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Writer's pictureBhavika Rajput

Section 122 of the CGST Act: A Detailed Overview of Penalties and Offences

The GST Act of 2017 sets guidelines for determining the different categories of GST-related offences and the associated penalties. The GST Council regularly updates these provisions and adds new ones to shift the list of grievances and punishments in business operations. Section 122 of the CGST Act is discussed in this comprehensive article since it gives specific offences and their related penalties. Go on reading.

 

Table of Contents

 

What is Section 122 of the CGST Act?

The CGST Act's Section 122 addresses GST non-payments, surplus input tax credit claims, and offences incorporating incorrect documentation. The Section outlines various monetary interest and fees for these infractions, such as paying unpaid taxes and varying quantities depending on the offence's nature. According to the section, the form and sincerity of the offence specify the penalty. Section 122 aims to discourage taxpayers from conducting illegal activities such as filing false invoices, claiming input tax credits, and adhering to GST documentation.


Penalties Under Section 122 of CGST Act

The severity of the offence is meant to be represented in the penalties under Section 122. The following table summarises the major punishments:

Sections 

Offences 

Penalty 

Section 122(1) 

  • Supplying goods or services without an invoice or issuing fake invoices.

  • Issuing invoices without actually supplying goods or services.

  • Collecting tax but not remitting it to the government within 3 months.

  • Not deducting or remitting tax under Section 51.

  • Not collecting or remitting tax under Section 52.

  • Claiming input tax credit (ITC) without receiving goods or services.

  • Obtaining tax refunds fraudulently.

  • Misusing or distributing ITC.

  • Providing false financial records or documents for tax evasion.

  • Not registering under GST despite being liable.

  • Giving false registration details.

  • Hindering tax officers in their duties.

  • Transporting taxable goods without proper documents.

  • Suppressing turnover for tax evasion.

  • Not maintaining required books and documents.

  • Giving false information or not providing required documents.

  • Supplying or storing goods that are liable for confiscation.

  • Issuing invoices using someone else’s registration number.

  • Tampering with or destroying documents or evidence. 

  • Tampering with seized, detained, or attached goods.

Higher of the following-

Rs. 10,000 

or 

Either of the following amounts as may be applicable-

- A sum equal to the amount of tax evaded,

- The tax not deducted as per Section 51 or short-deducted or deducted but not paid 

- The tax not collected as per section 52 or short collected or collected but not paid 

- The ITC claimed/ passed on/ distributed irregularly

- The refund claimed fraudulently

Section 122(1A) 

 

 

Retaining benefits of transaction under Section 122 (1), clause (i), (ii), (vii) or (ix)

 

Clause (i): Supplies without issuing an invoice or issuing incorrect/false invoice

 

Clause (ii): Not supplying goods or services or both but issuing an invoice 

 

Clause (vii): Availing of ITC receiving goods or services or both fully or partially

 

Clause (ix): Availing of or distributing ITC in contravention of section 20

Sum equivalent to tax evasion amount or ITC availed 

Section 122(1B)

 

 

An e-commerce operator under Section 52 through its platform:

  • Letting an unregistered person who is also not exempted from registration to trade

  • Permitting inter-state supply of goods by persons not eligible for it 

  • Failing to provide the correct documentation for such trades 

 

Rs. 10,000 or a sum equivalent to the tax liability for supplies made through registered persons, whichever is higher

 

 

Section 122(2) 

 

 

Any registered person supplying goods and services without paying tax, short payment or erroneously refund or availed ITC wrongly for: 

  • Other than fraud or wrongdoing 

  • Due to fraud, wilful misstatement, suppression of facts 

Rs. 10,000 or 10% of the tax due, whichever is higher

Section 122(3)

 

 

A registered person who either: 

  • Helping or abetting offences under Section 122 (1), clause (i) to (xxi)

  • Knowingly getting, keeping, removing, depositing, transporting, supplying or concealing goods or services liable to confiscation 

  • Knowingly receiving or supplying goods in contravention of any provisions of the GST Act

  • Not appearing before the officer when summoned to give evidence or documents related above-mentioned unlawful activities 

  • Not issuing an invoice in accordance with the GST Act 

Up to ₹25,000


Multiple offences may lead to more serious financial implications because these penalties are cumulative.


