Section 122 of the Central Goods and Services Tax Act, 2017 deals with penalties for certain offences and contraventions under GST. It is one of the principal penalty provisions in Chapter XIX of the CGST Act, which deals with offences and penalties.
The section covers a wide range of GST violations, including issuing invoices without actual supply, issuing incorrect or false invoices, collecting tax but not paying it to the Government, wrongful input tax credit, fraudulent refunds, failure to obtain registration, suppression of turnover, failure to maintain records, transportation of taxable goods without prescribed documents, misuse of another person’s GST registration number and several other contraventions.
Section 122 also contains separate provisions for persons who retain the benefit of certain specified transactions, electronic commerce operators liable to collect tax at source under Section 52, registered persons who have unpaid or short-paid tax or wrongly availed/utilised input tax credit, and other persons who aid, abet or otherwise participate in specified contraventions. The current framework therefore goes beyond a simple penalty on the registered supplier and covers different categories of conduct.
What Is Section 122 of the CGST Act?
Section 122 is titled “Penalty for certain offences.”
The section establishes several categories of penalty:
- Section 122(1) covers specified offences committed by a taxable person.
- Section 122(1A) covers certain persons who retain the benefit of specified transactions and at whose instance those transactions are conducted.
- Section 122(1B) deals with specified contraventions by electronic commerce operators that are liable to collect tax at source under Section 52.
- Section 122(2) deals with specified tax short-payment, non-payment, erroneous refund and wrongful ITC situations involving registered persons.
- Section 122(3) covers other persons involved in specified conduct, including aiding or abetting offences and failure to comply with certain summons or invoice requirements.
Section 122 is therefore an important provision for understanding how GST law responds to different types of non-compliance.
Why Is Section 122 Important?
GST compliance involves several interconnected obligations.
A registered person may be required to:
- issue a correct tax invoice;
- charge and pay the correct tax;
- maintain proper books and records;
- obtain registration when liable;
- file accurate returns;
- claim only eligible input tax credit;
- comply with e-way bill requirements;
- provide information requested by GST officers;
- use its own GST registration number; and
- comply with other requirements under the CGST Act and Rules.
A violation of these obligations can have different consequences depending on the nature of the conduct.
Section 122 provides specific penalties for many of these situations rather than leaving every violation to the general penalty provision under Section 125.
Section 122(1) – Penalty on a Taxable Person
Section 122(1) begins with the words “Where a taxable person who” and then lists 21 specified acts.
Where a taxable person commits any of the listed offences, the person is liable to a penalty of:
₹10,000 or an amount equivalent to the relevant tax, ITC, refund or other amount specified in the provision, whichever is higher.
The exact amount therefore depends on the nature of the offence.
In many cases, the relevant amount is connected with:
- tax evaded;
- tax not deducted or short deducted under Section 51;
- tax deducted but not paid;
- tax not collected or short collected under Section 52;
- ITC wrongly availed, passed on or distributed; or
- refund fraudulently claimed.
The statutory minimum of ₹10,000 is therefore important, but it does not necessarily cap the penalty at ₹10,000.
Section 122(1) – Twenty-One Specified Offences
Section 122(1) contains 21 clauses, from clause (i) to clause (xxi). These cover different types of GST non-compliance.
1. Supply Without Invoice or Incorrect/False Invoice
Under Section 122(1)(i), a taxable person is liable to penalty if the person:
- supplies goods or services without issuing an invoice; or
- issues an incorrect or false invoice relating to the supply.
A tax invoice is an important GST document because it records the taxable value, tax charged and other transaction details.
Example
A registered supplier makes a taxable supply of ₹5 lakh but does not issue the required invoice.
This can attract penalty under Section 122(1)(i), subject to the applicable proceedings and facts.
Similarly, issuing an invoice containing materially false information can also fall within this clause.
2. Invoice or Bill Without Actual Supply
Section 122(1)(ii) covers issuing an invoice or bill without an actual supply of goods or services, in violation of the CGST Act or Rules.
This provision is particularly important in cases involving fake invoices.
Example
Company A issues an invoice to Company B for goods worth ₹10 lakh, but no goods are actually supplied.
