Ajustment of Credit of Penalty paid during Transport

ITC / Input 163 views 1 replies

Dear Sir, 

I have paid GST penalty charged by GST officer due to Mismatch in E-way bill and Invoice. He has charged penalty and accordingly GST penalty has been paid by me. The GST officer has generated the Penalty Challan under temporary ID. The Goods were dispatched from Maharashtra to Karnataka and GST penalty was paid of Rs.85515/- at Karanata Border.

Now, I am filling GST return for May 2023 and there is a GST Tax Payable of Rs.22585/- (GST of Sales Less GST of Purchases). So, Can we claim the Penalty amount paid towards GST Payable.  

Please guide me regarding the same.

Replies (1)

Hi YK Associates,

Regarding your query on adjustment of GST penalty paid during transport against your GST payable:


Key Point:

GST penalty paid cannot be claimed as Input Tax Credit (ITC) or adjusted against GST liability.


Explanation:

  1. Penalty under GST is a cess or fine and is not considered as input tax.
    It is a punitive payment for non-compliance and hence, ineligible for ITC.

  2. As per Section 17(5) of CGST Act, 2017, ITC is not allowed on the following:

    • Motor vehicles used for transportation (except specified cases)

    • Goods and services used for personal consumption

    • Penalty or late fees paid under GST law

  3. The penalty paid due to E-way bill mismatch is classified as a penalty/fee and thus cannot be adjusted against your output tax liability or claimed as credit.

  4. The penalty challan generated under a temporary ID is just the mode of payment; it does not convert the penalty into a recoverable credit.


What Should You Do?

  • Pay the GST tax payable of Rs. 22,585/- separately while filing your May 2023 return.

  • Treat the penalty amount as a business expense in your books but do not claim ITC on it.

  • Maintain records of penalty payment and challan for audit and compliance purposes.


Summary:

Particulars Can you claim ITC / adjust against GST payable?
GST on sales Yes
GST on purchases Yes
Penalty for E-way bill mismatch No


CCI Pro

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