proviso under discussion is qualifying that if penalty is levied under CGST+SGST than penalty for IGST would be CGST+SGST. If there is no CGST  and IGST, penalty will as per CGST Act, as the Section 20 of IGST says “… shall, mutatis mutandis, apply, so far as may be, in relation to integrated tax as they apply in relation to central tax as if they are enacted under this Act”

The above is my understanding.

Thanks

[Shilpi Jain]

The provision states 'penalty leviable' and does not use the word 'payable' as I see from what is extracted above.

In such a situation, we need to understand this provision as what would be the penalty in case it was to be levied under CGST and SGST act and accordingly calculate IGST.

Taking this stand that no penalty is payable under CGST and SGST and thereby no penalty under IGST may not find favour with the courts.

[Sadanand Bulbule]

Dear all

The entire discussion inspires to understand that, the amount of penalty leviable under Section 73 or Section 74 of the respective GST Acts implies the amount of penalty leviable under Section 20 of the IGST Act on the same footing. In simple words, IGST Act too contemplates levy of penalty on par with the CGST/SGST Acts. So there is no margin to escape from levy of penalty under the IGST Act.

Thanks and regards.

[KASTURI SETHI]

Sh.Sadanand Bulbule Ji,

Sir, I am expressing my views for enrichment of my knowledge by way of exchange of views with you on this public forum. Pl. let me know if I am on wrong footing or skipping something.

Query-wise my views are as under :-

Q. No. [1] In terms of 4^th proviso to Section 20 of the IGST Act, the amount of penalty to be quantified/levied is the sum total of the amount of penalty “payable “under the CGST Act plus the SGST Act or the UTGST Act. As such there is no independent provision of its own under the IGST Act to quantify the amount of penalty. Rather it is working under the borrowed provisions of the CGST/SGST/UTGST Acts.

Agreed wholly.

2] In this scenario, what emerges is that, the quantum of penalty under the IGST Act is entirely dependent upon the penalty “payable” under the CGST/SGST/UTGST Acts.

[Agreed as the words, 'shall' 'mutatis mutandis ' used in Section 20 of IGST Act makes it clear and I intend to add that both CGST Act and IGST Act are not mutually exclusive rather mutually inclusive. Similarly, CGST Rules and IGST Rules are mutually inclusive. So the phrase, 'entirely inter-dependent' is better choice than the phrase, 'entirely dependent' in this context.

3] The real question that arises here is, assuming that if there is zero liability of penalty under the CGST/SGST/UTGST Acts, whether the penalty payable under the IGST Act should also be zero in view of the controlling penalty provisions of the CGST/SGST/UTGST Acts?

[ I do not agree inasmuch as the applicability of the provisions of CGST Act mentioned under Section 20 of IGST Act [(sub-clause nos. (i) to (xxv)] including imposition of penalty & interestis subject to IGST Act and IGST Rules.

Or else, what should be the quantum of penalty under the IGST Act under the circumstances that compel to levy it ?

Penalty can be determined under Sections 73, 74, 122 to 132 of CGST Act and Rule 162 of CGST Rules for contravention of the various provisions of IGST Act and IGST Rules as both Acts and Rules are mutually inclusive.

4] Whether the rate of penalty under Section 73/74 need to be reckoned for the purpose of penalty under the IGST Act also, despite there is no liability to pay penalty under Section 73/74 ? Yes, Sir

5] The adjudicating authorities are standing at cross roads ? Nothing to be nonplussed as CGST/SGST Act and IGST Act and CGST Rules and IGST Rules are not mutually exclusive rather mutually inclusive.

Disclaimer Certificate : These are my personal views for discussion with other experts on this forum. I shall welcome contrary views, if any.

[Sadanand Bulbule]

 Dear Sir ji

In continuation of my humble acceptance at Sl No. 5, your explanation is 360 degree clarification and it hallmarks the simplification of complicated query.

Thanks and regards Sir.

[Alkesh Jani]

Dear Experts,

The Section 75(13) of the CGST Act, 2017, same is reproduced below:-

"(13) Where any penalty is imposed under section 73 or section 74, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act."

Do any other provision includes Section 6 of the CGST Act, 2017.

Please offer your comments.

Thanks

[KASTURI SETHI]

Sh.Alkesh Jani Ji,

Answer is 'NO'.

[Ganeshan Kalyani]

Nice discussion. It enriched my knowledge. Thanks to experts for simplifying the complex law. Though it seems clear that penalty under IGST would be independent of penalty under CGST and SGST it is learning point that if there is no penalty under CGST, SGST then also the penalty lies under IGST Act.

AI Summary

Experts Debate IGST Penalty Calculation: Should Zero Penalty Under CGST/SGST Mean None Under IGST? Complex Interdependence Highlighted. A discussion on the quantum of penalty under the IGST Act reveals that the penalty is derived from the sum total of penalties under the CGST, SGST, or UTGST Acts, as the IGST Act lacks independent penalty provisions. Experts debated whether a zero penalty under CGST/SGST implies no penalty under IGST. Some argued that penalties under IGST should align with CGST/SGST, while others suggested that penalties might still apply independently. The conversation highlighted the complexities of interpreting penalty provisions and the interdependence of GST Acts, with a consensus that penalties under IGST are not automatically nullified by the absence of penalties under CGST/SGST.