The invoice is not merely a documentation mistake. The absence of an underlying supply can create serious GST consequences, including penalty under Section 122 and, depending on the facts and statutory conditions, possible consequences under other provisions dealing with offences and prosecution.
3. Collecting Tax but Not Paying It
Section 122(1)(iii) applies where a person collects an amount as tax but fails to pay it to the Government beyond three months from the date on which the payment becomes due.
Example
A supplier collects GST of ₹1 lakh from customers and is required to pay that amount to the Government, but does not do so for more than three months after the amount becomes due.
The conduct can attract Section 122(1)(iii), apart from other applicable consequences.
This provision is particularly important because GST collected from customers is not an amount that the supplier can treat as its own business income.
4. Collecting Tax in Contravention of GST Law
Section 122(1)(iv) applies where a person collects tax in contravention of the provisions of the CGST Act and then fails to pay it to the Government beyond three months from the date on which payment becomes due.
This provision should be distinguished from Section 32, which prohibits unauthorised collection of tax.
Section 32 addresses the prohibition, while Section 122 provides a penalty consequence for specified conduct.
5. Failure to Deduct or Pay TDS
Section 122(1)(v) covers certain failures relating to tax deduction at source under Section 51.
It applies where the person:
- fails to deduct tax;
- deducts less than the required amount; or
- fails to pay to the Government the amount deducted as tax.
Section 51 applies to specified categories of persons required to deduct GST TDS.
Example
A specified Government department makes a payment on which GST TDS is required but fails to deduct the required amount.
The relevant penalty consequences can arise under Section 122(1)(v).
6. Failure to Collect or Pay TCS
Section 122(1)(vi) covers certain failures relating to tax collection at source under Section 52.
It applies where a person:
- fails to collect required TCS;
- collects less than the required amount; or
- fails to pay the collected amount to the Government.
This provision is particularly relevant to electronic commerce operators covered by the GST TCS framework.
7. Wrong ITC Without Actual Receipt of Goods or Services
Section 122(1)(vii) covers taking or utilising input tax credit without actual receipt of goods or services, either fully or partially, in contravention of the Act or Rules.
This is one of the important penalty provisions relating to fraudulent or irregular ITC.
Example
A business receives an invoice for goods worth ₹10 lakh but the goods are never actually delivered.
If the business takes or utilises ITC on the basis of that invoice without actual receipt of the goods, Section 122(1)(vii) may become relevant.
The actual tax and penalty consequences depend on the facts and applicable provisions.
8. Fraudulent Refund
Section 122(1)(viii) covers fraudulently obtaining a refund of tax under the CGST Act.
GST provides refund mechanisms for eligible situations, but a refund obtained through fraudulent means can attract penalty.
Example
A person submits fabricated documentation to obtain a GST refund that is not actually due.
If the refund is fraudulently obtained, Section 122(1)(viii) can apply, in addition to other provisions that may be relevant.
9. Wrongful ITC Distribution by ISD
Section 122(1)(ix) covers taking or distributing input tax credit in contravention of Section 20 or the relevant rules.
This is relevant to the Input Service Distributor (ISD) framework.
An ISD must distribute eligible input service credit according to the statutory rules.
Improper distribution of ITC can therefore attract penalty consequences.
10. False Records, Fake Accounts or False Information
Section 122(1)(x) covers:
- falsifying or substituting financial records;
- producing fake accounts or documents; or
- furnishing false information or return,
where this is done with an intention to evade payment of tax.
The reference to intention to evade payment of tax is significant.
Example
A business deliberately maintains two sets of sales records and reports lower taxable turnover in GST returns to reduce its tax liability.
Such conduct can fall within the scope of Section 122(1)(x), subject to the facts and applicable proceedings.
11. Failure to Obtain GST Registration
Section 122(1)(xi) applies where a person is liable to be registered under the CGST Act but fails to obtain registration.
A person cannot avoid GST registration merely by continuing business without applying for registration where the statutory requirement has been triggered.
The amount of penalty under Section 122(1) is determined under the statutory formula applicable to the offence.
12. False Registration Information
Section 122(1)(xii) covers furnishing false information regarding registration particulars:
- when applying for registration; or
- subsequently.
Example
A person deliberately provides a false business address or other materially false registration information to obtain or maintain GST registration.
