Heavy GST Penalties on Company Executives Face Legal Scrutiny

By: Admin | August 27, 2024 | Categories: GST Recent News | 4 Min Read

The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued thousands of notices to various companies, their directors, and promoters over alleged wrongful availment of input tax credit (ITC). The issue at the core of these disputes is the failure of vendors to remit taxes to the government, coupled with other concerns related to ITC availment and utilization.

Key Points of Concern:

• Imposing Tax Liability on Recipients: A significant question is whether tax liability can be placed on service recipients who are not directly at fault. The ongoing investigations underline the complexities of tax compliance and the responsibilities of different parties in the supply chain.
• Personal Penalties on Executives: Notices reviewed indicate that some penalties, especially for the financial year 2017-18, have reached up to 100% of the disputed tax amount, targeting directors and promoters of companies. These penalties have stirred significant unrest in the industry, raising concerns over potential harassment of taxpayers, contrary to the Finance Minister’s stance.
• Constitutional Validity: Legal experts argue that imposing such severe personal penalties on individuals must withstand constitutional scrutiny. These penalties may not hold up in appeal forums or jurisdictional High Courts unless the Revenue Department can prove malafide intent and that individuals personally benefited from the wrongful actions.
• Legal Burden: The onus is on the Revenue Department to demonstrate malafide intent in cases where penalties are imposed on individuals, particularly when no personal gain is evident. Legal petitions challenging these penalties have already been filed, emphasizing the need for a careful judicial review of such punitive measures.

This development brings to light the potential legal challenges companies and their executives may face concerning GST compliance, highlighting the importance of due process and fair treatment in tax-related matters.

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