CGST Act · Chapter XIX
Offences and Penalties
s. 122Penalty for certain offences
Section 122 is the main penalty provision. It lists offences such as supply without invoice, invoices without supply, wrongful credit and refund, and fixes the penalty — usually the higher of Rs. 10,000 and the tax involved. Since 2021 it also reaches the person who benefits from and directs a fake-invoice transaction.
- Under section 122(1) of the CGST Act, 2017 a taxable person who commits any of twenty-one listed offences — including supply without invoice, invoice without supply, collecting tax and not paying it, wrongful availment of credit or refund, and false returns — is liable to a penalty of Rs. 10,000 or the tax evaded or credit or refund wrongly taken, whichever is higher.
- From 01.01.2021, any person who retains the benefit of a transaction under clauses (i), (ii), (vii) or (ix) and at whose instance it is conducted is liable to a penalty equal to the tax evaded or credit availed or passed on (section 122(1A)).
- From 01.10.2023, an e-commerce operator liable to collect tax at source that allows a supply through it by an unregistered person not exempted from registration, or an inter-State supply by a person not eligible to make one, or fails to report correctly supplies by persons exempted from registration, is liable to the higher of Rs. 10,000 and the tax involved (section 122(1B), as substituted retrospectively by the Finance (No. 2) Act, 2024).
- A registered person who short pays tax is liable to 10% of tax (minimum Rs. 10,000), or to the tax due where fraud or suppression is involved (section 122(2)).
- Abetting offences, dealing in goods liable to confiscation, failing to appear on summons, and failing to issue or account for invoices attract a penalty of up to Rs. 25,000 (section 122(3)).
s. 123Penalty for information return failure
Section 123 enforces the duty of banks, registrars and other authorities to file information returns under section 150.
- Under section 123 of the CGST Act, 2017 a person required to furnish an information return under section 150 who fails to do so within the period in the notice may be directed to pay a penalty of Rs. 100 for each day of continued default, up to Rs. 5,000.
s. 124Fine for statistics failure
Section 124 punishes failure to provide statistical information that the Commissioner calls for under section 151.
- Under section 124 of the CGST Act, 2017 a person who without reasonable cause fails to furnish information or a return under section 151, or wilfully furnishes false information, is punishable with a fine of up to Rs. 10,000, and for a continuing offence up to Rs. 100 a day, subject to a maximum of Rs. 25,000.
s. 125General penalty
Section 125 is the residuary penalty: it applies only where no other provision prescribes a penalty for the contravention.
- Under section 125 of the CGST Act, 2017 a person who contravenes the Act or rules, where no separate penalty is provided, is liable to a penalty of up to Rs. 25,000 under each of the CGST and SGST Acts.
s. 126General disciplines
Section 126 is a charter for proportionate penalties. It bars penalties for minor, rectifiable mistakes made without fraud, and requires every penalty to fit the breach, to follow a hearing and to be reasoned.
- Under section 126(1) of the CGST Act, 2017 no penalty may be imposed for minor breaches of tax regulations or procedural requirements, especially easily rectifiable documentation errors made without fraudulent intent or gross negligence. A breach is minor if the tax involved is less than Rs. 5,000; a mistake is easily rectifiable if it is an error apparent on the face of the record.
- The penalty must depend on the facts and be commensurate with the severity of the breach; no penalty without a hearing; the order must specify the breach and the provision (section 126(2)–(4)).
- Voluntary disclosure before discovery may be treated as a mitigating factor (section 126(5)).
- The section does not apply where the Act fixes the penalty as a fixed sum or fixed percentage (section 126(6)).
s. 127Power to impose penalty
Section 127 provides the procedure for imposing penalties that arise outside assessment, demand, detention or confiscation proceedings.
- Under section 127 of the CGST Act, 2017, where a person is liable to a penalty not covered by proceedings under section 62, 63, 64, 73, 74, 74A, 129 or 130, the proper officer may issue an order levying the penalty after giving a reasonable opportunity of being heard.
s. 128Power to waive
Section 128 is the power behind the late fee waivers and amnesties issued since 2017.