Such conduct can attract the penalty provision.
13. Obstructing a GST Officer
Section 122(1)(xiii) covers obstructing or preventing an officer from discharging duties under the CGST Act.
GST officers have statutory powers under different provisions of the Act.
Interfering with the lawful exercise of those powers can therefore have penalty consequences.
14. Transportation of Taxable Goods Without Prescribed Documents
Section 122(1)(xiv) covers transporting taxable goods without the documents specified under the GST law.
This provision is closely connected with GST transportation compliance and the e-way bill framework.
Depending on the circumstances, other provisions, including Section 129 concerning detention, seizure and release of goods and conveyances in transit, may also become relevant.
The GST Council has also historically considered rationalisation of the penalty framework relating to transportation of goods without required documents.
15. Suppression of Turnover
Section 122(1)(xv) covers suppression of turnover leading to evasion of tax.
Example
A business makes taxable sales of ₹2 crore but reports only ₹1.5 crore in its GST records with the intention of reducing its tax liability.
The suppressed turnover can lead to tax demand and penalty consequences, depending on the facts and applicable demand provisions.
16. Failure to Maintain Books and Documents
Section 122(1)(xvi) covers failure to keep, maintain or retain books of account and other documents as required under the CGST Act or Rules.
GST record-keeping requirements are important because the records support:
- turnover;
- output tax;
- ITC;
- refunds;
- invoices;
- stock;
- purchases; and
- other compliance information.
A business should therefore maintain the required records for the statutory retention period.
17. Failure to Furnish Information or False Information
Section 122(1)(xvii) covers failure to furnish information or documents called for by an officer in accordance with the Act or Rules, as well as furnishing false information or documents during proceedings under the Act.
This provision can become relevant during GST proceedings where an officer lawfully requests documents or information.
Example
A taxpayer receives a lawful request for specific purchase records during GST proceedings but fails to provide the required documents without complying with the statutory requirements.
Section 122(1)(xvii) may become relevant.
18. Dealing With Goods Liable to Confiscation
Section 122(1)(xviii) covers supplying, transporting or storing goods that the person has reason to believe are liable to confiscation under the CGST Act.
This provision should be distinguished from the separate confiscation provisions under Section 130.
Section 122 imposes a penalty for the specified conduct, while Section 130 deals with confiscation and associated consequences in the circumstances prescribed by that section.
19. Using Another Registered Person’s GST Number
Section 122(1)(xix) covers issuing an invoice or document by using the registration number of another registered person.
GST registration numbers are specific to individual registered persons.
Using another person’s GSTIN can create serious compliance problems for both the actual registered person and the person misusing the number.
Example
Person A issues invoices using Person B’s GSTIN without authority.
Such conduct can attract consequences under Section 122(1)(xix), along with any other applicable provisions depending on the circumstances.
20. Tampering With or Destroying Evidence
Section 122(1)(xx) covers tampering with or destroying material evidence or documents.
The provision is important because GST proceedings can depend heavily on documentary evidence.
Destroying or altering relevant records can interfere with the proper determination of tax liability and therefore attracts a specific penalty provision.
21. Disposing of or Tampering With Detained, Seized or Attached Goods
Section 122(1)(xxi) covers disposing of or tampering with goods that have been:
- detained;
- seized; or
- attached
under the CGST Act.
Example
GST authorities lawfully detain certain goods during proceedings.
The person later removes or disposes of those goods without legal authority.
Such conduct can attract Section 122(1)(xxi).
Penalty Amount Under Section 122(1)
The basic penalty formula under Section 122(1) is important.
The taxable person is liable to pay:
₹10,000 or the relevant amount specified in the section, whichever is higher.
Depending on the offence, the relevant amount can relate to:
- tax evaded;
- tax not deducted;
- tax short deducted;
- tax deducted but not paid;
- tax not collected;
- tax short collected;
- tax collected but not paid;
- ITC wrongly availed;
- ITC passed on;
- ITC irregularly distributed; or
- refund fraudulently claimed.
Therefore, the financial exposure can be substantially greater than ₹10,000.
Section 122(1A) – Person Retaining the Benefit
Section 122(1A) deals with a different category of person.
