Ch 31 - Offences and Penalties | GST Saral by CA Dhruv Aggarwal PDF Download

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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 31 - Offences and penal ti es 
 
 
 
 
 
CHAPTER 31 
 
Offences and penalties 
 
EXECUTIVE SUMMARY 
 
?   Major provision of penalty is for non-payment of GST. These penalties are discussed earlier under 
'Demands of tax not paid, input tax credit wrongly availed and consequent penalty'. 
?   Other penalties are specified in sections 122 to 127 of CGST Act. These covers various offences 
like non-payment  of taxes,  transporting  offending goods,  fraudulently  taking refund,  violation of 
provisions of CGST/SGST Act and Rules etc. 
?   Tax Officers  have  powers  to  detain,  seize  and  confiscate  offending  goods  and  conveyances  - 
sections 129 and 130 of CGST Act. 
?   Punishment of imprisonment can be imposed for serious offences under section 132 of CGST Act. 
?   Offences relating to evasion of taxes exceeding Rs five crores are cognizable and non-bailable. 
?   In other case, bail can be granted by GST officer himself. 
31.1 Offences under GST Law 
 
Major offence in GST law is obviously non-payment or short payment of taxes or improper availment or 
utilization of input tax credit or erroneous refund. These are covered under sections 73 and 74 of CGST Act. 
Once penalty under provisions of section 73 or 74 are paid, a l proceedings are concluded and penalty cannot 
be imposed under any other provision of GST Law [of course, prosecution can be launched]. 
Provisions relating to other offences are discussed in this chapter. 
 
Fo lowing are offences under GST Law other than those covered  in sections 73 and 74 of CGST Act. 
Penalties can be imposed by departmental authorities to person committing the specified offence. 
Section 122(1) of CGST Act states as follows — 
Where a taxable person who — 
(i)   supplies any goods or services or both without issue of any invoice or issues an incorrect or false 
i nvoice with regard to any such supply. 
(ii)   issues any invoice or Bill without supply of goods or services or both in violation of the provisions of 
this Act, or the rules made thereunder. 
(iii)   co lects any amount as tax but fails to pay the same to the credit of the Government beyond a period 
of three months from the date on which such payment becomes due. 
(iv)  co lects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of 
the Government beyond a period of three months from the date on which such payment becomes 
due. 
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about:blank 1/7 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 31 - Offences and penal ti es 
 
 
 
 
 
CHAPTER 31 
 
Offences and penalties 
 
EXECUTIVE SUMMARY 
 
?   Major provision of penalty is for non-payment of GST. These penalties are discussed earlier under 
'Demands of tax not paid, input tax credit wrongly availed and consequent penalty'. 
?   Other penalties are specified in sections 122 to 127 of CGST Act. These covers various offences 
like non-payment  of taxes,  transporting  offending goods,  fraudulently  taking refund,  violation of 
provisions of CGST/SGST Act and Rules etc. 
?   Tax Officers  have  powers  to  detain,  seize  and  confiscate  offending  goods  and  conveyances  - 
sections 129 and 130 of CGST Act. 
?   Punishment of imprisonment can be imposed for serious offences under section 132 of CGST Act. 
?   Offences relating to evasion of taxes exceeding Rs five crores are cognizable and non-bailable. 
?   In other case, bail can be granted by GST officer himself. 
31.1 Offences under GST Law 
 
Major offence in GST law is obviously non-payment or short payment of taxes or improper availment or 
utilization of input tax credit or erroneous refund. These are covered under sections 73 and 74 of CGST Act. 
Once penalty under provisions of section 73 or 74 are paid, a l proceedings are concluded and penalty cannot 
be imposed under any other provision of GST Law [of course, prosecution can be launched]. 
Provisions relating to other offences are discussed in this chapter. 
 
