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.
Key points
- 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)).
The provisions
126(1)–(6)General disciplines related to penalty
Statutory text
(1) No officer under this Act shall impose any penalty for minor breaches of tax regulations or procedural requirements and in particular, any omission or mistake in documentation which is easily rectifiable and made without fraudulent intent or gross negligence.
Explanation.-For the purpose of this sub-section,-
(a) a breach shall be considered a "minor breach" if the amount of tax involved is less than five thousand rupees;
(b) an omission or mistake in documentation shall be considered to be easily rectifiable if the same is an error apparent on the face of record.
(2) The penalty imposed under this Act shall depend on the facts and circumstances of each case and shall be commensurate with the degree and severity of the breach.
(3) No penalty shall be imposed on any person without giving him an opportunity of being heard.
(4) The officer under this Act shall while imposing penalty in an order for a breach of any law, regulation or procedural requirement, specify the nature of the breach and the applicable law, regulation or procedure under which the amount of penalty for the breach has been specified.
(5) When a person voluntarily discloses to an officer under this Act the circumstances of a breach of the tax law, regulation or procedural requirement prior to the discovery of the breach by the officer under this Act, the proper officer may consider this fact as a mitigating factor when quantifying a penalty for that person.
(6) The provisions of this section shall not apply in such cases where the penalty specified under this Act is either a fixed sum or expressed as a fixed percentage.
*Enforced w.e.f. 1st July, 2017 .
Statutory text as published on the CBIC tax information portal, as on 03.10.2026; the numbered notes record each amendment. Official source
Common questions
- Is penalty payable for a minor GST mistake?
- Not where the tax involved is under Rs. 5,000 or the mistake is easily rectifiable and made without fraud or gross negligence (section 126 CGST).
Commentary and case notes checked against the judgments and CBIC sources on 04.10.2026.
What it means
Courts rely on section 126 when penalties are imposed for technical lapses — for example, minor e-way bill errors where there is no intent to evade (see section 129).