It provides that any person who retains the benefit of a transaction covered by Section 122(1)(i), (ii), (vii) or (ix), and at whose instance the transaction is conducted, is liable to a penalty equivalent to the tax evaded or ITC availed of or passed on.
The four underlying categories are:
- supply without invoice or false/incorrect invoice;
- invoice without actual supply;
- ITC without actual receipt of goods or services; and
- ITC taken or distributed contrary to Section 20.
The provision is therefore aimed at the person who satisfies the statutory conditions of retaining the benefit and being the person at whose instance the specified transaction was conducted.
Why Section 122(1A) Is Important
Section 122(1A) was introduced through the Finance Act, 2020 and brought into force from 1 January 2021.
It addresses situations where the person who formally carries out a transaction may not be the only person who is relevant from a penalty perspective.
The provision focuses on the person who:
- retains the benefit of the specified transaction; and
- is the person at whose instance the transaction is conducted.
Both elements are important.
A recent Bombay High Court decision examining Section 122(1A) emphasised these two statutory requirements.
The Delhi High Court has also considered Section 122(1A) in the context of persons associated with companies and observed that the question of who retained the benefit and at whose instance the transaction was conducted can involve factual determination.
Section 122(1A) and Directors
Section 122(1A) has been considered in cases involving directors and other persons associated with companies.
The important point is that being a director or employee does not, by itself, establish every element of Section 122(1A).
The statutory requirements concerning:
- the specified transaction;
- retention of the benefit; and
- the person at whose instance the transaction was conducted
must be examined on the facts of the case.
The Delhi High Court has dealt with this issue in connection with penalties imposed on directors and highlighted the factual nature of determining benefit and involvement.
Section 122(1B) – Penalty for Certain E-Commerce Operator Contraventions
Section 122(1B) deals with specified contraventions by an electronic commerce operator (ECO) that is liable to collect tax at source under Section 52.
The provision covers an ECO that:
- allows supplies through its platform by an unregistered person, except where the person is exempted from registration by notification;
- allows an inter-State supply through its platform by a person who is not eligible to make such inter-State supply; or
- fails to furnish correct details in the statement under Section 52(4) relating to an outward supply of goods made through it by a person exempted from obtaining registration.
The penalty is:
₹10,000 or an amount equivalent to the tax involved had the supply been made by a registered person other than a person paying tax under Section 10, whichever is higher.
Current Scope of Section 122(1B)
The wording of Section 122(1B) was amended so that it applies to an electronic commerce operator who is liable to collect tax at source under Section 52.
The GST Council recorded that this amendment was intended to restrict the penal provision to the ECOs that are actually required to collect TCS under Section 52. The amendment was made retrospectively from 1 October 2023, when Section 122(1B) came into force.
This distinction is important because not every digital platform necessarily falls within the same TCS obligations under Section 52.
Section 122(1B) Example
Suppose an ECO covered by Section 52 allows an unregistered person to make supplies through its platform despite the person not being eligible under the applicable exemption and special procedure.
If the statutory conditions of Section 122(1B) are satisfied, the ECO can be liable to the prescribed penalty.
The penalty is based on the higher of:
- ₹10,000; or
- the amount of tax involved calculated in the manner specified by Section 122(1B).
Section 122(2) – Penalty on Registered Persons for Tax and ITC Defaults
Section 122(2) deals with a registered person who supplies goods or services on which:
- tax has not been paid;
- tax has been short-paid;
- tax has been erroneously refunded; or
- input tax credit has been wrongly availed or utilised.
The section divides the penalty treatment into two broad situations:
- cases other than fraud, wilful misstatement or suppression of facts to evade tax; and
- cases involving fraud, wilful misstatement or suppression of facts to evade tax.
Section 122(2)(a) – Non-Fraud Cases
Where the non-payment, short payment, erroneous refund or wrongful ITC is for a reason other than fraud, wilful misstatement or suppression of facts to evade tax, Section 122(2)(a) provides a penalty of:
₹10,000 or 10% of the tax due, whichever is higher.
Example
Suppose the tax due is ₹80,000 and the case falls under Section 122(2)(a).
Ten percent of ₹80,000 is ₹8,000.