Fo lowing are offences under GST Law other than those covered  in sections 73 and 74 of CGST Act. 
Penalties can be imposed by departmental authorities to person committing the specified offence. 
Section 122(1) of CGST Act states as follows — 
Where a taxable person who — 
(i)   supplies any goods or services or both without issue of any invoice or issues an incorrect or false 
i nvoice with regard to any such supply. 
(ii)   issues any invoice or Bill without supply of goods or services or both in violation of the provisions of 
this Act, or the rules made thereunder. 
(iii)   co lects any amount as tax but fails to pay the same to the credit of the Government beyond a period 
of three months from the date on which such payment becomes due. 
(iv)  co lects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of 
the Government beyond a period of three months from the date on which such payment becomes 
due. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(v)  fails to deduct the tax in accordance with the provisions of section 51(1), or deducts an amount 
which is less than the amount required to be deducted under the said subsection, or where he fails to 
pay to the credit of the Government under section 51(2) thereof, the amount deducted as tax. 
(vi)  fails to co lect tax in accordance with the provisions of section 52(1), or co lects an amount which is 
less than the amount required to be co lected under the said sub-section, or where he fails to pay to 
the credit of the Government under section 52(4) thereof, the amount co lected as tax. 
(vii)  takes or utilizes input tax credit without actual receipt of goods or services or both either fully  or 
partia ly, in contravention of the provisions of this Act, or the rules made thereunder. 
(viii)  fraudulently obtains ref und of tax under this Act. 
(ix)  takes or distributes input tax credit in violation of section 20, or the rules made thereunder. 
(x)  falsifies or substitutes financial records or produces fake accounts or documents or furnishes any 
false information or return with an intention to evade payment of tax due under this Act. 
(xi)  is liable to be registered under this Act but fails to obtain registration. 
(xii)  furnishes any false information with regard to registration particulars, either at the time of applying for 
registration, or subsequently. 
(xiii)  obstructs or prevents any officer in discharge of his duties under this Act. 
(xiv)  transports any taxable goods without the cover of documents as may be specified in this behalf. 
(xv)  suppresses his turnover leading to evasion of tax under this Act. 
(xvi)  fails to keep, maintain or retain books of account and other documents  in accordance  with the 
provisions of this Act or the rules made thereunder. 
(xvii)  fails to furnish information or documents ca led for by an officer in accordance with the provisions of 
this Act or rules made thereunder or furnishes false information or documents during any proceedings 
under this Act. 
(xviii)  supplies, transports or stores any goods which he has reason to believe are liable to confiscation 
under this Act. 
(xix)  issues any invoice or document by using the registration number of another registered person. 
(xx)  tampers with, or destroys any material evidence or document. 
(xxi)  disposes off or tampers with any goods that have been detained, seized, or attached under this Act. 
 
shall be liable to a penalty of rupees ten thousand or an amount equivalent to the tax evaded or the tax not 
deducted under section 51 or short deducted or deducted but not paid to the Government or tax not 
co lected under section 52 or short co lected or co lected but not paid to the Government or input tax 
credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, as the case may 
be, whichever is higher. 
 
31.2 Supplying goods on which tax not paid or short paid or input  tax credit wrongly availed 
 
Section 122(2) of CGST Act states as fo lows 
 
Any registered person who supplies any goods or services or both on which any tax has not been paid or 
short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,— 
 
(a)   for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to 
evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent of the tax due from such 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 31 - Offences and penal ti es 
 
 
 
 
 
CHAPTER 31 
 
Offences and penalties 
 
EXECUTIVE SUMMARY 
 
?   Major provision of penalty is for non-payment of GST. These penalties are discussed earlier under 
'Demands of tax not paid, input tax credit wrongly availed and consequent penalty'. 
?   Other penalties are specified in sections 122 to 127 of CGST Act. These covers various offences 
like non-payment  of taxes,  transporting  offending goods,  fraudulently  taking refund,  violation of 
provisions of CGST/SGST Act and Rules etc. 
?   Tax Officers  have  powers  to  detain,  seize  and  confiscate  offending  goods  and  conveyances  - 
sections 129 and 130 of CGST Act. 
?   Punishment of imprisonment can be imposed for serious offences under section 132 of CGST Act. 
?   Offences relating to evasion of taxes exceeding Rs five crores are cognizable and non-bailable. 
?   In other case, bail can be granted by GST officer himself. 
31.1 Offences under GST Law 
 
Major offence in GST law is obviously non-payment or short payment of taxes or improper availment or 
utilization of input tax credit or erroneous refund. These are covered under sections 73 and 74 of CGST Act. 
Once penalty under provisions of section 73 or 74 are paid, a l proceedings are concluded and penalty cannot 
be imposed under any other provision of GST Law [of course, prosecution can be launched]. 
Provisions relating to other offences are discussed in this chapter. 
 
