Penalty for not registering under GST
 |
| Penalty-for-not-registering-under-GST |
In India, any person whose aggregate turnover exceeds the prescribed threshold or who is otherwise liable must obtain GST registration; failure to do so attracts stringent penalties under Section 122 of the CGST Act. The penalty for not registering is the higher of:
- An amount equal to the tax that would have been evaded by non-registration, or
- A fixed sum of ₹10,000.
- There is no separate late‑registration fee—if authorities detect a default, the same penalty applies, and goods in transit may be detained or confiscated, with no entitlement to input tax credit.
📋 Overview of GST Registration Requirements
Every supplier of goods or services whose aggregate turnover in a financial year exceeds ₹20 lakhs (₹10 lakhs for special category States) must register for GST . Certain categories (e‑commerce operators, casual taxable persons, non‑resident taxable persons) are mandatorily required to register irrespective of turnover.
🚫 Penalty for Not Registering under GST
Section 122(1): Offence and Quantum of Penalty
Under Section 122(1), a person liable to register but unregistered is deemed to have committed an offense. The penalty is the greater of:
- The amount of tax evaded by non-registration, or
- ₹10,000.
No Separate Late‑Registration Penalty
There is no distinct provision for “late” registration. If the department discovers that a taxable person failed to register in time, the same penalty—higher of tax evaded or ₹10,000—applies.
🔍 Calculation and Illustrative Examples
- Example 1: A dealer crosses the ₹20 lakh threshold on July 1, 2024, but registers only on September 1, 2024. Tax due for the period is ₹1,20,000. Penalty = 10% of ₹1,20,000 = ₹12,000 (since this exceeds ₹10,000).
- Example 2: Tax due on evaded turnover is ₹80,000; penalty = ₹10,000 (higher of ₹10,000 or ₹80,000).
🛑 Consequences Beyond Monetary Penalty
- Detention and Confiscation: Goods and conveyances may be detained or confiscated if found moving without registration.
- Loss of Input Tax Credit: Unregistered persons cannot claim or transfer input tax credits.
- Additional Penalties: For aiding non‑registration or obstructing officers, further penalties up to ₹25,000 may apply under Section 122(3) and Section 125.
📑 Procedure for Regularization after Default
A person discovered to be unregistered must file Form REG‑01 within 30 days of notice. Upon registration, tax dues, interest, and penalty must be paid. Registration may be effective from the date liability arose, but remission of penalty is at the discretion of the proper officer.
⚖️ Legal Safeguards and Judicial Trends
High Courts have sometimes mitigated penalties where no fraudulent intent is proved, imposing a token ₹10,000 under Section 122 instead of higher amounts (e.g., Faruk Rathore vs. Dy. CCT Bikaner).
Failure to register under GST not only attracts hefty monetary penalties but also operational disruptions and loss of credit. Prompt compliance and, where defaults occur, swift regularization can minimize exposure.
Conclusion
Under the Goods and Services Tax (GST) system, non-registration may invite big penalties and operational setback. As per Section 122 in the CGST Act, failing to register when compelled may result in cases against an individual of a penalty of ₹10,000 or the equivalent amount of tax evaded, whichever is greater. Other than mere financial penalties, they may also lead to losing input tax credits, goods being detained, or potential court actions. Such compliance attracts the creditworthiness of the business and allows the seamless process of business. All eligible taxpayers should, therefore, go for registration in this indirect tax scheme by complying with the set standards and with efficiency in time.