- Under section 128 of the CGST Act, 2017 the Government, on the recommendations of the Council, may by notification waive in whole or part any penalty under section 122, 123 or 125, or late fee under section 47, for a class of taxpayers in specified mitigating circumstances.
s. 128AFA 2024 Amnesty
Section 128A is the GST amnesty of 2024. For non-fraud demands for the first three years of GST, a taxpayer who pays the full tax by the notified date gets interest and penalty waived and the proceedings closed.
- Under section 128A(1) of the CGST Act, 2017, for demands under section 73 for the period 01.07.2017 to 31.03.2020 — at the notice stage, after the order, or after the first appellate or revisional order — interest and penalty are waived if the full tax demanded is paid by the notified date, and the proceedings are then concluded.
- The notified date was 31.03.2025; where the tax arises from an appellate or revisional order, payment is due within six months of that order (Notification 21/2024-Central Tax; Rule 164).
- It also covers section 74 notices that an appellate authority or court holds must be redetermined under section 73 (first proviso).
- It excludes demands for erroneous refunds (section 128A(2)), and requires any appeal or writ petition to be withdrawn (section 128A(3)); no appeal lies once the benefit is availed, and amounts already paid are not refunded.
- The section came into force on 01.11.2024 (Finance (No. 2) Act, 2024).
s. 129Detention
Section 129 lets officers stop goods moving in breach of the Act — typically without a valid e-way bill or invoice — and release them only on payment of a penalty or security. Since 2022 it is a penalty-only provision with tight timelines, and courts have refused to treat technical lapses as evasion.
- Under section 129(1) of the CGST Act, 2017 goods transported or stored in transit in contravention of the Act, with the conveyance and documents, may be detained or seized, and are released on payment of penalty or furnishing equivalent security.
- From 01.01.2022 the penalty is 200% of the tax payable where the owner comes forward, and the higher of 50% of the value and 200% of the tax where the owner does not; for exempted goods, 2% or 5% of value respectively, capped at Rs. 25,000.
- A notice must issue within seven days of detention and an order within seven days of its service; no penalty without a hearing (section 129(3)–(4)).
- If the penalty is not paid within fifteen days of the order, the goods or conveyance may be sold; a conveyance is released on the transporter paying the penalty or Rs. 1 lakh, whichever is less (section 129(6)).
- In Assistant Commissioner (ST) v Satyam Shivam Papers (2022) the Supreme Court upheld the quashing of a penalty where an e-way bill expired because traffic was blocked, holding that evasion cannot be presumed from such a lapse.
s. 130Confiscation
Section 130 is the most severe consequence for goods: confiscation. It requires intent to evade, or unaccounted goods, or supply without registration, and the owner can redeem the goods by paying a fine.
- Under section 130(1) of the CGST Act, 2017 goods or conveyances are liable to confiscation, and the person to penalty under section 122, where the person supplies or receives goods in contravention with intent to evade tax, does not account for goods on which tax is payable, supplies taxable goods without applying for registration, contravenes the Act with intent to evade, or uses a conveyance in contravention (unless the owner proves lack of knowledge).
- The owner must be given the option to pay a fine in lieu of confiscation, not exceeding the market value less tax; the aggregate of fine and penalty must be at least 100% of the tax payable (section 130(2), as amended from 01.01.2022).
- A conveyance used for hire may be redeemed on a fine equal to the tax on the goods (third proviso).
- No order without a hearing; on confiscation title vests in the Government (section 130(4)–(5)).
s. 131Confiscation not to interfere
Section 131 makes clear that departmental confiscation or penalty and criminal punishment can go together.
- Under section 131 of the CGST Act, 2017, without prejudice to the Code of Criminal Procedure, no confiscation or penalty under the Act prevents any other punishment to which the person is liable under the Act or any other law.
s. 132Prosecution
Section 132 lists the GST offences and their punishments. Since 01.10.2023 the prosecution threshold is Rs. 2 crore for most offences, but Rs. 1 crore for issuing invoices without supply.
- Under section 132(1) of the CGST Act, 2017 offences include supply without invoice to evade tax, invoices without supply, availing credit on such invoices or without any invoice, collecting tax and not paying it for three months, other evasion or fraudulent refund, falsification of records, dealing in goods liable to confiscation, and attempts or abetment.