Fo lowing are offences under GST Law other than those covered  in sections 73 and 74 of CGST Act. 
Penalties can be imposed by departmental authorities to person committing the specified offence. 
Section 122(1) of CGST Act states as follows — 
Where a taxable person who — 
(i)   supplies any goods or services or both without issue of any invoice or issues an incorrect or false 
i nvoice with regard to any such supply. 
(ii)   issues any invoice or Bill without supply of goods or services or both in violation of the provisions of 
this Act, or the rules made thereunder. 
(iii)   co lects any amount as tax but fails to pay the same to the credit of the Government beyond a period 
of three months from the date on which such payment becomes due. 
(iv)  co lects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of 
the Government beyond a period of three months from the date on which such payment becomes 
due. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(v)  fails to deduct the tax in accordance with the provisions of section 51(1), or deducts an amount 
which is less than the amount required to be deducted under the said subsection, or where he fails to 
pay to the credit of the Government under section 51(2) thereof, the amount deducted as tax. 
(vi)  fails to co lect tax in accordance with the provisions of section 52(1), or co lects an amount which is 
less than the amount required to be co lected under the said sub-section, or where he fails to pay to 
the credit of the Government under section 52(4) thereof, the amount co lected as tax. 
(vii)  takes or utilizes input tax credit without actual receipt of goods or services or both either fully  or 
partia ly, in contravention of the provisions of this Act, or the rules made thereunder. 
(viii)  fraudulently obtains ref und of tax under this Act. 
(ix)  takes or distributes input tax credit in violation of section 20, or the rules made thereunder. 
(x)  falsifies or substitutes financial records or produces fake accounts or documents or furnishes any 
false information or return with an intention to evade payment of tax due under this Act. 
(xi)  is liable to be registered under this Act but fails to obtain registration. 
(xii)  furnishes any false information with regard to registration particulars, either at the time of applying for 
registration, or subsequently. 
(xiii)  obstructs or prevents any officer in discharge of his duties under this Act. 
(xiv)  transports any taxable goods without the cover of documents as may be specified in this behalf. 
(xv)  suppresses his turnover leading to evasion of tax under this Act. 
(xvi)  fails to keep, maintain or retain books of account and other documents  in accordance  with the 
provisions of this Act or the rules made thereunder. 
(xvii)  fails to furnish information or documents ca led for by an officer in accordance with the provisions of 
this Act or rules made thereunder or furnishes false information or documents during any proceedings 
under this Act. 
(xviii)  supplies, transports or stores any goods which he has reason to believe are liable to confiscation 
under this Act. 
(xix)  issues any invoice or document by using the registration number of another registered person. 
(xx)  tampers with, or destroys any material evidence or document. 
(xxi)  disposes off or tampers with any goods that have been detained, seized, or attached under this Act. 
 
shall be liable to a penalty of rupees ten thousand or an amount equivalent to the tax evaded or the tax not 
deducted under section 51 or short deducted or deducted but not paid to the Government or tax not 
co lected under section 52 or short co lected or co lected but not paid to the Government or input tax 
credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, as the case may 
be, whichever is higher. 
 
31.2 Supplying goods on which tax not paid or short paid or input  tax credit wrongly availed 
 
Section 122(2) of CGST Act states as fo lows 
 
Any registered person who supplies any goods or services or both on which any tax has not been paid or 
short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,— 
 
(a)   for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to 
evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent of the tax due from such 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
person, whichever is higher. 
(b)   for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a 
penalty equal to ten thousand rupees or the tax due from such person, whichever is higher. 
31.3 Aiding or abating offence or contravening provisions 
 
Section 122(3) of CGST Act states as fo lows 
 
Any person who 
 
(a)   aids or abets any of the offences specified in sections (i) to (xxi) of section 122(1) above. 
(b)   acquires  possession  of,  or  in any way  concerns  himself  in transporti ng,  removing,  depositing, 
keeping, conceali ng, supplying, or purchasing or in any other manner deals with any goods which he 
knows  or  has  reasons  to  believe  are  liable  to  confiscation  under  this  Act  or  the  rules  made 
thereunder. 
(c)   receives or is in any way concerned with the supply of, or in any other manner deals with any supply 
of services which he knows or has reason to believe are in contravention of any provisions of this 
Act or the rules made thereunder. 
(d)   fails to appear before the officer of central tax, when issued with a summon for appearance to give 
evidence or produce a document in an enquiry. 
(e)   fails to issue i nvoice in accordance with the provisions of this Act or rules made thereunder, or fails 
to account for an invoice in his books of account. 
 
shall be liable to a penalty which may extend to rupees twenty five thousand. 
 
31.4 Penalty  for failure to furnish information or return under section 150 or 151 
 
If a person who is required to furnish an information return under section 150 fails to do so within the period 
specified in the notice issued under -section 150(3), the proper officer may direct that such person shall be 
liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish such 
return continues. The penalty imposed under this section shall not exceed five thousand rupees - section 123 of 
CGST Act. 
If any person required to furnish any information or return under section 151 - (a) without reasonable cause 
fails to furnish such information or return as may be required under that section, or (b) wilfully  furnishes or 
causes to furnish any information or return which he knows to be false, he shall be punishable with a fine which 
may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to 
one hundred rupees for each day after the first day during which the offence continues subject to a maximum 
limit of twenty five thousand rupees - section 124 of CGST Act. 
31.5 General i.e. residual penalty 
 
Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no 
penalty is separately provided for in this Act, shall be liable to a penalty which may extend to rupees twenty 
five thousand - section 125 of CGST Act. 
31.6 General disciplines  related to penalty 
 
General principles of imposing penalty are given in section 126 of CGST Act. The provisions of this section 
will not apply in such cases where the penalty prescribed under the Act is either a fixed sum or expressed as a 
fixed percentage- section 126(6) of CGST Act 
The principles are sound but unfortunately fo lowed very rarely. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 31 - Offences and penal ti es 
 
 
 
 
 
