Section 122A of the Central Goods and Services Tax Act, 2017 provides a specific penalty for failure to register certain machines used in the manufacture of specified goods in accordance with a special procedure notified under Section 148.
The provision was inserted to strengthen compliance and monitoring for manufacturers of specified goods where the Government has prescribed a special machine-registration procedure. Under the current law, a person covered by the notified special procedure who contravenes it is liable to a penalty of ₹1 lakh for every machine that is not registered. In addition, the unregistered machine is liable to seizure and confiscation, subject to the statutory exception available when the penalty is paid and the machine is registered within the prescribed three-day period after communication of the penalty order.
Section 122A is therefore different from the general penalty provisions under Section 122. It is a specific penalty provision linked directly to the special machine-registration procedure notified under Section 148.
What Is Section 122A of the CGST Act?
Section 122A is titled:
“Penalty for failure to register certain machines used in manufacture of goods as per special procedure.”
The provision contains two sub-sections.
Section 122A(1)
It provides a penalty of ₹1 lakh for every machine not so registered where:
- a person is engaged in the manufacture of goods;
- a special procedure relating to registration of machines has been notified under Section 148 for those goods; and
- the person acts in contravention of that special procedure.
The penalty under Section 122A is in addition to any penalty that may be payable under Chapter XV or other provisions of Chapter XIX of the CGST Act.
Section 122A(2)
In addition to the monetary penalty, every machine that has not been registered is liable to seizure and confiscation.
However, the machine will not be confiscated if:
- the penalty imposed under Section 122A is paid; and
- registration of the machine is completed in accordance with the special procedure within three days of receipt of communication of the penalty order.
Why Was Section 122A Introduced?
Section 122A was introduced to create a specific statutory penalty for manufacturers who fail to comply with a special procedure requiring registration or declaration of manufacturing machines.
The GST Council had considered additional measures for commodities considered vulnerable to tax evasion, including stronger machine-level monitoring and identification. The Council’s agenda records specifically note the recommendation for a separate penalty for running an unregistered machine and the proposal to insert Section 122A in addition to the existing Section 122 penalties.
The provision was inserted by the Finance Act, 2024, with effect from 1 October 2024.
The important point is that Section 122A does not independently require every manufacturer in India to register every machine.
The section operates only where a special procedure relating to registration of machines has been notified under Section 148 for the relevant goods.
Connection Between Section 122A and Section 148
Section 122A cannot be properly understood without Section 148.
Section 148 enables the Government, on the recommendation of the GST Council, to notify a special procedure for specified classes of registered persons in relation to:
- registration;
- maintenance of accounts;
- other documents;
- returns;
- or other specified matters.
Section 122A specifically refers to a special procedure relating to registration of machines notified under Section 148.
Therefore, the structure is:
Section 148 → Special procedure
Special procedure → Machine registration requirement
Section 122A → Penalty for contravention
This means the scope of Section 122A depends upon the goods and manufacturers covered by the relevant Section 148 notification.
Who Can Be Liable Under Section 122A?
Section 122A applies to a person engaged in the manufacture of goods where a special machine-registration procedure has been notified for those goods.
Therefore, the following conditions need to be considered:
| Condition | Requirement |
|---|---|
| Manufacturer | Person must be engaged in manufacture of the specified goods |
| Special procedure | A special procedure relating to machine registration must be notified under Section 148 |
| Covered goods | The goods must fall within the scope of the relevant notification |
| Contravention | The person must act in contravention of that special procedure |
| Unregistered machine | The penalty is linked to each machine not registered |
A person should therefore not assume that Section 122A applies merely because the person operates manufacturing machinery.
The relevant Section 148 notification must first be examined.
₹1 Lakh Penalty for Every Unregistered Machine
The most important monetary consequence under Section 122A is the penalty of:
₹1,00,000 for every machine not registered.
The penalty is machine-specific.
Example
Suppose a manufacturer has:
- 1 unregistered machine → ₹1 lakh penalty
- 2 unregistered machines → ₹2 lakh penalty
- 5 unregistered machines → ₹5 lakh penalty
- 10 unregistered machines → ₹10 lakh penalty
The statutory wording uses the expression “for every machine not so registered.” Therefore, the penalty is not a single flat amount for the entire manufacturing unit.
Example of Section 122A
Suppose a manufacturer covered by a Section 148 special procedure has 8 machines that are required to be registered.
The manufacturer registers 6 machines but fails to register 2 machines.