- Punishment: imprisonment up to five years and fine where the amount exceeds Rs. 5 crore; up to three years for Rs. 2–5 crore; up to one year for invoices without supply involving Rs. 1–2 crore; up to six months for falsification of records (section 132(1)(i)–(iv)).
- From 01.10.2023 the Finance Act, 2023 omitted the offences of obstructing officers, tampering with evidence and failing to supply information, and raised the general threshold from Rs. 1 crore to Rs. 2 crore.
- Offences under clauses (a)–(d) above Rs. 5 crore are cognizable and non-bailable; all others are non-cognizable and bailable (section 132(4)–(5)); prosecution needs the Commissioner's sanction (section 132(6)).
- Since 01.01.2021 the section also covers whoever "causes to commit and retains the benefits" of the offences.
s. 133Liability of officers
Section 133 protects taxpayer information by punishing unauthorised disclosure by those who handle it.
- Under section 133(1) of the CGST Act, 2017 a person engaged in collecting statistics under section 151, an officer with access to information under section 150, or a person employed with the common portal service provider, who discloses such information without authority, is punishable with imprisonment up to six months, fine up to Rs. 25,000, or both.
- Prosecution of a government servant needs the Government's sanction, and of others the Commissioner's (section 133(2)).
s. 134Cognizance
Section 134 adds a check before any GST prosecution reaches court: the Commissioner must have sanctioned it.
- Under section 134 of the CGST Act, 2017 no court may take cognizance of an offence under the Act or rules except with the previous sanction of the Commissioner, and no court below a Magistrate of the First Class may try it.
s. 135Presumption of mental state
Section 135 reverses the usual burden on intent: once the prosecution proves the act, the court presumes the guilty mind, and the accused must disprove it.
- Under section 135 of the CGST Act, 2017, in a prosecution for an offence requiring a culpable mental state, the court presumes it, but the accused may prove that he had no such mental state.
- "Culpable mental state" includes intention, motive, knowledge and belief; a fact is proved only when the court believes it beyond reasonable doubt, not merely on a preponderance of probability (Explanation).
- The Supreme Court in Radhika Agarwal (2025) left the validity of section 135 open, as no prosecution was then before it.
s. 136Relevancy of statements
Section 136 controls the use of statements recorded under summons. A statement is not automatically evidence; it becomes relevant only in two situations, and in the second the maker must first be examined before the court.
- Under section 136 of the CGST Act, 2017 a statement made and signed in response to summons under section 70 is relevant in a prosecution only (a) when its maker is dead, cannot be found, is incapable of giving evidence, is kept away by the adverse party or cannot be produced without unreasonable delay or expense; or (b) when its maker is examined as a witness and the court considers it should be admitted in the interest of justice.
s. 137Offences by companies
Section 137 attributes an offence by a company or other entity to the individuals in charge of its business, while letting them escape if they show they did not know or took all due care.
- Under section 137(1) of the CGST Act, 2017 where a company commits an offence, every person in charge of and responsible for its business at the time, and the company, are deemed guilty.
- A director, manager, secretary or other officer is also guilty where the offence was committed with his consent or connivance or is attributable to his negligence (section 137(2)).
- For a partnership firm, LLP, HUF or trust, the partner, karta or managing trustee is deemed guilty (section 137(3)).
- No one is punished who proves that the offence was committed without his knowledge or that he exercised all due diligence to prevent it (section 137(4)).
s. 138Compounding
Section 138 lets an accused settle a GST offence by paying a compounding amount, after paying the tax, interest and penalty. Compounding ends the prosecution, but is not available for issuing invoices without supply.
- Under section 138(1) of the CGST Act, 2017 any offence may be compounded by the Commissioner, before or after prosecution, on payment of the compounding amount, after the tax, interest and penalty have been paid.
- Compounding is not available to a person who has once compounded an offence under clauses (a)–(f), (h), (i) or (l) of section 132(1); to a person accused of issuing invoices without supply (clause (b)); to a person convicted by a court; or to prescribed classes (first proviso, as substituted from 01.10.2023).
- The compounding amount is between 25% and 100% of the tax involved (from 01.10.2023; earlier between Rs. 10,000 or 50% of tax and Rs. 30,000 or 150% of tax, whichever was higher) (section 138(2)).
- On payment, no further proceedings may be initiated for the same offence and pending criminal proceedings abate (section 138(3)).