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Offences under GST - CA Final (Navkar Institute)
Here is a complete coverage of Offences, Penalties, and Prosecution under GST law, as per the CA Final GST textbook.
Section 122 - Offences and Penalties
(i) Penalty under Section 122(1) - 21 Specified Offences
Section 122(1) lists 21 offences punishable under GST law, applicable to a taxable person (registered or liable to be registered). They are grouped as:
(A) Offences Related to Invoice
| Clause | Offence |
|---|---|
| (i) | Supplies goods/services without invoice or issues incorrect/false invoice |
| (ii) | Issues invoice/bill without actual supply of goods/services |
| (xix) | Issues invoice using the registration number of another registered person |
(B) Offences Related to Tax Evasion / TCS / TDS
| Clause | Offence |
|---|---|
| (iii) | Collects tax but fails to pay to Government within 3 months |
| (iv) | Collects tax in contravention of the Act but fails to pay to Government within 3 months |
| (v) | Fails to deduct tax under Section 51 (TDS), or deducts short, or fails to pay deducted amount |
| (vi) | Fails to collect tax under Section 52 (TCS), or collects short, or fails to pay collected amount |
| (xv) | Suppresses turnover leading to evasion of tax |
(C) Offences Related to ITC
| Clause | Offence |
|---|---|
| (vii) | Takes or utilises ITC without actual receipt of goods/services |
| (ix) | Takes or distributes ITC in contravention of Section 20 (ISD provisions) |
(D) Offence Related to Refund
| Clause | Offence |
|---|---|
| (viii) | Fraudulently obtains refund of tax |
(E) Offences Related to Records/Documents/Books of Accounts
| Clause | Offence |
|---|---|
| (x) | Falsifies or substitutes financial records, produces fake accounts/documents, or furnishes false information to evade tax |
| (xvi) | Fails to maintain books of account as required |
| (xvii) | Fails to furnish information/documents called for by an officer, or furnishes false information during proceedings |
(F) Offences Related to Registration
- Fails to register despite being liable to be registered.
(G) Offences Related to Transportation and Storage
| Clause | Offence |
|---|---|
| (xiv) | Transports taxable goods without prescribed documents (e.g., E-way Bill) |
| (xviii) | Supplies, transports, or stores goods believed to be liable to confiscation |
(H) Other Offences
| Clause | Offence |
|---|---|
| (xiii) | Obstructs or prevents any officer in discharge of duties |
| (xx) | Tampers with or destroys material evidence or documents |
| (xxii) | Disposes off or tampers with goods that have been detained, seized, or attached |
Quantum of Penalty - Section 122(1)
| Law | Penalty |
|---|---|
| CGST / SGST / UTGST | Higher of ₹10,000 OR tax evaded / ITC availed irregularly / refund claimed fraudulently |
| IGST | Higher of ₹20,000 OR tax evaded / ITC availed irregularly / refund claimed fraudulently |
Note: The penalty under CGST is mirrored equally under the respective SGST/UTGST Act.
(ii) Penalty under Section 122(1A) - Beneficiary Penalty
Section 122(1A) levies penalty on any person who retains the benefit or at whose instance the following offences are conducted:
- Supply without invoice / incorrect invoice
- Invoice without supply
- ITC availed without receipt of goods/services
- Irregular distribution of credit by ISD
Quantum: Amount equivalent to tax evaded or ITC availed/passed on.
The Commissioner may also provisionally attach property (including bank accounts) of such beneficiary under Section 83.
(iii) Penalty under Section 122(1B) - E-Commerce Operators
An ECO liable to collect TCS under Section 52 is liable to penalty if it:
- Permits supply through it by an unregistered person (other than notified exempt persons)
- Allows inter-State supply by ineligible persons
- Fails to furnish correct details in Form GSTR-8
(iv) Penalty under Section 122(2) - Non-Taxable Persons
Any person (not a taxable person) who:
- Aids or abets any of the 21 offences
- Deals with goods/services knowing they are liable to confiscation
- Fails to appear before the officer when summoned
- Fails to issue invoice or account for it in books
Quantum: Penalty up to ₹25,000 (each under CGST and SGST/UTGST) or ₹50,000 (IGST).
Section 123 - Penalty for Failure to Furnish Information Return
If any person required to furnish information/return under Section 151:
- Fails to furnish without reasonable cause, OR
- Willfully furnishes false information/return
They shall be punishable with a fine which may extend to ₹10,000, and in case of continuing failure, a further fine of ₹100 per day subject to a maximum of ₹1 lakh.