If the failure constitutes a contravention of the notified special procedure, Section 122A(1) can result in a penalty of:
2 × ₹1,00,000 = ₹2,00,000
The two unregistered machines may also be liable to seizure and confiscation under Section 122A(2), subject to the statutory exception for payment of penalty and registration within three days of communication of the penalty order.
Penalty Is in Addition to Other Penalties
Section 122A(1) begins with a “Notwithstanding anything contained in this Act” clause and expressly states that the penalty is payable in addition to any penalty that is paid or payable under:
- Chapter XV; or
- other provisions of Chapter XIX.
This means Section 122A is not designed as a replacement for every other GST penalty.
Where the facts also attract another applicable penalty provision, the consequences must be examined separately under the relevant provision.
This is an important distinction because Section 122A creates a specific consequence for machine-registration contraventions, while other GST provisions address different defaults.
Seizure and Confiscation of the Unregistered Machine
Section 122A(2) introduces an additional consequence beyond the ₹1 lakh penalty.
It states that every machine that is not registered is liable for:
- seizure; and
- confiscation.
Therefore, non-registration can affect the machine itself, not merely the manufacturer’s financial liability.
This makes Section 122A substantially more significant than a provision imposing only a monetary penalty.
When Will the Machine Not Be Confiscated?
The proviso to Section 122A(2) provides an important exception.
The machine will not be confiscated where both of the following conditions are satisfied:
- the penalty imposed under Section 122A is paid; and
- registration of the machine is made in accordance with the special procedure within three days of receipt of communication of the penalty order.
Both conditions are important.
Paying the penalty alone does not satisfy the proviso.
Similarly, registering the machine without paying the imposed penalty does not satisfy both requirements.
Three-Day Registration Window
The three-day period is specifically linked to the receipt of communication of the order of penalty.
The statutory language does not simply say three days from the date of the penalty order.
Therefore, the taxpayer should carefully maintain evidence of when the penalty order was communicated or received, as this can become relevant to determining compliance with the three-day requirement.
Example
Suppose a penalty order is communicated to the manufacturer on Monday.
The manufacturer pays the penalty and completes the required machine registration within the applicable three-day period.
Subject to compliance with the other requirements, the machine falls within the proviso that prevents confiscation.
Section 122A and the Special Procedure for Specified Manufacturers
A significant practical application of Section 122A is the special procedure notified for manufacturers of specified commodities such as pan masala, chewing tobacco and related tobacco products.
The GST Council records that Notification No. 04/2024-Central Tax dated 5 January 2024 prescribed a revised special procedure for registered manufacturers of specified goods. The implementation was subsequently extended, and the procedure became applicable from 15 May 2024.
The special procedure includes machine-related reporting and requires manufacturers to furnish information through prescribed forms, including:
- FORM GST SRM-I for registration and disposal of packing machines; and
- FORM GST SRM-II for monthly details of inputs and outputs.
Section 122A provides the statutory penalty mechanism for contravention of a machine-registration special procedure of this type.
What Is FORM GST SRM-I?
Under the special procedure for the specified manufacturers, FORM GST SRM-I is used for information relating to the registration and disposal of packing machines.
The GST Council’s published material confirms that the form covers machine-related information and that the procedure requires manufacturers to furnish details of their machines.
The Council’s clarification also states that the machine number is mandatory in the relevant table of FORM GST SRM-I.
Where the machine number is not available on the machine or in available documents or records, the manufacturer may assign a numeric number to the machine and provide that information in the form.
Make and Model Number of the Machine
The GST Council’s clarification on the special procedure states that the make and model number are optional in the relevant table of FORM GST SRM-I.
Where the make of an old machine is unavailable, the year of purchase may be declared as the make number.
Where the machine number itself is unavailable, a numeric number may be assigned to the machine in accordance with the clarification.
This is particularly relevant for manufacturers using old or second-hand machinery.
Electricity Consumption Rating
The special procedure also requires information relating to the electricity consumption rating of the packing machine.
The GST Council’s clarification states that the rating should be declared based on information available on the machine or in the relevant documents or records.
Where the information is not available, the manufacturer may have the consumption per hour calculated by a Chartered Engineer and certified in the prescribed FORM GST SRM-III format. The certificate is to be uploaded with FORM GST SRM-I as specified.
Which Machine Has to Be Registered?
A manufacturing process may involve several machines.
For example:
- one machine may fill containers;
- another may place a seal; and
- another may perform final packing.
The GST Council’s clarification states that, under the specified special procedure, the machine required to be reported in the relevant table of FORM GST SRM-I is the machine being used for final packing of the specified goods.
