Section 122 of the CGST Act, 2017

What is Section 122 of the CGST Act?

Section 122 is one of the central penalty provisions in the GST law. It identifies a wide range of specified GST offences and prescribes monetary penalties. These include incorrect or missing invoices, invoices without actual supply, non-payment of tax collected, TDS/TCS defaults, ITC taken without receipt of goods or services, fraudulent refunds, false records, failure to register, obstruction of officers, transport without prescribed documents, suppression of turnover, poor record keeping, non-compliance with information requests, dealing with confiscable goods and tampering with evidence or detained goods.

For a business, this section is especially important because several of the listed defaults can arise from weaknesses in invoicing, GST return preparation, purchase controls, e-invoice/e-way bill processes, ITC reconciliation, TDS/TCS compliance, document retention or responses to departmental proceedings. Serious cases can also have consequences under other provisions of the Act, including the provisions dealing with determination of tax, confiscation and prosecution.

Section 122 explained — complete contents

1Current statutory framework of Section 122

Section 122 is contained in Chapter XIX of the CGST Act, 2017, dealing with offences and penalties. The current text contains three principal penalty blocks: sub-section (1), sub-section (1A), sub-section (1B), sub-section (2) and sub-section (3). Sub-section (1) contains 21 specified offences.

2Section 122 penalty map at a glance

3The 21 offences under Section 122(1)

Section 122(1) is often searched online as “21 GST offences under Section 122.” The safest way to understand it is to group the clauses by business activity rather than memorising them as a long list.

Group A — invoices and outward supplies

Group B — tax collected but not paid

Group C — TDS and TCS compliance

Group D — input tax credit and refund abuse

Group E — records, registration and departmental proceedings

Group F — goods in transit, confiscation and evidence

4Penalty on the person who retains the benefit or causes the transaction

Section 122(1A) is especially important in fake-invoice and fraudulent-ITC cases. It was inserted by the Finance Act, 2020 and brought into force from 1 January 2021. The provision is designed to address situations where the person facing the commercial benefit or causing the specified transaction may not be the same person who physically issued the invoice or recorded the transaction.

Which four offences are linked to 122(1A)?

1. 122(1)(i): supply without invoice or incorrect/false invoice;
2. 122(1)(ii): invoice/bill without actual supply;
3. 122(1)(vii): ITC without actual receipt of goods/services; and
4. 122(1)(ix): taking/distributing ITC in contravention of Section 20/rules.

Why this matters in a company structure

Consider a company where an employee or intermediary arranges invoices from a supplier that does not actually provide the goods. The accounting team may technically receive and book the invoice, but Section 122(1A) asks a different question: who retained the benefit and at whose instance was the specified transaction conducted? The answer depends on evidence and facts; it should not be assumed merely because a person holds a particular designation.

Example — fake invoice arrangement

A business receives an invoice showing taxable value of ₹20 lakh and GST of ₹3.60 lakh. Investigation establishes that the goods were never received and the invoice was arranged to create ITC. If the statutory requirements of 122(1A) are established against a person who retained the benefit and at whose instance the transaction was conducted, the penalty under 122(1A) can be linked to the ₹3.60 lakh ITC involved. The exact legal result depends on the facts and adjudication.

Evidence that may become important

• Purchase orders and work orders;
• Goods receipt notes, delivery challans and lorry receipts;
• E-way bill records;
• Bank payment trail;
• Stock register and consumption records;
• Site inward registers;
• Email/WhatsApp/business communication records where legally obtained and relevant;
• Vendor master and due-diligence documents;
• GST return and GSTR-2B/IMS reconciliation records;
• Accounting entries and journal vouchers; and
• Statements and other evidence collected during proceedings.

5E-commerce operator penalty under Section 122(1B)

Section 122(1B) creates a separate penalty framework for specified electronic commerce operator (ECO) defaults. The provision is tied to an ECO that is liable to collect tax at source under Section 52.

Penalty amount

The provision specifies ₹10,000 or an amount equivalent to the tax involved had the supply been made by a registered person other than a person paying tax under Section 10, whichever is higher.