CHAPTER 31 
 
Offences and penalties 
 
EXECUTIVE SUMMARY 
 
?   Major provision of penalty is for non-payment of GST. These penalties are discussed earlier under 
'Demands of tax not paid, input tax credit wrongly availed and consequent penalty'. 
?   Other penalties are specified in sections 122 to 127 of CGST Act. These covers various offences 
like non-payment  of taxes,  transporting  offending goods,  fraudulently  taking refund,  violation of 
provisions of CGST/SGST Act and Rules etc. 
?   Tax Officers  have  powers  to  detain,  seize  and  confiscate  offending  goods  and  conveyances  - 
sections 129 and 130 of CGST Act. 
?   Punishment of imprisonment can be imposed for serious offences under section 132 of CGST Act. 
?   Offences relating to evasion of taxes exceeding Rs five crores are cognizable and non-bailable. 
?   In other case, bail can be granted by GST officer himself. 
31.1 Offences under GST Law 
 
Major offence in GST law is obviously non-payment or short payment of taxes or improper availment or 
utilization of input tax credit or erroneous refund. These are covered under sections 73 and 74 of CGST Act. 
Once penalty under provisions of section 73 or 74 are paid, a l proceedings are concluded and penalty cannot 
be imposed under any other provision of GST Law [of course, prosecution can be launched]. 
Provisions relating to other offences are discussed in this chapter. 
 
Fo lowing are offences under GST Law other than those covered  in sections 73 and 74 of CGST Act. 
Penalties can be imposed by departmental authorities to person committing the specified offence. 
Section 122(1) of CGST Act states as follows — 
Where a taxable person who — 
(i)   supplies any goods or services or both without issue of any invoice or issues an incorrect or false 
i nvoice with regard to any such supply. 
(ii)   issues any invoice or Bill without supply of goods or services or both in violation of the provisions of 
this Act, or the rules made thereunder. 
(iii)   co lects any amount as tax but fails to pay the same to the credit of the Government beyond a period 
of three months from the date on which such payment becomes due. 
(iv)  co lects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of 
the Government beyond a period of three months from the date on which such payment becomes 
due. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(v)  fails to deduct the tax in accordance with the provisions of section 51(1), or deducts an amount 
which is less than the amount required to be deducted under the said subsection, or where he fails to 
pay to the credit of the Government under section 51(2) thereof, the amount deducted as tax. 
(vi)  fails to co lect tax in accordance with the provisions of section 52(1), or co lects an amount which is 
less than the amount required to be co lected under the said sub-section, or where he fails to pay to 
the credit of the Government under section 52(4) thereof, the amount co lected as tax. 
(vii)  takes or utilizes input tax credit without actual receipt of goods or services or both either fully  or 
partia ly, in contravention of the provisions of this Act, or the rules made thereunder. 
(viii)  fraudulently obtains ref und of tax under this Act. 
(ix)  takes or distributes input tax credit in violation of section 20, or the rules made thereunder. 
(x)  falsifies or substitutes financial records or produces fake accounts or documents or furnishes any 
false information or return with an intention to evade payment of tax due under this Act. 
(xi)  is liable to be registered under this Act but fails to obtain registration. 
(xii)  furnishes any false information with regard to registration particulars, either at the time of applying for 
registration, or subsequently. 
(xiii)  obstructs or prevents any officer in discharge of his duties under this Act. 
(xiv)  transports any taxable goods without the cover of documents as may be specified in this behalf. 
(xv)  suppresses his turnover leading to evasion of tax under this Act. 
(xvi)  fails to keep, maintain or retain books of account and other documents  in accordance  with the 
provisions of this Act or the rules made thereunder. 
(xvii)  fails to furnish information or documents ca led for by an officer in accordance with the provisions of 
this Act or rules made thereunder or furnishes false information or documents during any proceedings 
under this Act. 
(xviii)  supplies, transports or stores any goods which he has reason to believe are liable to confiscation 
under this Act. 
(xix)  issues any invoice or document by using the registration number of another registered person. 
(xx)  tampers with, or destroys any material evidence or document. 
(xxi)  disposes off or tampers with any goods that have been detained, seized, or attached under this Act. 
 
shall be liable to a penalty of rupees ten thousand or an amount equivalent to the tax evaded or the tax not 
deducted under section 51 or short deducted or deducted but not paid to the Government or tax not 
co lected under section 52 or short co lected or co lected but not paid to the Government or input tax 
credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, as the case may 
be, whichever is higher. 
 
