Section 122 – Penalty for Certain Offences

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Section 122 of CGST Act, 2017 – Penalty for Certain Offences

Updated on: February 2026 (as applicable till date)
Prepared by: Yours Tax Consultant

1. Objective of Section 122

Section 122 prescribes penalties for specified offences committed under GST law.

The provision aims to:

  • Prevent tax evasion
  • Discourage fake invoicing
  • Protect input tax credit system
  • Ensure compliance with GST provisions

2. Statutory Provision – Section 122(1)

A taxable person committing specified offences shall be liable to:

Penalty of ₹10,000 or an amount equivalent to the tax evaded, tax not deducted, tax not collected, input tax credit wrongly availed or utilized, or refund wrongly taken, whichever is higher.

3. Major Offences Covered under Section 122(1)

  • Supply without issuing invoice
  • Issuing invoice without actual supply (fake invoice)
  • Collecting tax but not paying to Government
  • Wrong availment or utilization of ITC
  • Fraudulent refund claims
  • Failure to deduct or collect TDS/TCS
  • Suppression of turnover
  • Failure to obtain registration
  • Furnishing false information
  • Transporting goods without prescribed documents

4. Section 122(1A) – Beneficiary of Fake Invoice Transactions

Any person who:

  • Retains benefit of fake invoice transactions, or
  • Causes commission of fake invoice offences

shall be liable to penalty equal to the tax evaded or ITC wrongly passed on.

This provision targets fake ITC rackets and bogus billing chains.

5. Section 122(2) – Penalty in Tax Short Payment Cases

Where tax is:

  • Not paid
  • Short paid
  • Erroneously refunded
  • ITC wrongly availed/utilized

Penalty shall apply as per:

  • Section 73 (non-fraud cases), or
  • Section 74 (fraud/suppression cases)

6. Section 122(3) – Penalty on Other Persons

Any person who:

  • Aids or abets GST offence
  • Deals with confiscable goods
  • Receives goods liable for confiscation
  • Fails to appear before GST authority

may be liable to penalty up to ₹25,000.

7. Quantum of Penalty – Summary Table

Nature of Offence Penalty
Tax evasion / fake invoice ₹10,000 or tax amount, whichever is higher
Beneficiary of fake ITC Equal to tax involved
Aiding or abetting offence Up to ₹25,000

8. Important Legal Principles

Penalty proceedings must comply with:

  • Principles of natural justice
  • Proper issuance of Show Cause Notice
  • Opportunity of hearing
  • Reasoned adjudication order

Penalty cannot be imposed mechanically.

9. Practical Examples

Example 1:
Issuing fake invoices without supply may attract penalty equal to tax involved.

Example 2:
Wrong ITC claim using bogus invoices can attract penalty under Section 122(1) and 122(1A).

Example 3:
Transporter moving goods without documents may face penalty under Section 122(3).

10. Section 122 vs Section 73 & 74

Section 73 Section 74 Section 122
Non-fraud demand cases Fraud/suppression cases Specific offences and penalties

11. Related Provisions

12. Professional Insight

Section 122 is one of the most powerful enforcement provisions under GST. It is heavily used in fake invoicing, bogus ITC and tax evasion investigations. However, penalties must always be supported by proper evidence, due process and legally sustainable findings.

Disclaimer: This article is prepared based on the CGST Act, 2017 and prevailing legal position as applicable till date. Penalty provisions and judicial interpretation may evolve through amendments and court rulings.

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