Offences Under Section 122 of CGST Act

Under this section, the following situations are considered offences:

  • Generating bills without the necessary equipment:  Deceptive Input Tax Credit (ITC) claims are made using fake invoices.


  • Supplying products or services without the appropriate invoices: not documenting transactions in compliance with GST regulations.


  • Abuse of ITC: ITC neglects when anyone takes credit for goods or services they haven't obtained.


  • Failure to pay the collected GST: The inability to deposit GST within three months of collection creates non-payment of collected GST. 


  • GST officers being obstructed:  Keeping GST officers from performing the audit or verifications is known as obstruction. 


  • Failure to pay or debit TDS/TCS: Not fulfilling the criteria for GST tax deduction at source.


  • Moving goods without valid documentation: Evasion by e-way bills or bills.


Tax officials take these traffic violations seriously, and enact penalties to prevent companies from committing them.


Latest Updates and Amendments in Section 122

The GST Council has initially proposed multiple amendments and continues to organise meetings on persistent issues. In addition to efforts to stop the more rigorous tax evasion and compliance with Section 122 of the GST Act, we have discussed some recent changes separately in these meetings. These comprise: 

  • Enhanced assessment of ITC claims 

  • Regulation of e-invoicing to stop fraudulent invoicing 

  • Greater scrutiny of warehouse keepers and transporters who support tax evasion.

Companies can reduce fines by continuing to keep up with these changes.


Compliance Tips 

Penalties are easier to avoid than they seem to be. Companies can take the following actions:

  • Ensure your invoices are accurate. Create invoices using software that complies with GST. 

  • The returns should be filed on time. Update your GST filings regularly to avoid late fees. 

  • Check for supplier compliance. To overcome discrepancies, evaluate supplier data with ITC claims.

  • Use technology to reduce errors by digitalising processes.

  • Educate staff members about the updated GST regulations. By implementing this strategy, firms can reduce risks and focus on expansion.


Conclusion

A fundamental element of India's tax compliance system is Section 122 of the GST Act. Successful implementation is important for companies, particularly MSMEs because it ensures integrity and long-term growth in addition to avoiding fines. Businesses can successfully negotiate the GST environment by obeying the advice in this guide, incorporating the newest technologies, and keeping updated on developments.


FAQ

Q1. What is  key objective of Section 122 of the CGST Act?

Section 122 of the CGST Act is intended to prevent taxpayers from engaging in criminal activities such as filing false invoices, asserting input tax credits, and complying with GST documentation.


Q2. What is the penalty for Section 122 of GST?

The form and sincerity of the offences assess the penalties under Section 122.


Q3. What types of offences are covered under Section 122?

Section 122 focuses on the following offences, including:  

  • Tax non payment or underpayment; 

  • Filing a claim and getting an excessive refund  

  • Taking advantage of excess ITC; 

  • Engaging in and profiting from transactions in compliance with clauses (i), (ii), (vii), or (ix) of Section 122 (1)

  • Offences of aiding or abetting under 122 (1), clauses (i) through (xxi)


Q4. What should businesses do to avoid penalties under Section 122?

  • Acknowledge the offences and desist from committing them. 

  • Refrain from willful fraud, fact suppression, or misrepresentation.   

  • Adhere to the documentation specifications.   

  • According to the GST Act's provisions, refrain from engaging in illegal activity. 


Q5. Why should MSMEs pay attention to Section 122?

Although non-compliance has higher expenses, compliance can feel burdensome for MSMEs. Tax penalties have the possibility to: 

  • Sharply reduce profit margins.

  • Cash flow disruption from unforeseen penalty payments. 

  • Damage the company's reputation, which will make it extremely challenging to draw in investors or obtain credit.

  • In extreme circumstances, non-compliance may occur in business disruptions, such as the cancellation of GST registration.

Maintaining compliance guarantees that your company will continue operating and be stable in the hypercompetitive industry.




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