31.2 Supplying goods on which tax not paid or short paid or input  tax credit wrongly availed 
 
Section 122(2) of CGST Act states as fo lows 
 
Any registered person who supplies any goods or services or both on which any tax has not been paid or 
short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,— 
 
(a)   for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to 
evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent of the tax due from such 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
person, whichever is higher. 
(b)   for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a 
penalty equal to ten thousand rupees or the tax due from such person, whichever is higher. 
31.3 Aiding or abating offence or contravening provisions 
 
Section 122(3) of CGST Act states as fo lows 
 
Any person who 
 
(a)   aids or abets any of the offences specified in sections (i) to (xxi) of section 122(1) above. 
(b)   acquires  possession  of,  or  in any way  concerns  himself  in transporti ng,  removing,  depositing, 
keeping, conceali ng, supplying, or purchasing or in any other manner deals with any goods which he 
knows  or  has  reasons  to  believe  are  liable  to  confiscation  under  this  Act  or  the  rules  made 
thereunder. 
(c)   receives or is in any way concerned with the supply of, or in any other manner deals with any supply 
of services which he knows or has reason to believe are in contravention of any provisions of this 
Act or the rules made thereunder. 
(d)   fails to appear before the officer of central tax, when issued with a summon for appearance to give 
evidence or produce a document in an enquiry. 
(e)   fails to issue i nvoice in accordance with the provisions of this Act or rules made thereunder, or fails 
to account for an invoice in his books of account. 
 
shall be liable to a penalty which may extend to rupees twenty five thousand. 
 
31.4 Penalty  for failure to furnish information or return under section 150 or 151 
 
If a person who is required to furnish an information return under section 150 fails to do so within the period 
specified in the notice issued under -section 150(3), the proper officer may direct that such person shall be 
liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish such 
return continues. The penalty imposed under this section shall not exceed five thousand rupees - section 123 of 
CGST Act. 
If any person required to furnish any information or return under section 151 - (a) without reasonable cause 
fails to furnish such information or return as may be required under that section, or (b) wilfully  furnishes or 
causes to furnish any information or return which he knows to be false, he shall be punishable with a fine which 
may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to 
one hundred rupees for each day after the first day during which the offence continues subject to a maximum 
limit of twenty five thousand rupees - section 124 of CGST Act. 
31.5 General i.e. residual penalty 
 
Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no 
penalty is separately provided for in this Act, shall be liable to a penalty which may extend to rupees twenty 
five thousand - section 125 of CGST Act. 
31.6 General disciplines  related to penalty 
 
General principles of imposing penalty are given in section 126 of CGST Act. The provisions of this section 
will not apply in such cases where the penalty prescribed under the Act is either a fixed sum or expressed as a 
fixed percentage- section 126(6) of CGST Act 
The principles are sound but unfortunately fo lowed very rarely. 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
No penalty for minor breaches - 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. 
For the purpose of this sub-section -(a) a breach shall be considered a 'minor breach' if the amount of tax 
i nvolved is less than rupees five thousand (b) an omission or mistake in documentation shall be considered to 
be easily rectifiable if the same is an error apparent on record- section 126(1) of CGST Act. 
Penalty to be commensurate with severity of breach - The penalty imposed shall depend on the facts and 
circumstances  of the case and shall be commensurate  with the degree and severity of the breach-  section 
126(2) of CGST Act. 
 
No penalty without hearing  - No penalty shall be imposed on any person without giving a notice to show 
cause and without giving him an opportunity of being heard- section 126(3) of CGST Act. 
Nature  of breach  and applicable  law should be specified while imposing penalty - 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- section 126(4) of CGST Act 
Lower penalty if breach  voluntarily  disclosed - 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- section 126(5) of CGST Act 
No penalty  once  penalty  in  section  73 or  74 is paid  -  Non-payment  or short payment of taxes or 
improper  availment  or utilization of input tax credit or erroneous  refunds  are major offences.  These  are 
covered under sections 73 and 74 of CGST Act. Once penalty under provisions of section 73 or 74 are paid, 
a l proceedi ngs are concluded and penalty cannot be imposed under any other provision of GST Law [of 
course, prosecution can be launched]. 
31.6-1 Separate notice and order if offence not covered under any other provision 
 
Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under 
any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or 
section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to 
such person - section 127 of CGST Act. 
31.6-2 General waiver or reduction in penalty  under mitigating circumstances 
 
The Government may, by notification, waive in part or fu l, any penalty referred to in section 122 or section 
123 or section 125 or any late fee referred to in section 47 for such class of taxpayers and under such 
mitigating circumstances as may be specified therein on the recommendations of the GST Council - section 
128 of CGST Act. 
 
