Many previous taxes, including excise duty, service tax, and value-added tax, have been superseded by the Goods and Services Tax (GST), a required indirect tax system in India. Penalty for Not Registering GST in India: Everything You Need to Know. Legally, you must register for GST if your company’s yearly turnover surpasses a specific threshold. Significant fines, penalties, and even legal action may result from failure to comply.
With a useful frequently asked questions section at the end, this blog discusses the legal ramifications of non-compliance. Penalty for Not Registering GST in India: Everything You Need to Know. Who is required to register, and what is the penalty for not registering under GST?
Who Needs GST Registration in India?
Before diving into penalties, it’s important to understand who is required to register for GST:
| Category | Mandatory Registration When |
|---|---|
| Normal Business | Turnover exceeds ₹40 lakhs (₹20 lakhs for special category states) |
| Service Providers | Turnover exceeds ₹20 lakhs (₹10 lakhs for special category states) |
| Interstate Suppliers | Regardless of turnover |
| E-commerce Sellers | Regardless of turnover |
| Casual/Non-resident Taxpayers | Mandatory |
| Input Service Distributors (ISD) | Mandatory |
| Reverse Charge Mechanism Liable Persons | Mandatory |
Penalty for Not Registering Under GST
According to Section 122 of the CGST Act, the following penalties are applicable:
1. Fixed Monetary Penalty
If a person is required to register under GST and fails to do so:
- Penalty: ₹10,000 or 10% of the tax due, whichever is higher.
If the offence involves deliberate tax evasion:
- Penalty: ₹10,000 or 100% of the tax due, whichever is higher.
Example:
If your tax liability is ₹1,50,000 and you failed to register:
- Penalty = 10% of ₹1,50,000 = ₹15,000 (since it’s higher than ₹10,000)
2. Interest on Tax Due
Apart from penalties, you will also be liable to pay interest on the unpaid tax at a rate of 18% per annum from the due date till the date of payment.
3. Blocking of Input Tax Credit (ITC)
If a business is not registered under GST, it cannot claim input tax credit, making purchases more expensive and non-compliant.
4. Business Notices and Audits
The GST department can issue notices and initiate audits or assessments, which may result in:
- Freezing of business accounts
- Seizure of goods
- Legal proceedings
5. Loss of Business Credibility
Not registering under GST may lead to loss of contracts, vendor relationships, or tenders, especially with B2B clients who prefer dealing with compliant entities.
Risks of Continuing a Business Without GST
- Disqualification from tenders: Many government and corporate contracts require a valid GSTIN.
- Difficulty in raising invoices: Non-registered entities cannot issue GST-compliant invoices.
- Legal Trouble: The government can prosecute offenders for serious GST violations.
- Backdated liability: You may still be required to pay tax from the date you were liable to register.
✅ How to Avoid GST Penalties
Here are some smart practices:
- Track your turnover regularly
- Register within 30 days of becoming liable
- Maintain proper books of accounts
- File returns on time
- Consult a GST expert or a CA
📄 How to Register for GST
You can register for GST online via the official GST portal: www.gst.gov.in
Basic documents required:
- PAN card
- Aadhaar card
- Business address proof
- Bank details
- Photograph and signature
- Company registration documents (if applicable)
🧾 Real-Life Example of Penalty for Not Registering Under GST
Scenario:
An online seller in Delhi with ₹45 lakh turnover did not register under GST. The tax liability calculated was ₹3,60,000.
Penalty:
10% of ₹3,60,000 = ₹36,000
So, total liability = ₹3,60,000 (tax) + ₹36,000 (penalty) + applicable interest.
Final Words
If you are operating a business and meet the eligibility criteria for GST registration, it is mandatory to register. Failing to do so can result in heavy penalties, tax liabilities, and loss of goodwill. The sooner you act, the better it is for your business.
Being GST-compliant not only helps avoid legal issues but also builds trust with customers and partners.
🧩 Frequently Asked Questions (FAQ) – Penalty for Not Registering GST
1. Is GST registration mandatory for all businesses?
No. It is only mandatory if your turnover exceeds the prescribed limit or if you fall under the compulsory registration category (e.g., e-commerce sellers, interstate suppliers).
2. What happens if I forget to register for GST?
You may face a penalty of ₹10,000 or 10% of tax due (100% if evasion is intentional), plus interest and denial of input tax credit.
3. Can I register for GST after the due date?
Yes, but you may have to pay penalties and interest from the date you became liable to register.
4. Is GST registration free?
Yes, GST registration is free of cost on the official GST portal, but you may incur a fee if you take help from a CA or legal expert.
5. How can I check if my business needs GST registration?
Check your annual turnover, nature of business (e.g., interstate supply), and services offered. If unsure, consult a tax professional or visit the GST portal.
6. Will I get arrested for not registering under GST?
Arrest is usually for serious tax evasion or fraud. However, failure to register and pay due taxes can lead to significant financial and legal consequences.