Section 125 - General Penalty
Any person who contravenes any provision of the Act or rules for which no specific penalty is prescribed shall be liable to a penalty up to ₹25,000.
Section 129 - Detention, Seizure and Release of Goods in Transit
Goods transported in contravention of provisions are liable to detention/seizure. The owner can get them released on payment of:
- Applicable tax and penalty (if owner comes forward)
- Penalty = 200% of tax payable (if owner does not come forward)
Section 130 - Confiscation of Goods / Conveyance
Redemption fine (Section 130(2)): Instead of confiscation, the officer may give an option to pay a fine. For conveyances used for hire, the fine = tax payable on the goods transported.
- No order of confiscation shall be passed without opportunity of being heard [Section 130(4)]
- Title of confiscated goods vests in the Government [Section 130(5)]
- Confiscated goods can be disposed of after 3 months' reasonable time to pay fine [Section 130(7)]
Section 131 - Confiscation/Penalty Not to Interfere with Other Punishments
Confiscation or penalty under the Act does not prevent any other punishment to which the person is liable.
Section 132 - Prosecution and Punishment for Offences
Punishable Offences and Imprisonment Terms
| Amount of Tax Evaded / ITC Wrongly Availed / Refund Wrongly Taken | Punishment |
|---|---|
| Exceeds ₹5 crore | Imprisonment up to 5 years + Fine |
| Exceeds ₹2 crore (but not ₹5 crore) | Imprisonment up to 3 years + Fine |
| Exceeds ₹1 crore (but not ₹2 crore) | Imprisonment up to 1 year + Fine |
| Second or subsequent offence (under clause a/b/c/d) | Imprisonment up to 5 years + Fine |
The term "tax" for Section 132 includes: tax evaded + ITC wrongly availed/utilised + refund wrongly taken under CGST, SGST, IGST, UTGST, and Compensation Cess.
Offences Triggering Prosecution [Section 132(1) - Key Clauses]
- (a) Supplies goods/services without invoice with intention to evade tax
- (b) Issues invoice without supply leading to wrongful ITC/refund
- (c) Avails ITC using fake invoice or fraudulently without invoice
- (d) Collects tax but fails to pay to Government within 3 months
Cognizable vs. Non-Cognizable Offences
| Category | When | Nature | Bail |
|---|---|---|---|
| Cognizable and Non-Bailable | Tax evaded/ITC wrongly availed/refund wrongly taken > ₹5 crore | Serious | Only by Judicial Magistrate |
| Non-Cognizable and Bailable | All other offences | Less serious | Released by Deputy/Assistant Commissioner |
- Cognizable offence - Police can arrest without warrant; investigation without court permission
- Non-cognizable offence - Police cannot arrest without warrant; investigation requires court order
Safeguards for Arrested Person [Section 69]
- If arrested for cognizable offence: Must be informed in writing of grounds; produced before magistrate within 24 hours
- If arrested for non-cognizable/bailable offence: Released on bail by Dy./Asst. Commissioner
- All arrests must comply with Code of Criminal Procedure, 1973
Section 134 - Cognizance of Offences
No court shall take cognizance of any offence under GST except with the previous sanction of the Commissioner. No court inferior to a Court of Judicial Magistrate of First Class shall try any such offence.
Section 137 - Offences by Companies
Where an offence is committed by a company (body corporate, firm, or association):
- Every director, manager, secretary, or officer who was responsible for the conduct of business shall be deemed guilty of the offence and liable to be punished accordingly
- Exception: If they can prove the offence was committed without their knowledge or they exercised all due diligence
Section 138 - Compounding of Offences
Any offence may be compounded (settled by paying money instead of prosecution) either before or after institution of proceedings.
Who CANNOT compound:
- Person previously convicted for an offence under Section 132(1)(b)
- Person previously compounded for Section 132 offences more than once
Compounding amount:
| Offence Type | Compounding Amount |
|---|---|
| Offence under Section 132(1)(i) | 50% of tax involved, minimum ₹10,000 |
| Offence under Section 132(1)(ii) | 150% of tax involved, minimum ₹30,000 |
Source: CA Final GST, Navkar Institute - Chapters on Offences, Penalties and Prosecution (Sections 122-138)
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