Since the statutory comparison is between ₹10,000 and 10% of the tax due, the penalty would be ₹10,000 under the provision.
If the tax due were ₹2,00,000, 10% would be ₹20,000, so the percentage-based amount would exceed ₹10,000.
Section 122(2)(b) – Fraud, Wilful Misstatement or Suppression
Where the non-payment, short payment, erroneous refund or wrongful ITC is by reason of fraud or any wilful misstatement or suppression of facts to evade tax, Section 122(2)(b) provides a penalty equal to the tax due, subject to the statutory wording of the provision.
The distinction between Section 122(2)(a) and Section 122(2)(b) is therefore significant.
The presence or absence of fraud, wilful misstatement or suppression can materially affect the penalty.
Section 122(1) vs Section 122(2)
These two provisions should not be confused.
| Basis | Section 122(1) | Section 122(2) |
|---|---|---|
| Main focus | Specific listed offences | Tax not paid/short paid, erroneous refund or wrongful ITC |
| Person covered | Taxable person | Registered person |
| Structure | 21 specified clauses | Fraud and non-fraud categories |
| Penalty | Generally ₹10,000 or specified amount, whichever higher | Depends on Section 122(2)(a) or (b) |
| Examples | Fake invoice, no registration, suppressed turnover, misuse of GSTIN | Tax short payment, erroneous refund, wrong ITC |
Section 122(1) is therefore a list of specified offences, whereas Section 122(2) provides a separate penalty framework for specified tax and ITC consequences.
Section 122(3) – Penalty on Other Persons
Section 122(3) applies to any person who commits any of the acts specified in clauses (a) to (e).
These include:
- aiding or abetting specified Section 122(1) offences;
- dealing with goods known or reasonably believed to be liable to confiscation;
- dealing with supplies of services known or reasonably believed to contravene GST law;
- failing to appear before a central tax officer after receiving a summons for evidence or production of documents; and
- failing to issue an invoice as required or failing to account for an invoice in the books.
The penalty may extend to ₹25,000.
The wording “may extend to” is significant because ₹25,000 is the maximum specified amount rather than an automatically mandatory penalty in every case.
Aiding or Abetting a GST Offence
Section 122(3)(a) covers a person who aids or abets any of the offences listed in Section 122(1)(i) to (xxi).
Example
Suppose one person actively assists another person in creating and using false GST invoices.
If the statutory requirements are satisfied, the assisting person can face penalty under Section 122(3), apart from consequences applicable to the primary offender.
Dealing With Goods Liable to Confiscation
Section 122(3)(b) covers a person who acquires possession of, transports, removes, deposits, keeps, conceals, supplies, purchases or otherwise deals with goods while knowing or having reason to believe that the goods are liable to confiscation.
The provision therefore extends beyond the person who originally supplied the goods.
Dealing With Contravening Services
Section 122(3)(c) deals with a person who receives or is otherwise concerned with a supply of services that the person knows or has reason to believe contravenes the CGST Act or Rules.
This provision can apply to persons other than the original supplier where the statutory conditions are satisfied.
Failure to Appear After Summons
Section 122(3)(d) covers failure to appear before a central tax officer when a person has been issued a summons requiring appearance to give evidence or produce a document during an inquiry.
This should be read together with Section 70, which provides the statutory power to summon persons during GST inquiries.
Failure to Issue or Account for an Invoice
Section 122(3)(e) covers a person who:
- fails to issue an invoice according to the Act or Rules; or
- fails to account for an invoice in the books of account.
The maximum penalty under Section 122(3) is ₹25,000.
Section 122 and Minor GST Breaches
Section 122 should also be read with Section 126, which contains general disciplines relating to penalties.
Section 126 provides that no penalty should be imposed for minor breaches of tax regulations or procedural requirements and, in particular, for an omission or mistake in documentation that is easily rectifiable and made without fraudulent intent or gross negligence.
The statutory explanation in Section 126 defines a minor breach as a violation where the amount of tax involved is less than ₹5,000. It also addresses easily rectifiable documentation errors.
This does not mean that every Section 122 penalty automatically disappears whenever the amount involved is below ₹5,000. The specific penalty provision, the nature of the breach and the conditions of Section 126 must be considered together.
