The Kerala GST Department has notified the manner of penalty calculation under IGST Act, 2017 for the show cause notices issued under section 73(1) or 74(1) of the KSGST Act, 2017 read with section 20 of the IGST Act, 2017.
The department has noticed that field formations require clarity in the computation and imposition of penalty under the fourth proviso of Section 20 of the Integrated Goods and Services Tax (IGST) Act, 2017 in cases where tax is being demanded under Section 73(1)/74(1) of the Kerala Goods and Services Tax (KSGST) Act, 2017.
In order to ensure uniformity in the implementation of the provisions of law across the field formations, in exercise of the powers conferred by section 168 (1) of the Kerala State Goods and Services Tax Act, 2017, clarified the issues.
The department clarified that Section 73 of the KSGST Act, 2017 provides for the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized for any reason other than fraud or any willful-misstatement or suppression of facts.
Section 73(9) of the KSGST Act, 2017 reads as follows:“The proper officer shall, after considering the representation, if any, made by person chargeable with tax, determine the amount of tax, interest and a penalty equivalent to ten per cent of tax or ten thousand rupees, whichever is higher, due from such person and issue an order .”
Section 74 of the KSGST Act, 2017 provides for the determination of tax not paid or short paid or erroneously refunded or input tax credit wrongly availed or utilized by reason of fraud or any willful-misstatement or suppression of facts.
In terms of 4th 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 “leviable” under the CGST Act plus the SGST Act. As such, there is no independent provision of its own under the IGST Act to quantify the amount of penalty; it arrives at such quantification through the provisions of the CGST and the SGST Acts.
In this scenario, what emerges is that the quantum of penalty under the IGST Act is entirely dependent upon the penalty “leviable” under the CGST and the SGST Acts.
As per 4th proviso of Section 20 of IGST Act, the penalty leviable under the IGST Act would be the sum total of the quantum of penalty to be levied under the CGST Act and the SGST Act. This is clarified with an Illustration worked out as under:
Illustration: For a service attracting 18% rate of tax, the tax levied under CGST is at the rate of 9% and that under SGST is at the rate of 9%. If it becomes an intra-state supply, the penalty to be levied on each Act is 10% as per section 73(9) of the CGST and the SGST Acts. (i.e., Taxable value x 9% x 10%).
