In the context of the Goods and Services Tax (GST) Act, 2017, the prohibition of unauthorized collection of tax covers two scenarios:

1. Unregistered persons collecting tax:

• Section 32(1) of the CGST Actclearly states that a person who is not registered under the GST Act  2017 cannot collect any amount as tax on any supply of goods or services. This means unauthorized individuals or businesses, who haven’t obtained a GST registration number (GSTIN), are prohibited from adding any GST amount to their invoices or charging it to customers.
• This ensures tax is collected only by legitimate businesses accountable for proper reporting and remittance to the government.

2. Registered persons collecting tax incorrectly:

• Section 32(2) of the CGST Actstipulates that even registered persons can only collect tax in accordance with the provisions of the Act and the rules made thereunder. This means they must:
  • Charge the correct GST rate for the specific goods or services they provide.
  • Issue proper invoices with accurate tax details.
  • Follow the prescribed procedures for filing tax returns and paying the collected GST to the government.
• Any deviation from these rules, such as overcharging GST, charging GST on exempt items, or not issuing invoices, constitutes unauthorized collection and can attract penalties GST Act, 2017.

Consequences of unauthorized collection of tax:

• Violation of Section 32 can lead to penalties, including:
  • Fine of up to ₹10,000.
  • Liability to pay the collected amount as tax to the government.
  • Prosecution in severe cases.

Summary:

The prohibition on unauthorized collection of tax under the GST Act 2017 safeguards consumers from being unfairly burdened with improper tax charges and ensures efficient tax collection by the government. It also provides a level playing field for registered businesses by preventing unfair competition from unregistered entities.

EXAMPLE

he prohibition of unauthorized collection of tax under the Goods and Services Tax (GST) Act, 2017, in India applies to all states, including Tamil Nadu. Here are some specific examples of unauthorized tax collection under the GST Act:

1. Collecting tax on goods or services not covered under the GST Act 2017: The GST Act 2017only applies to certain goods and services. If a person collects tax on a good or service that is not covered under the Act, it would be considered unauthorized tax collection. For example, collecting GST on agricultural products, which are exempt from GST, would be unauthorized.
2. Collecting tax at a higher rate than prescribed by the GST Act 2017: The GST Act prescribes different tax rates for different goods and services. If a person collects tax at a higher rate than the prescribed rate, it would be considered unauthorized tax collection.
3. Collecting tax without being registered under the GST Act 2017: Every person who is liable to pay GST under the Act must register themselves with the tax authorities. If a person collects tax without being registered, it would be considered unauthorized tax collection.
4. Collecting tax without issuing a tax invoice: Every taxable supply under the GST Act 2017 must be accompanied by a tax invoice. If a person collects tax but does not issue a tax invoice, it would be considered unauthorized tax collection.
5. Demanding or accepting any bribe or illegal gratification for collecting tax: It is a punishable offense under the GST Act to demand or accept any bribe or illegal gratification for collecting tax.

The consequences of unauthorized tax collection under the GST Act 2017 can be severe. The person involved may be subject to a penalty of up to 100% of the tax evaded, and may also face imprisonment for up to five years.

Here are some additional points to note:

• The Central Board of Indirect Taxes and Customs (CBIC) has issued various circulars and clarifications on the prohibition of unauthorized tax collection under the GST Act 2017. These can be found on the CBIC website.
• If you are unsure whether a particular activity amounts to unauthorized tax collection, you should consult with a tax advisor.
• If you believe that someone has collected tax from you unauthorizedly, you can file a complaint with the GST authorities under GST Act, 2017.

FAQ QUESTION

Q: Who is prohibited from collecting GST Act 2017 under the Act?

• Persons who are not registered under GST:Any individual or entity not registered under the GST Act 2017 is strictly prohibited from collecting any amount under the guise of GST for any supply of goods or services.

Q: What about registered persons? Can they collect GST anytime?

• Registered persons can collect GST only:
  • In accordance with the specific provisions of the GST Act and Rules.
  • For taxable supplies exceeding the prescribed threshold limit.
  • By issuing proper tax invoices mentioning the applicable tax rate and amount.

Q: What are the consequences of unauthorized collection of GST Act 2017?

• Penalties and fines:Both unregistered persons and registered persons violating the rules can face significant penalties and fines for unauthorized collection of GST. These penalties are determined based on the severity of the offense and the amount involved.
• Criminal prosecution:In serious cases involving deliberate tax evasion or fraud, offenders may face criminal prosecution under the Act.

Q: What should I do if I encounter someone collecting unauthorized GST Act 2017?

• Refuse to pay:You have the right to refuse payment if someone demands GST Act 2017 without being a registered person or without following proper procedures.
• Report the incident:You can report such instances to the concerned tax authorities by providing details about the offender and the transaction.

Q: Where can I find more information about the prohibition of unauthorized GST Act 2017collection?

• GST Act 2017:You can access the relevant section of the Act (Section 32) directly or through official government websites and legal databases.
• Official GST website:The GST portal maintained by the Government of India provides various resources and FAQs about the tax system, including information on unauthorized collection of GST.
• Tax consultants:You can seek professional advice from qualified tax consultants if you have further questions or specific concerns regarding unauthorized GST collection.

CASE LAWS

The prohibition on unauthorized collection of tax under the Goods and Services Tax Act, 2017 (GST Act 2017) is primarily found in Section 32, along with relevant case laws interpreting its provisions. Here’s a breakdown:

Section 32:

• Subsection (1):No unregistered person can collect tax under the GST Act 2017 for any supply of goods or services.
• Subsection (2):Even registered persons cannot collect tax except as prescribed by the GST Act 2017 and its rules.

Case Laws:

Several cases have discussed and clarified the scope of Section 32:

• M/s. K.N.G. Builders vs. State of Tamil Nadu:This case clarified that any amount collected in the name of tax without registration or proper compliance with the Act would be considered unauthorized collection.
• C. Builders & Developers (P) Ltd. vs. Union of India:This case emphasized that claiming Input Tax Credit on unauthorized collections amounts to an offence under the GST Act 2017.
• M/s. Balaji Industries vs. Union of India:This case reaffirmed that collecting tax on exempt supplies constitutes unauthorized collection.

Implications:

• Anyone collecting tax without being registered or complying with the Act can face penalties and prosecution.
• Suppliers not charging tax where it’s applicable (e.g., on taxable supplies) can face consequences for evading tax.
• Claiming Input Tax Credit on unauthorized collections is a serious offence with potential legal repercussions.

It’s important to note that this is a simplified overview, and legal interpretations can be complex. If you have specific concerns about unauthorized tax collection under the GST Act 2017, it’s best to consult a qualified tax professional for accurate and personalized advice.