👉 Read More → Section 123 – Penalty for failure to furnish information return
Penalty Must Be Based on the Nature of the Violation
Section 126 also provides that the penalty imposed under the CGST Act should depend on the facts and circumstances of each case and be commensurate with the degree and severity of the breach.
Therefore, GST penalty proceedings should not be viewed simply as an automatic mathematical exercise.
The officer must consider the applicable statutory provision and the facts of the particular case.
Opportunity of Being Heard
Section 126(3) provides an important procedural safeguard:
No penalty shall be imposed on any person without giving the person an opportunity of being heard.
This principle is particularly important where the taxpayer disputes:
- whether the contravention occurred;
- whether the person was responsible;
- whether the relevant statutory provision applies;
- the amount involved;
- whether there was fraud or wilful misstatement;
- whether facts were suppressed; or
- the quantum of penalty.
Section 122 and Section 123
Section 122 deals with penalties for specified GST offences.
Section 123 separately deals with penalty for failure to furnish an information return under Section 150.
Under Section 123, the proper officer may impose ₹100 for each day during which the failure continues, subject to a maximum of ₹5,000.
Therefore, Section 122 should not be confused with every penalty provision in Chapter XIX.
Section 122 and Section 125
Section 125 is the general penalty provision.
It applies where a person contravenes a provision of the CGST Act or Rules for which no separate penalty is provided.
The penalty under Section 125 may extend to ₹25,000.
The basic distinction is:
Section 122 → Specific listed offences and specified penalty consequences
Section 125 → General penalty where no separate penalty is provided
Where a specific penalty provision applies, the general penalty provision should not simply be treated as a substitute for it.
Section 122 and Section 126
Section 126 establishes general disciplines relating to penalties.
It addresses:
- minor breaches;
- easily rectifiable documentation errors;
- proportionality;
- opportunity of hearing;
- specifying the nature of breach in the penalty order;
- voluntary disclosure as a mitigating factor; and
- cases where a specific fixed penalty or fixed percentage already applies.
Thus, Section 122 should be read together with Section 126 when considering penalty proceedings.
Section 122 and Section 127
Section 127 gives the proper officer power to impose a penalty in certain cases where a person is liable to penalty and the matter is not covered by proceedings under specified assessment, demand, detention or confiscation provisions.
The provision requires a reasonable opportunity of being heard before the penalty order is passed.
Therefore, Section 122 identifies many offences, while Section 127 can provide the procedural route for imposing certain penalties where the matter is not otherwise covered by specified proceedings.
Section 122 and Section 128
Section 128 gives the Government power, on the recommendations of the GST Council, to waive in part or in full certain penalties referred to in Section 122, Section 123 and Section 125, or certain late fees under Section 47, for specified classes of taxpayers and mitigating circumstances through notification.
This is an enabling provision for notification-based waiver or reduction.
It does not mean that a taxpayer can independently waive a Section 122 penalty without an applicable statutory or notified basis.
Section 122 and Section 129
Section 129 deals with detention, seizure and release of goods and conveyances in transit where goods are transported or stored while in transit in contravention of GST provisions.
Section 122, by contrast, is a penalty provision covering specified offences.
The same factual situation can potentially involve more than one GST provision, depending on the statutory requirements.
For example, transportation of taxable goods without prescribed documents can involve Section 122(1)(xiv), while detention and release of goods in transit is separately addressed by Section 129.
Section 122 and Section 130
Section 130 deals with confiscation of goods or conveyances and levy of penalty in the circumstances specified by that section.
Section 122 does not replace Section 130.
A case involving goods liable to confiscation may therefore require examination of both the penalty provisions and the separate confiscation framework, depending on the facts.
Section 122 and Section 132
Section 132 deals with punishment for certain offences and therefore forms part of the criminal-offence framework under the CGST Act.
Section 122 primarily provides civil penalty consequences for specified contraventions.
A particular set of facts may have consequences under more than one provision where the statutory requirements are independently satisfied.
This distinction is important because a penalty under Section 122 and prosecution under Section 132 are not the same legal consequence.
Practical Examples Under Section 122
Example 1 – Invoice Without Supply
A supplier issues a GST invoice for ₹10 lakh but does not actually supply the goods.