31.6-3 Lenient  view in case of bona fide belief or technical lapses 
 
Supreme Court in Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC 253 = 25 STC 211=83 ITR 26 = 
(1969) 2 SCC 627 = 2 ELT (J159) (SC), observed as follows : The discretion to impose penalty must be 
exercised judicia ly. A penalty will ordinarily be imposed in case where the party acts deliberately in defiance 
of law, but not in cases where there is a technical or venial breach of the provisions of the Act or where the 
breach flows from a bona fide belief that the offender is not liable under the Act. - - An order imposing 
penalty for failure to carry out a statutory obligation is the result of quasi-judicial proceeding. Penalty will not 
be ordinarily imposed unless the party obliged either acted deliberately in defiance of law or was guilty of 
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CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 31 - Offences and penal ti es 
 
 
 
 
 
CHAPTER 31 
 
Offences and penalties 
 
EXECUTIVE SUMMARY 
 
?   Major provision of penalty is for non-payment of GST. These penalties are discussed earlier under 
'Demands of tax not paid, input tax credit wrongly availed and consequent penalty'. 
?   Other penalties are specified in sections 122 to 127 of CGST Act. These covers various offences 
like non-payment  of taxes,  transporting  offending goods,  fraudulently  taking refund,  violation of 
provisions of CGST/SGST Act and Rules etc. 
?   Tax Officers  have  powers  to  detain,  seize  and  confiscate  offending  goods  and  conveyances  - 
sections 129 and 130 of CGST Act. 
?   Punishment of imprisonment can be imposed for serious offences under section 132 of CGST Act. 
?   Offences relating to evasion of taxes exceeding Rs five crores are cognizable and non-bailable. 
?   In other case, bail can be granted by GST officer himself. 
31.1 Offences under GST Law 
 
Major offence in GST law is obviously non-payment or short payment of taxes or improper availment or 
utilization of input tax credit or erroneous refund. These are covered under sections 73 and 74 of CGST Act. 
Once penalty under provisions of section 73 or 74 are paid, a l proceedings are concluded and penalty cannot 
be imposed under any other provision of GST Law [of course, prosecution can be launched]. 
Provisions relating to other offences are discussed in this chapter. 
 
Fo lowing are offences under GST Law other than those covered  in sections 73 and 74 of CGST Act. 
Penalties can be imposed by departmental authorities to person committing the specified offence. 
Section 122(1) of CGST Act states as follows — 
Where a taxable person who — 
(i)   supplies any goods or services or both without issue of any invoice or issues an incorrect or false 
i nvoice with regard to any such supply. 
(ii)   issues any invoice or Bill without supply of goods or services or both in violation of the provisions of 
this Act, or the rules made thereunder. 
(iii)   co lects any amount as tax but fails to pay the same to the credit of the Government beyond a period 
of three months from the date on which such payment becomes due. 
(iv)  co lects any tax in contravention of the provisions of this Act but fails to pay the same to the credit of 
the Government beyond a period of three months from the date on which such payment becomes 
due. 
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(v)  fails to deduct the tax in accordance with the provisions of section 51(1), or deducts an amount 
which is less than the amount required to be deducted under the said subsection, or where he fails to 
pay to the credit of the Government under section 51(2) thereof, the amount deducted as tax. 
(vi)  fails to co lect tax in accordance with the provisions of section 52(1), or co lects an amount which is 
less than the amount required to be co lected under the said sub-section, or where he fails to pay to 
the credit of the Government under section 52(4) thereof, the amount co lected as tax. 
(vii)  takes or utilizes input tax credit without actual receipt of goods or services or both either fully  or 
partia ly, in contravention of the provisions of this Act, or the rules made thereunder. 
(viii)  fraudulently obtains ref und of tax under this Act. 
(ix)  takes or distributes input tax credit in violation of section 20, or the rules made thereunder. 
(x)  falsifies or substitutes financial records or produces fake accounts or documents or furnishes any 
false information or return with an intention to evade payment of tax due under this Act. 
(xi)  is liable to be registered under this Act but fails to obtain registration. 
(xii)  furnishes any false information with regard to registration particulars, either at the time of applying for 
registration, or subsequently. 
(xiii)  obstructs or prevents any officer in discharge of his duties under this Act. 
(xiv)  transports any taxable goods without the cover of documents as may be specified in this behalf. 
(xv)  suppresses his turnover leading to evasion of tax under this Act. 
(xvi)  fails to keep, maintain or retain books of account and other documents  in accordance  with the 
provisions of this Act or the rules made thereunder. 
(xvii)  fails to furnish information or documents ca led for by an officer in accordance with the provisions of 
this Act or rules made thereunder or furnishes false information or documents during any proceedings 
under this Act. 
(xviii)  supplies, transports or stores any goods which he has reason to believe are liable to confiscation 
under this Act. 
(xix)  issues any invoice or document by using the registration number of another registered person. 
(xx)  tampers with, or destroys any material evidence or document. 
(xxi)  disposes off or tampers with any goods that have been detained, seized, or attached under this Act. 
 
shall be liable to a penalty of rupees ten thousand or an amount equivalent to the tax evaded or the tax not 
deducted under section 51 or short deducted or deducted but not paid to the Government or tax not 
co lected under section 52 or short co lected or co lected but not paid to the Government or input tax 
credit availed of or passed on or distributed irregularly, or the refund claimed fraudulently, as the case may 
be, whichever is higher. 
 