This clarification is important because a manufacturer may otherwise assume that every machine involved at every stage of the manufacturing process must necessarily be reported under the same machine-registration requirement.
The exact requirement must be determined from the applicable special procedure and its clarifications.
Manual Seamer and Sealer
The GST Council has also clarified that the special procedure notified through Notification No. 04/2024-Central Tax does not apply to manual seamers or sealers used for packing operations.
It is also not applicable to manual packing operations such as post-harvest packing of tobacco leaves.
Therefore, a manufacturer should examine the nature of the equipment and process before concluding that a particular machine falls within the special procedure.
Job Worker and Contract Manufacturer
The special procedure is also relevant in cases involving job work and contract manufacturing.
The GST Council’s clarification states that the special procedure applies to persons involved in the manufacturing process, including a job worker or contract manufacturer.
Where the job worker or contract manufacturer is unregistered, the responsibility for complying with the special procedure lies with the concerned principal manufacturer.
This is important because the responsibility cannot simply be ignored by saying that production is being carried out through a third party.
The applicable facts and registration status of the parties need to be examined.
Special Economic Zone Units
The GST Council’s clarification states that the special procedure under Notification No. 04/2024-Central Tax is not applicable to manufacturing units located in Special Economic Zones.
Therefore, the applicability of Section 122A in a particular case still depends on whether the manufacturer and goods are actually covered by the relevant Section 148 special procedure.
Section 122A Is Not a General Machine Registration Law
One of the most important points to understand is that Section 122A does not create a general requirement for every GST-registered manufacturer to register every machine.
The section is conditional.
It applies where:
- specified goods are covered by a special procedure;
- that procedure includes registration of machines; and
- the manufacturer contravenes the procedure.
The GST Council’s own discussion of Section 122A links the penalty to the special procedure notified under Section 148.
Therefore, a manufacturer should first identify the applicable notification before applying Section 122A.
Section 122A and Notification No. 04/2024-Central Tax
Notification No. 04/2024-Central Tax was issued on 5 January 2024 to prescribe a special procedure for registered persons engaged in manufacturing certain specified goods.
The GST Council records that the notification replaced the earlier Notification No. 30/2023-Central Tax and was subsequently accompanied by Notification No. 08/2024-Central Tax, which extended the implementation timeline to 15 May 2024.
The procedure was designed around greater visibility of manufacturing operations, including machine registration and monthly reporting.
Why Machine-Level Information Matters
Machine-level information can help tax administration understand the manufacturing capacity and production activity of specified manufacturers.
The GST Council’s earlier discussions on the special procedure included proposals for:
- machine-wise production records;
- shift-wise production;
- machine additions and disposals;
- inputs procured and utilised;
- product-wise and brand-wise clearances;
- electricity consumption records; and
- unique identification of manufactured packages.
Section 122A forms part of the broader statutory framework supporting compliance with such special procedures.
👉 Read More → Section 123 – Penalty for failure to furnish information return
Section 122A and Tax Evasion Risk
The specific machine-registration penalty is particularly relevant to sectors where production capacity and manufacturing output can be important for tax administration.
The GST Council’s discussions leading to Section 122A specifically considered the need for a separate penalty for non-declaration or non-registration of machines in addition to the existing penalty provisions under Section 122.
However, Section 122A itself does not establish that every failure to register a machine automatically constitutes tax evasion.
Its immediate statutory consequence is the specified penalty and the seizure/confiscation framework for the machine where the special procedure has been contravened.
Section 122A vs Section 122
Section 122 contains a broad range of penalties for specified GST offences.
Section 122A is narrower and specifically addresses machine-registration contraventions under a Section 148 special procedure.
| Basis | Section 122 | Section 122A |
|---|---|---|
| Nature | Various GST offences | Machine-registration contravention |
| Scope | Multiple offences | Specific special procedure |
| Machine-specific penalty | Not generally structured this way | ₹1 lakh per unregistered machine |
| Connection with Section 148 | Not the central feature | Directly linked |
| Seizure/confiscation of machine | Not the defining consequence | Specifically provided |
| Additional penalty | Depends on relevant clause | Expressly in addition to other applicable penalties |
Section 122A therefore operates as a special penalty provision rather than a replacement for Section 122.
Section 122A vs Section 125
Section 125 provides a general penalty where a person contravenes the CGST Act or Rules and no separate penalty is provided.