6Tax not paid, short-paid, erroneous refund or wrong ITC

Section 122(2) is different from the 21-clause list in Section 122(1). It specifically addresses a registered person where tax has not been paid or has been short-paid, a refund has been erroneously granted, or ITC has been wrongly availed or utilised.

Example — short payment without fraud

Suppose the legally determined tax due is ₹80,000 and the case falls under 122(2)(a). Ten per cent of the tax due is ₹8,000. Comparing ₹10,000 and ₹8,000, the statutory penalty under this clause would be ₹10,000, subject to the full legal facts and applicable determination order.

Example — fraud-related case

Suppose tax due is ₹80,000 and the case falls under 122(2)(b). Comparing ₹10,000 and ₹80,000, the amount under this clause is ₹80,000, subject to adjudication and the applicable statutory provisions.

Interaction with Sections 73, 74 and 74A

The tax-determination provisions have changed over time. Section 74 deals with specified fraud/wilful-misstatement/suppression cases for periods up to FY 2023-24, while Section 74A deals with determination for FY 2024-25 onward. Therefore, when reading a penalty provision for an actual dispute, always identify the financial year and the determination section used in the proceeding rather than applying a generic internet summary.

7Penalty on persons other than the main taxable person

Section 122(3) is important because GST penalties are not limited to the registered supplier. Certain other persons can also face a penalty of up to ₹25,000 if they fall within one of the specified categories.

8Detailed real-world examples

Example 1 — goods supplied but invoice not issued

A trader dispatches taxable goods worth ₹5 lakh and receives payment, but intentionally does not issue the GST tax invoice. The issue can fall under Section 122(1)(i). The penalty is not automatically limited to ₹10,000; the section compares ₹10,000 with the relevant amount specified in the provision.

Control: Ensure every dispatch/supply has an invoice sequence, invoice date, GSTIN, HSN/SAC, taxable value, tax rate and other required particulars as applicable.

Example 2 — invoice without supply

Company A issues an invoice to Company B for ₹10 lakh plus GST, but no goods are supplied and no genuine service is performed. The invoice is allegedly created only to generate ITC. This is a classic risk area under Section 122(1)(ii), and the beneficiary/instigator provisions may also become relevant where their statutory conditions are established.

Example 3 — ITC without receipt

A company books a purchase invoice for ₹12 lakh plus GST. The invoice appears in accounting records, but the goods never reached the warehouse, project site or customer location and there is no evidence of actual receipt. The company claims ITC. Section 122(1)(vii) specifically addresses ITC taken or utilised without actual receipt of goods or services.

Control: Do not rely only on the invoice. Maintain purchase order, GRN, e-way bill where applicable, transporter document, inward register, stock records, site acknowledgement and payment trail.

Example 4 — false books with tax-evasion intention

A business maintains one set of internal records and a manipulated set of financial records for GST reporting, with an intention to suppress taxable turnover. Section 122(1)(x) is potentially relevant because the clause expressly refers to falsification/substitution of financial records, fake accounts/documents or false information/return with an intention to evade tax.

Example 5 — registration not obtained

A person becomes liable for GST registration but continues taxable business without obtaining registration. Section 122(1)(xi) is one of the specified offences. Separate tax, interest and registration consequences may also arise under other provisions.

Example 6 — false registration information

A taxpayer deliberately provides incorrect information regarding registration particulars and later continues using those false particulars. Section 122(1)(xii) can become relevant. Businesses should therefore keep the GST registration profile aligned with the actual legal name, principal/additional places of business and other particulars as applicable.

Example 7 — transport without required documents

A transporter moves taxable goods without the documents required under GST law. If the statutory conditions are satisfied, Section 122(1)(xiv) may apply. Depending on the facts, the detention/confiscation provisions can also become relevant.

Example 8 — turnover suppression

A contractor receives ₹1 crore of taxable consideration but intentionally reports only ₹70 lakh, resulting in tax evasion. Section 122(1)(xv) addresses suppression of turnover leading to evasion of tax.