31.2 Supplying goods on which tax not paid or short paid or input  tax credit wrongly availed 
 
Section 122(2) of CGST Act states as fo lows 
 
Any registered person who supplies any goods or services or both on which any tax has not been paid or 
short-paid or erroneously refunded, or where the input tax credit has been wrongly availed or utilised,— 
 
(a)   for any reason, other than the reason of fraud or any wilful misstatement or suppression of facts to 
evade tax, shall be liable to a penalty of ten thousand rupees or ten per cent of the tax due from such 
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person, whichever is higher. 
(b)   for reason of fraud or any wilful misstatement or suppression of facts to evade tax, shall be liable to a 
penalty equal to ten thousand rupees or the tax due from such person, whichever is higher. 
31.3 Aiding or abating offence or contravening provisions 
 
Section 122(3) of CGST Act states as fo lows 
 
Any person who 
 
(a)   aids or abets any of the offences specified in sections (i) to (xxi) of section 122(1) above. 
(b)   acquires  possession  of,  or  in any way  concerns  himself  in transporti ng,  removing,  depositing, 
keeping, conceali ng, supplying, or purchasing or in any other manner deals with any goods which he 
knows  or  has  reasons  to  believe  are  liable  to  confiscation  under  this  Act  or  the  rules  made 
thereunder. 
(c)   receives or is in any way concerned with the supply of, or in any other manner deals with any supply 
of services which he knows or has reason to believe are in contravention of any provisions of this 
Act or the rules made thereunder. 
(d)   fails to appear before the officer of central tax, when issued with a summon for appearance to give 
evidence or produce a document in an enquiry. 
(e)   fails to issue i nvoice in accordance with the provisions of this Act or rules made thereunder, or fails 
to account for an invoice in his books of account. 
 
shall be liable to a penalty which may extend to rupees twenty five thousand. 
 
31.4 Penalty  for failure to furnish information or return under section 150 or 151 
 
If a person who is required to furnish an information return under section 150 fails to do so within the period 
specified in the notice issued under -section 150(3), the proper officer may direct that such person shall be 
liable to pay a penalty of one hundred rupees for each day of the period during which the failure to furnish such 
return continues. The penalty imposed under this section shall not exceed five thousand rupees - section 123 of 
CGST Act. 
If any person required to furnish any information or return under section 151 - (a) without reasonable cause 
fails to furnish such information or return as may be required under that section, or (b) wilfully  furnishes or 
causes to furnish any information or return which he knows to be false, he shall be punishable with a fine which 
may extend to ten thousand rupees and in case of a continuing offence to a further fine which may extend to 
one hundred rupees for each day after the first day during which the offence continues subject to a maximum 
limit of twenty five thousand rupees - section 124 of CGST Act. 
31.5 General i.e. residual penalty 
 
Any person, who contravenes any of the provisions of this Act or any rules made thereunder for which no 
penalty is separately provided for in this Act, shall be liable to a penalty which may extend to rupees twenty 
five thousand - section 125 of CGST Act. 
31.6 General disciplines  related to penalty 
 
General principles of imposing penalty are given in section 126 of CGST Act. The provisions of this section 
will not apply in such cases where the penalty prescribed under the Act is either a fixed sum or expressed as a 
fixed percentage- section 126(6) of CGST Act 
The principles are sound but unfortunately fo lowed very rarely. 
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No penalty for minor breaches - 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. 
For the purpose of this sub-section -(a) a breach shall be considered a 'minor breach' if the amount of tax 
i nvolved is less than rupees five thousand (b) an omission or mistake in documentation shall be considered to 
be easily rectifiable if the same is an error apparent on record- section 126(1) of CGST Act. 
Penalty to be commensurate with severity of breach - The penalty imposed shall depend on the facts and 
circumstances  of the case and shall be commensurate  with the degree and severity of the breach-  section 
126(2) of CGST Act. 
 
No penalty without hearing  - No penalty shall be imposed on any person without giving a notice to show 
cause and without giving him an opportunity of being heard- section 126(3) of CGST Act. 
Nature  of breach  and applicable  law should be specified while imposing penalty - 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- section 126(4) of CGST Act 
Lower penalty if breach  voluntarily  disclosed - 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- section 126(5) of CGST Act 
No penalty  once  penalty  in  section  73 or  74 is paid  -  Non-payment  or short payment of taxes or 
improper  availment  or utilization of input tax credit or erroneous  refunds  are major offences.  These  are 
covered under sections 73 and 74 of CGST Act. Once penalty under provisions of section 73 or 74 are paid, 
a l proceedi ngs are concluded and penalty cannot be imposed under any other provision of GST Law [of 
course, prosecution can be launched]. 
31.6-1 Separate notice and order if offence not covered under any other provision 
 
Where the proper officer is of the view that a person is liable to a penalty and the same is not covered under 
any proceedings under section 62 or section 63 or section 64 or section 73 or section 74 or section 129 or 
section 130, he may issue an order levying such penalty after giving a reasonable opportunity of being heard to 
such person - section 127 of CGST Act. 
31.6-2 General waiver or reduction in penalty  under mitigating circumstances 
 
The Government may, by notification, waive in part or fu l, any penalty referred to in section 122 or section 
123 or section 125 or any late fee referred to in section 47 for such class of taxpayers and under such 
mitigating circumstances as may be specified therein on the recommendations of the GST Council - section 
128 of CGST Act. 
 