Section 122A, in contrast, specifically provides a penalty for the covered machine-registration contravention.
Therefore, where Section 122A specifically applies, the existence of the specific provision is important when determining the applicable penalty framework.
The GST Council’s legislative discussion specifically noted that before the introduction of Section 122A, Section 125 could be invoked for certain such contraventions, while the proposed Section 122A would create a dedicated penalty provision.
Section 122A and Section 126
Section 126 contains general disciplines relating to penalties, including provisions concerning:
- minor breaches;
- proportionality of penalty;
- opportunity of being heard; and
- specification of the nature of breach and applicable law in the penalty order.
Section 122A itself contains a specific penalty amount and special consequences for an unregistered machine.
Accordingly, the penalty provisions should be read together with the general statutory framework governing the imposition of penalties.
Opportunity of Being Heard
Section 126(3) provides that no penalty shall be imposed under the CGST Act without giving the person an opportunity of being heard.
Therefore, the specific penalty under Section 122A should also be considered within the broader procedural safeguards applicable to penalties under the CGST Act.
A manufacturer facing a Section 122A proceeding should carefully examine the notice or order, the machine details, the relevant Section 148 notification and the alleged contravention.
Practical Compliance Checklist for Manufacturers
Manufacturers covered by a machine-registration special procedure should maintain a clear machine-wise compliance system.
1. Identify the Applicable Goods
Check whether the goods manufactured by the business are covered by the relevant Section 148 notification.
2. Identify the Applicable Machines
Determine which machines are required to be registered under the notified special procedure.
3. Maintain Machine Details
Maintain records of:
- machine number;
- make;
- model;
- purchase details;
- installation;
- capacity;
- electricity consumption information;
- disposal or removal; and
- other details required by the applicable procedure.
4. File the Prescribed Forms
Where applicable, submit the prescribed machine-registration and other returns or information within the required time.
For the special procedure discussed above, FORM GST SRM-I and FORM GST SRM-II are relevant.
5. Update Machine Changes
Machines that are added, removed, disposed of or otherwise changed should be dealt with according to the applicable special procedure.
6. Maintain Supporting Documents
Keep purchase documents, machine records, technical certificates and other supporting material.
7. Check Job Work Arrangements
If manufacturing is undertaken through a job worker or contract manufacturer, determine which party is responsible for compliance.
8. Respond Promptly to Any Penalty Order
If a Section 122A penalty is imposed, examine the statutory three-day requirement for registration if the business intends to rely on the proviso against confiscation.
What Happens If a Machine Is Not Registered?
Where a covered manufacturer contravenes the applicable special procedure, Section 122A may result in:
₹1 lakh penalty × number of unregistered machines
In addition, the unregistered machine is liable to seizure and confiscation.
However, the machine will not be confiscated where the penalty is paid and the machine is registered according to the special procedure within three days of receipt of communication of the penalty order.
Example – Three Unregistered Machines
Suppose a covered manufacturer has three machines that should have been registered under the applicable special procedure.
All three remain unregistered and the contravention is established.
The Section 122A penalty would be:
3 × ₹1,00,000 = ₹3,00,000
Each unregistered machine would also be subject to the seizure and confiscation provisions of Section 122A(2), subject to the proviso.
Example – Penalty Paid and Machines Registered
Suppose a manufacturer receives a Section 122A penalty order covering two unregistered machines.
The manufacturer:
- pays the imposed penalty; and
- registers both machines according to the special procedure within three days of receiving communication of the penalty order.
The proviso to Section 122A(2) provides that the machines shall not be confiscated where these conditions are satisfied.
Example – Penalty Paid but Registration Not Completed
Suppose the manufacturer pays the penalty but does not complete the required machine registration within the specified three-day period.
The manufacturer has not satisfied both conditions of the proviso.
Therefore, payment of the penalty by itself does not provide the statutory protection from confiscation.
Example – Registration Completed but Penalty Not Paid
The same principle applies in reverse.
If the manufacturer registers the machine but does not pay the penalty imposed under Section 122A, both conditions of the proviso are not fulfilled.
The manufacturer should therefore treat the payment and registration requirements separately and ensure compliance with both.
Important Distinction: Machine Registration and GST Registration
The phrase “registration” in Section 122A can be misunderstood.
Section 122A concerns registration of certain manufacturing machines under a special procedure.
It is not referring to the normal GST registration of a taxable person under Sections 22 to 30.
Therefore:
GST registration = registration of the person/business
Machine registration = registration or declaration of covered machinery under a special procedure
The two are separate compliance requirements.
