Seldom has anyone come across a fine of 100,000 percent. A trader in Andhra Pradesh received a notice from the Goods and Service tax officials to pay a penalty of more than that.

An Andhra Pradesh tax officer, in a show cause notice, has commanded a trader to pay a fine of INR 20,000 for omitting a GST of INR 15 in a bill. “It’s clearly established that you wilfully violated the provisions (of GST law)…a punishable offence,” the notice said.

Since the time the new indirect tax regime has been implemented, the government has asked approximately 200 officials to conceal their identities and go shopping around the country in order to identify those traders who are breaking the norms set forth in GST. “During the visit to your business premises you have sold one ready-made shirt worth Rs 300 to a customer and collected the full amount, but failed to issue tax invoice, and thereby, evaded GST,” stated the tax notice which was issued to the trader on September 5.

However, the quantum of a fine is nowhere defined under GST and it entirely depends on the discretion of the officials. The industry experts, on the other hand, are of the opinion that slapping penalties in this manner might end up keeping the small traders and businessmen away from the ambit of the new tax regime.

MS Mani, the partner at Deloitte India, said, “Ideally no penalty should be levied for minor transgressions as the law is of recent vintage and there could be inadvertent mistakes committed initially by taxpayers. It would be better to encourage taxpayers who have been out of the indirect tax fold to come into the GST framework without any fear of penal action.”

“The penal provisions can be invoked once taxpayers are familiar with its provisions and current issues being faced by taxpayers are settled,” Mr. Mani added.