Navigating Penalties under GST

In the recent writ petition filed against Exhibit P-5 order dated 14.09.2023, the petitioner
challenges the penalty assessed amounting to Rs. 40,000. The heart of the matter revolves
around the timely payment of tax, with the petitioner contending that all taxes were paid
within thirty days of receiving the notice, dated 28.02.2022.
The crux of the petitioner’s argument lies in Sub-section (8) of Section 73 of the GST Act, 2017,
which stipulates that if the taxpayer settles the tax along with the applicable interest within
thirty days of the notice, no penalty shall be imposed, and proceedings are deemed
However, the government pleader counters this by invoking Sub-section (11) of Section 73,
emphasizing that if the taxpayer has collected but not remitted the tax within the stipulated
period, penalty provisions come into play. This subsection, starting with a non-obstante clause,
asserts that penalties are applicable if the self-assessed tax or collected tax remains unpaid
beyond thirty days from the due date.
The Assessing Authority, as per Exhibit P-5 order, justifies the penalty imposition based on the
fact that while the petitioner remitted the short-paid amount within the timeframe, it was after
the issuance of the show cause notice. Therefore, the penalty under Section 73(9) read with
Section 73(11) of the CGST/KSGST Act 2017 and Section 20(xxv) of the IGST Act 2017 is deemed
Examining Sub-sections (6), (8), and (9) of Section 73, it becomes apparent that while Subsection (8) provides a waiver of penalties if tax and interest are paid within thirty days of notice,
Sub-section (11) overrides this in cases where the tax collected is not remitted within the same
timeframe. The Assessing Authority, in this instance, contends that failure to deposit the
collected tax within thirty days attracts penalties, and Sub-section (8) is inapplicable.
The court, dismissing the writ petition, validates the Assessing Authority’s stance, emphasizing
the correctness of the applied legal provisions.

SW Point of View: From a legal perspective, this case serves as a compelling reminder for businesses to exercise due diligence in complying with GST regulations, lest they find themselves entangled in the intricate web of penalties and legal intricacies.

Aagam Jain, Associate- Indirect Tax, SW India