Example 9 — records not maintained

A registered business cannot produce the required books, supporting records and documents for the statutory period because records were discarded or were never properly maintained. Section 122(1)(xvi) can become relevant. Good accounting software does not by itself prove compliance; the underlying records must be maintained and retrievable.

Example 10 — ignoring a departmental information request

An officer calls for a purchase ledger, invoices, bank statements and reconciliation, but the taxpayer neither furnishes the information nor gives a proper response, or submits false documents during proceedings. Section 122(1)(xvii) can become relevant.

Example 11 — tampering with seized goods

Goods are detained or seized under GST law and a person moves, sells or tampers with them contrary to the statutory position. Section 122(1)(xxi) specifically addresses disposal or tampering with goods that have been detained, seized or attached.

Example 12 — TDS short deduction

A notified deductor is required to deduct GST TDS under Section 51 but deducts less than required. Section 122(1)(v) is one of the specified offences. The exact tax amount, period and other statutory consequences should be calculated separately.

9Important differences in Section 122

Penalty is not the same as tax

If a business has short-paid GST, the department may determine the unpaid tax and applicable interest under the relevant provisions. Section 122 deals with penalty exposure. The taxpayer should therefore separate the working papers into at least three components: tax, interest and penalty, while also checking whether any other statutory consequence applies.

Penalty is not the same as prosecution

Some conduct covered by GST penalty provisions can also be relevant to the offences and prosecution framework under Section 132 if its conditions are met. A Section 122 analysis should therefore not be treated as a complete analysis of every legal consequence arising from serious fraud or fake-invoice activity.

Penalty is not automatically waived because tax is paid

Payment of tax can affect the consequences available under particular statutory provisions, but a taxpayer should not assume that payment alone automatically eliminates every penalty. The exact section, timing, nature of proceedings and applicable statutory relief must be checked.

10How a private limited company can reduce Section 122 risk

For a company with multiple projects, branches, GST registrations, vendors and large purchase volumes, Section 122 compliance is best handled through internal controls rather than only by checking a notice after it arrives.

Monthly Section 122 risk checklist

11What should a taxpayer do after receiving a Section 122 penalty notice?

A penalty notice should not be answered with a generic statement such as “we have paid the tax.” First identify exactly which clause or sub-section is invoked and what factual allegation is made.

1. Read the allegation line by line. Identify the relevant clause: 122(1)(i), 122(1)(vii), 122(2)(a), 122(2)(b), 122(3), etc.
2. Identify the period. Tax law changes can have different effective dates. Record the financial year and tax period.
3. Reconcile the amount. Compare the department's tax/ITC/refund figure with the books, returns, invoices and payment records.
4. Separate tax, interest and penalty. Do not mix the three calculations.
5. Check the factual allegation. For example, “ITC without receipt” is different from “invoice not appearing in 2B,” because non-appearance alone does not establish every element of a 122(1)(vii) allegation.
6. Collect evidence. Build an indexed bundle rather than sending hundreds of unorganised files.
7. Respond within the applicable time. Track the statutory/procedural deadline and preserve proof of submission.
8. Take professional advice where required. Large-value fake-invoice, fraud, confiscation or prosecution-linked matters should be assessed by an appropriately qualified professional.

12Documents a business should preserve

Because many Section 122 allegations are fact-intensive, the quality of the documentary trail can be extremely important.

13Important changes to Section 122

14Common questions people search about Section 122

15Related GST provisions you should read with Section 122

16Frequently asked questions on Section 122

17Section 122 in one page

How to use this page

This page is prepared for public education, GST compliance awareness and practical workflow support. It is not a substitute for the CGST Act, CGST Rules, notifications, circulars, departmental instructions or judicial decisions applicable to the specific facts and period of a case.

GST law changes through amendments, notifications and judicial interpretation. For an actual notice, demand, penalty, fake-invoice allegation, ITC dispute, confiscation matter or prosecution-related issue, verify the law applicable to the relevant date and obtain professional advice where appropriate.