The Directorate General of Goods and Services Tax Intelligence ( DGGI ) has issued more than 300 show-cause notices to company officials for wrongful availing of input tax credit ( ITC ), imposing penalties of up to 100%. The notices target top management where their involvement in tax evasion has been clearly established. Industry stakeholders argue that such penalties should only be applied in exceptional circumstances, and many of the recipients have already challenged these notices in court.
The DGGI has sent notices to promoters, directors, and senior management of companies, seeking to impose penalties as high as 100% for wrongful ITC claims.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
According to tax officials, the notices were issued in cases where investigations clearly established the role of management in wrongful ITC claims. An official explained, “Notices have been sent only in cases where the investigation pointed to the role of promoters or senior management.” The notices were issued under Section 122(1A) of the Central GST Act, which allows penalties for those facilitating tax evasion through direct involvement or assistance in fraudulent invoicing.
Industry representatives, however, disagree with the tax authorities’ approach. They contend that personal penalties should only be imposed under specific, exceptional conditions, such as when the intent to commit tax fraud is well established.
Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here
In one instance, a penalty of Rs. 102 crore was imposed on a company’s managing director, equal to the evaded tax amount. This has raised concerns among industry leaders about imposing penalties on individuals when the matter may involve interpretation issues rather than deliberate fraud.
Experts believe that while imposing penalties equal to the evaded tax or wrongfully availed ITC serves as a strong deterrent, it must be exercised with caution.
The debate continues as to whether these penalties are justified or if they overreach the intended scope of GST law, with many awaiting judicial scrutiny of the notices.
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