The conduct may fall under Section 122(1)(ii).
If another person retains the benefit of the specified transaction and satisfies the requirements of Section 122(1A), that provision may also become relevant.
Example 2 – ITC Without Receipt of Goods
A company receives an invoice but the corresponding goods are never received.
The company nevertheless avails and utilises ITC.
Section 122(1)(vii) may apply, subject to the facts and other applicable provisions.
Example 3 – Failure to Register
A person becomes liable for GST registration but continues taxable business without obtaining registration.
Section 122(1)(xi) may apply.
The person may also become liable for the underlying tax and other applicable consequences.
Example 4 – Suppression of Turnover
A registered person makes taxable supplies of ₹1 crore but deliberately reports only ₹70 lakh with the intention of evading tax.
The conduct may fall under Section 122(1)(xv).
The tax demand and other consequences would depend on the applicable demand and penalty provisions.
Example 5 – Misuse of GSTIN
A person issues invoices using another registered person’s GSTIN.
Section 122(1)(xix) specifically addresses this conduct.
Other consequences may also arise depending on the facts.
Example 6 – Failure to Respond to Summons
A person receives a summons requiring appearance before a central tax officer to give evidence or produce documents but fails to appear.
Section 122(3)(d) may become relevant, subject to the statutory requirements.
Difference Between Tax, Interest and Penalty
Tax, interest and penalty are not the same thing.
Tax
Tax is the underlying GST liability arising from taxable supplies or other applicable provisions.
Interest
Interest generally compensates for delayed payment or arises under specific statutory provisions, such as Section 50.
Penalty
Penalty is a statutory consequence for specified contraventions.
For example, a person may have:
- tax payable;
- interest for delayed payment; and
- penalty under Section 122.
These amounts should therefore not be treated as interchangeable.
Is Section 122 Automatically Applicable for Every GST Mistake?
No.
Section 122 contains specific statutory offences and conditions.
A minor documentation error, an easily rectifiable mistake or a procedural breach without fraudulent intent or gross negligence may need to be considered in light of Section 126.
Similarly, the exact wording of the relevant Section 122 clause must be matched with the facts.
A penalty should therefore be based on the applicable legal provision and the facts of the case rather than merely on the existence of an error.
Important Compliance Measures to Avoid Section 122 Penalties
Businesses can reduce the risk of Section 122 violations by maintaining strong GST controls.
Maintain Proper Invoices
Ensure every taxable supply is supported by a correct invoice wherever required.
Do Not Issue Fake Invoices
An invoice should correspond to an actual underlying supply.
Verify ITC
Claim ITC only when the statutory conditions are satisfied and the relevant goods or services have actually been received where required.
Pay Collected Tax
GST collected from customers should be properly accounted for and paid to the Government within the applicable time.
Maintain GST Records
Keep books, invoices and supporting documents as required under the CGST Act and Rules.
Use the Correct GSTIN
Invoices and GST documents should contain the correct registration particulars.
Comply With E-Way Bill Requirements
Where an e-way bill or other prescribed documents are required for transportation, ensure compliance before movement of goods.
Respond to Lawful Information Requests
Maintain a system for responding to notices, summons and document requests within the applicable period.
Review Registration Requirements
Monitor turnover and other circumstances that may trigger GST registration.
Section 122 – Quick Comparison of Penalty Categories
| Provision | Main category | Broad penalty consequence |
|---|---|---|
| Section 122(1) | 21 specified offences by taxable person | ₹10,000 or relevant amount, whichever is higher |
| Section 122(1A) | Person retaining benefit of specified transactions and at whose instance conducted | Amount equivalent to tax evaded or ITC availed/passed on |
| Section 122(1B) | Specified ECO contraventions | ₹10,000 or specified tax amount, whichever is higher |
| Section 122(2)(a) | Non-fraud tax/ITC cases | ₹10,000 or 10% of tax due, whichever is higher |
| Section 122(2)(b) | Fraud/wilful misstatement/suppression cases | Penalty equal to tax due |
| Section 122(3) | Other specified persons/acts | May extend to ₹25,000 |
The exact application of each provision depends on the statutory requirements and facts of the case.
