Non- payment of GST on supply of services- reg
This query is : Resolved
18 July 2025
Dear expert,
One of my client received an email from GST preventive unit for discharging tax liability with interest as per sec 50 and penalty of 15% on Output. My query is whether Penalty of 15% is mandatory.
Facts of the case:
Payment received in third quarter (Oct-Dec 2024) and cheque dated 30-sep-2024 and govt department deducted GST TDS and credited GST TDS in quarter 2 our client has not declared sales in Q2 in the mean while received a mail from preventive unit compelling payment of 15% penalty on GST output and client has declared his sales in Q3 (Oct-Dec 2024)
Thank you
One of my client received an email from GST preventive unit for discharging tax liability with interest as per sec 50 and penalty of 15% on Output. My query is whether Penalty of 15% is mandatory.
Facts of the case:
Payment received in third quarter (Oct-Dec 2024) and cheque dated 30-sep-2024 and govt department deducted GST TDS and credited GST TDS in quarter 2 our client has not declared sales in Q2 in the mean while received a mail from preventive unit compelling payment of 15% penalty on GST output and client has declared his sales in Q3 (Oct-Dec 2024)
Thank you
19 July 2025
penalty has been levied under section 74 so you must have received notice under section 74. you can oppose initiation of section 74 in reply and if the officer doesn't oblige file an appeal against final order.
19 July 2025
Dear Sir, We have not received any Show Cause Notice (SCN) from the GST Department. However, we have received an email from the GST Preventive Unit stating that we have not declared sales in Q2 and requesting us to discharge the liability along with 18% interest on the output tax and a 15% penalty on the same and we have discharged liability and interest now he is ready to issue SCN with 25% penalty (Since we have discharged liability in Q3 after getting a email)
12 August 2025
Legal Position on Penalty and Interest:
Interest under Section 50
Interest is always applicable on delayed payment of GST. Your client has rightly paid the interest.
Penalty for Late Payment
Penalty of 15% (or Rs. 10,000 whichever is less) is usually levied for late payment of tax under Section 47, which is relatively lenient.
However, if the department initiates proceedings under Section 74 (for cases of fraud, willful misstatement, or suppression of facts), a penalty of 100% of tax amount or 25% penalty may be imposed.
In your case, since the department is threatening SCN under Section 74 with 25% penalty, it means they consider it a serious violation.
Is 15% penalty mandatory?
If no SCN is issued under Section 74 or 73, and the case is simply delayed payment, then penalty of 15% is the usual and minimum penalty.
But since they have not issued any SCN and only sent an email, penalty is not "automatically" mandatory until formal proceedings start.
You can contest or explain the delay, especially since payment and interest have been discharged.
If SCN is issued under Section 74
You can oppose it in your reply to the notice.
You may argue that there was no intent to evade tax, payment was made with interest, and no suppression or fraud was committed.
Appeal the order if penalty is imposed unfairly.
Interest under Section 50
Interest is always applicable on delayed payment of GST. Your client has rightly paid the interest.
Penalty for Late Payment
Penalty of 15% (or Rs. 10,000 whichever is less) is usually levied for late payment of tax under Section 47, which is relatively lenient.
However, if the department initiates proceedings under Section 74 (for cases of fraud, willful misstatement, or suppression of facts), a penalty of 100% of tax amount or 25% penalty may be imposed.
In your case, since the department is threatening SCN under Section 74 with 25% penalty, it means they consider it a serious violation.
Is 15% penalty mandatory?
If no SCN is issued under Section 74 or 73, and the case is simply delayed payment, then penalty of 15% is the usual and minimum penalty.
But since they have not issued any SCN and only sent an email, penalty is not "automatically" mandatory until formal proceedings start.
You can contest or explain the delay, especially since payment and interest have been discharged.
If SCN is issued under Section 74
You can oppose it in your reply to the notice.
You may argue that there was no intent to evade tax, payment was made with interest, and no suppression or fraud was committed.
Appeal the order if penalty is imposed unfairly.
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