Accounting treatment for penalty paid under sec 129 (3)

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This discussion addresses the accounting treatment for penalties imposed under Section 129(3) of the GST Act. It clarifies that an invoice must be issued for goods seized and released, allowing the buyer to claim Input Tax Credit (ITC), provided they meet the conditions. The advice also covers the accounting entry for the penalty paid, which is expensed and paid via bank transfer, and the need to issue an IGST invoice for inter-state sales.

janak kumar singhal

janak kumar singhal (Querist)

22 June 2021 Sir,
I want to state that my client has sold goods without invoice and goods was intercepted during transit. A.O. imposed penalty as 100 % of due tax and 100 % equal to tax as penalty under sec 129(3).
Now, i want to know, whether i can issue taxable sales invoice after releasing goods from officer and pass on credit to the buyer or not?
Whether buyer is eligible to take ITC of such goods?

If i can not issue taxable sales invoice, then what accounting entry we can pass for such type of sale?

CA Altamush Zafar

CA Altamush Zafar (Expert)

22 June 2021 Yes you will have to raise invoice and the buyer will be eligible for credit subject to section 17

janak kumar singhal

janak kumar singhal (Querist)

23 June 2021 Thansk Sir,
Further, i want to ask, what is accounting entry for penalty paid (4000/- as CGST and SGST Tax and 40000/- as penalty) under sec 129(3).
The sale of goods is related to other state, then i have to issue a new sales bill with IGST tax to the consumer, and pass on IGST credit to the consumer.

CA Altamush Zafar

CA Altamush Zafar (Expert)

23 June 2021 Penalty will have to be expensed and paid by bank

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