Section 122A and GSTIN
A manufacturer may already have a valid GST registration and GSTIN.
That does not automatically mean that the manufacturer has fulfilled a separate machine-registration requirement under a Section 148 special procedure.
Where the special procedure applies, the machine-related compliance must be completed separately in the prescribed manner.
Section 122A and Machine Disposal
Where the applicable special procedure requires reporting of machine disposal, manufacturers should maintain evidence relating to the disposal.
For the special procedure applicable to specified pan masala and tobacco manufacturers, the GST Council identifies FORM GST SRM-I as the form concerning registration and disposal of packing machines.
This helps ensure that the GST portal information remains aligned with the actual machinery installed and operated by the manufacturer.
Section 122A and Old Machines
The age of a machine does not automatically remove a covered machine from the special procedure.
The GST Council specifically considered representations concerning old and second-hand packing machines.
Its clarification states that where the machine number is unavailable, the manufacturer may assign a numeric number and report it in FORM GST SRM-I.
Therefore, manufacturers using old equipment should maintain proper records rather than assuming that older machines are outside the reporting framework.
Section 122A and Second-Hand Machines
Second-hand machinery can also be relevant where it falls within the scope of the applicable special procedure.
The GST Council specifically discussed manufacturers using old and second-hand packing machines and clarified how machine details may be reported when certain information is unavailable.
The compliance obligation should therefore be determined by the notified procedure rather than by the age or ownership history of the machine alone.
Key Takeaways of Section 122A
Section 122A can be summarised through the following points:
- Section 122A provides a specific penalty for failure to register certain machines.
- It applies to persons engaged in manufacturing goods covered by a special procedure notified under Section 148.
- The special procedure must relate to registration of machines.
- The penalty is ₹1 lakh for every machine not registered.
- The penalty is in addition to other penalties that may be applicable under the CGST Act.
- Every unregistered machine is also liable to seizure and confiscation.
- There is a statutory exception to confiscation.
- The penalty must be paid to satisfy the first condition of that exception.
- The machine must also be registered according to the special procedure.
- Registration must be completed within three days of receipt of communication of the penalty order.
- Payment of the penalty alone is not sufficient for the statutory exception.
- Registration alone is also not sufficient.
- Section 122A is not a general requirement to register every machine used by every manufacturer.
- Its application depends on the relevant Section 148 special procedure.
- The provision was inserted with effect from 1 October 2024.
- A major practical application is the special procedure for specified manufacturers such as pan masala and tobacco products.
- Notification No. 04/2024-Central Tax introduced the revised special procedure for specified manufacturers, with implementation extended to 15 May 2024.
- FORM GST SRM-I deals with registration and disposal of relevant packing machines.
- FORM GST SRM-II deals with monthly input and output information under the specified procedure.
- The exact applicability of the special procedure must be checked against the relevant notification and its amendments or clarifications.
👉 Read More → Section 121 – Non-appealable decisions and orders
Conclusion
Section 122A of the CGST Act creates a specific and substantial penalty for manufacturers who fail to comply with a notified special procedure relating to registration of certain machines.
The provision is important because it goes beyond a normal monetary penalty. A person covered by the relevant Section 148 special procedure can face a penalty of ₹1 lakh for every machine that is not registered, and the unregistered machine can also become liable to seizure and confiscation.
At the same time, the law provides an important statutory exception to confiscation. If the penalty imposed under Section 122A is paid and the machine is registered in accordance with the special procedure within three days of receipt of communication of the penalty order, the machine is not to be confiscated under the proviso to Section 122A(2).
Section 122A should not be misunderstood as a general requirement applicable to every manufacturing machine in India. Its operation depends on a special procedure notified under Section 148 for the manufacture of specified goods.
The provision has particular practical relevance to special compliance procedures for specified commodities such as pan masala and tobacco products. The GST Council records that Notification No. 04/2024-Central Tax prescribed a revised special procedure involving machine registration and reporting through forms such as FORM GST SRM-I and FORM GST SRM-II, with implementation from 15 May 2024 after the timeline was extended.
For manufacturers covered by such a procedure, machine-wise compliance is therefore important. Businesses should identify the applicable machines, maintain accurate machine records, complete the prescribed registration and reporting requirements, and carefully monitor any changes in machinery, including additions and disposals.
In short, Section 122A links machine-level compliance with a specific statutory penalty framework, making it important for manufacturers operating under a Section 148 special procedure to ensure that every covered machine is properly reported and registered.
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