31.6-3 Lenient  view in case of bona fide belief or technical lapses 
 
Supreme Court in Hindustan Steel Ltd. v. State of Orissa AIR 1970 SC 253 = 25 STC 211=83 ITR 26 = 
(1969) 2 SCC 627 = 2 ELT (J159) (SC), observed as follows : The discretion to impose penalty must be 
exercised judicia ly. A penalty will ordinarily be imposed in case where the party acts deliberately in defiance 
of law, but not in cases where there is a technical or venial breach of the provisions of the Act or where the 
breach flows from a bona fide belief that the offender is not liable under the Act. - - An order imposing 
penalty for failure to carry out a statutory obligation is the result of quasi-judicial proceeding. Penalty will not 
be ordinarily imposed unless the party obliged either acted deliberately in defiance of law or was guilty of 
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conduct contumacious  or dishonest  or acted  in conscious  disregard  of its obligation.  Penalty will not be 
imposed merely because it is lawful to do so. - - Even if a minimum penalty is prescribed, the Authority will be 
justified in refusing to impose penalty, when there is a technical or venial breach of the Act or where breach 
flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the Statute - 
quoted with approval in Shiv Dutt Fateh Chand v. UOI - (1983) 53 STC 289 (SC) = AIR 1984 SC 1194= 
148 ITR 664 (SC). 
 
In Bharjatiya  Steel Industries  v. CST (2008) 11 SCC 617 = 13 VST 514 (SC), it was held that when 
assessing  authority  has  been  conferred  with  a  discretionary  jurisdiction  to  levy  penalty,  by  necessary 
implication, the authority may not levy penalty. If it has discretion not to levy penalty, existence of mens rea is 
a relevant factor. [In earlier para of the judgment, it has been held that where adjudicatory authority has no 
discretion in imposing penalty, existence of mens rea is not relevant]. 
In Cement Marketing Co. of India v. Asstt. Commissioner of Sales Tax - (1980) 1 SCC 71 = (6) ELT 
295 (SC) = 124 ITR 15 = 4 Taxman 44 = (1980) 45 STC 197 (SC) = AIR 1980 SC 346 also, it was held 
that even if a minimum penalty is prescribed, the authority will be justified in refusing to impose a penalty when 
there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide 
belief that the offender is not liable to act in the manner prescribed in the statute. In this case, it was held that 
'falsely represents' postulates mens rea in that the representation should be something which in fact and to his 
knowledge  is false, and this element would  be excluded  if the person acted in bona  fide belief that his 
representation is true. 
In D Navinchandra  v. UOI - 1987 (29) ELT 492 (SC) = 1987 (3) SCC 66 and B Vijay Kumar v. UOI - 
AIR 1987 SC 1794 also, it has been held that bona fides must be considered while imposing penalty. 
No penalty if party had bona fide belief - If party did not pay tax due to bona fide belief, it cannot be said 
that it acted deliberately in defiance of law or that its conduct is dishonest or that it had acted in conscious 
disregard of its obligation. Imposition of penalty in such case is not justified. - EID Parry v. ACCT 2000 AIR 
SCW 86 = 117 STC 457 = AIR 2000 SC 551. 
31.7 Detention of goods and conveyances,  and levy of penalty 
 
Notwithstanding anything contained in this Act, where any person transports any goods or stores any goods 
while they are in transit in contravention of the provisions of this Act or rules made thereunder, a l such goods 
and the conveyance used as a means of transport for carrying the said goods and documents relating to such 
goods and conveyances shall be liable to detention or seizure. 
After detention or seizure, the goods and conveyance shall be released— 
 
(a)   on payment of the applicable tax and penalty equal to one hundred per cent of the tax payable on 
such goods and, in case of exempted goods, on payment of an amount equal to two per cent of the 
value of goods or twenty five thousand rupees, whichever is less, where the owner of the goods 
comes forward for payment of such tax and penalty. 
(b)   on payment of the applicable tax and penalty equal to the fifty per cent of the value of the goods 
reduced by the tax amount paid thereon and, in case of exempted goods, on payment of an amount 
equal to five per cent of the value of goods or twenty five thousand rupees, whichever is less, where 
the owner of the goods does not come forward for payment of such tax and penalty. 
(c)   upon furnishing a security equivalent to the amount payable under clause (a) or clause (b) in such 
form and manner as may be prescribed - section 129(1) of CGST Act. 
No detention or seizure without serving order - No such goods or conveyance shall be detained or seized 
without serving an order of detention or seizure on the person transporting the goods - proviso to section