Key Takeaways of Section 122
Section 122 is one of the most important penalty provisions under GST. The key points are:
- Section 122 is contained in Chapter XIX of the CGST Act.
- It deals with penalties for certain specified offences.
- Section 122(1) contains 21 specified offences.
- These offences cover invoicing, tax payment, TDS, TCS, ITC, refunds, registration, records, transportation and other GST compliance areas.
- The basic penalty under Section 122(1) is ₹10,000 or the relevant amount specified in the provision, whichever is higher.
- Section 122(1A) covers persons who retain the benefit of specified transactions and at whose instance those transactions are conducted.
- Section 122(1A) specifically refers to transactions covered by clauses (i), (ii), (vii) and (ix) of Section 122(1).
- Section 122(1B) covers specified contraventions by electronic commerce operators liable to collect TCS under Section 52.
- Section 122(1B) was introduced in connection with the compliance framework for supplies through ECOs by specified unregistered persons and composition taxpayers.
- The applicability of Section 122(1B) was retrospectively restricted to ECOs liable to collect TCS under Section 52 with effect from 1 October 2023.
- Section 122(2) deals with tax not paid, short-paid, erroneously refunded or wrongful ITC involving registered persons.
- Section 122(2)(a) applies to specified non-fraud cases.
- Section 122(2)(b) applies where fraud, wilful misstatement or suppression of facts to evade tax is involved.
- Section 122(3) applies to specified conduct by any person, including aiding or abetting.
- Section 122(3) also covers certain persons dealing with goods or services in contravention of GST law.
- Failure to appear after a relevant summons can attract Section 122(3)(d).
- Failure to issue or properly account for an invoice can attract Section 122(3)(e).
- The maximum penalty under Section 122(3) may extend to ₹25,000.
- Section 126 provides general disciplines relating to GST penalties.
- No penalty should be imposed without giving the person an opportunity of being heard.
- Section 122 should be distinguished from Section 125, which provides a general penalty where no separate penalty is prescribed.
- Section 122 should also be distinguished from Section 132, which deals with punishment for certain offences.
- Section 129 and Section 130 provide separate frameworks concerning detention and confiscation.
- Proper GST invoicing, ITC verification, record maintenance, registration compliance and timely payment of tax are important safeguards against Section 122 penalties.
👉 Read More → Section 121 – Non-appealable decisions and orders
Conclusion
Section 122 of the CGST Act provides a detailed framework for imposing penalties for several important GST offences and compliance failures. It covers a wide range of conduct, beginning with incorrect or missing invoices and extending to fake invoices, non-payment of collected tax, TDS and TCS defaults, wrongful ITC, fraudulent refunds, failure to register, suppression of turnover, record-keeping failures, transportation without prescribed documents and misuse of another person’s GST registration number.
The provision is not limited to the person who directly commits a GST violation. Section 122(1A) can apply to a person who retains the benefit of specified transactions and at whose instance the transaction is conducted. Section 122(1B) separately addresses specified contraventions by electronic commerce operators that are liable to collect tax at source under Section 52. Section 122(3) also covers persons who aid or abet specified offences, deal with goods or services in specified circumstances, fail to appear pursuant to relevant summons, or fail to issue or account for invoices.
For registered persons, Section 122(2) is particularly important where tax has not been paid or has been short-paid, a refund has been erroneously obtained, or input tax credit has been wrongly availed or utilised. The provision distinguishes between cases other than fraud, wilful misstatement or suppression of facts and cases involving those circumstances, resulting in different penalty consequences.
At the same time, Section 122 should not be read in isolation. Section 126 provides general disciplines relating to penalties, including proportionality and the requirement of an opportunity of being heard. Other provisions such as Sections 125, 127, 128, 129, 130 and 132 deal with different aspects of penalties, waivers, recovery, detention, confiscation and punishment.
For businesses, the most effective way to reduce Section 122 exposure is to maintain accurate invoices and records, claim only eligible ITC, ensure tax collected is properly paid, comply with registration and transportation requirements, use the correct GSTIN and respond properly to lawful GST proceedings. Section 122 therefore serves as a central penalty provision designed to address specified GST violations while operating alongside the broader assessment, demand, recovery and prosecution provisions of the CGST Act.
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