Last updated: 4 October 2026. Section 122(1) of the CGST Act lists 21 offences a taxable person can commit, from supplying goods without an invoice to failing to register. For each one the penalty is ₹10,000 or the tax involved, whichever is higher. That makes ₹10,000 a minimum, not a cap, and it applies under the CGST Act with a matching amount under your State GST Act. Lesser breaches go to Section 122(3) or Section 125, which carry a ceiling of ₹25,000 instead.
Applicability Note: This guide is based on GST provisions applicable as of 4 October 2026, read from CBIC's active repository that day. Always verify the current position on gst.gov.in or with a GST professional before taking action.
Who Should Care?
This guide applies to:
- Registered businesses that have received a show cause notice naming Section 122
- Businesses buying from suppliers who may be issuing invoices without supplying anything
- Directors, partners and senior employees served with personal penalty notices under Section 122(1A)
- E-commerce operators who collect tax at source under Section 52
1. How to Read Every Figure in This Guide
Every amount below is the figure under the CGST Act. Each State and Union Territory GST Act has a matching provision, so in an intra-State case the same amount usually applies again under the State Act, and a ₹10,000 minimum tends to mean ₹20,000 in total.
2. The 21 Offences in Section 122(1)
Section 122(1) applies to a "taxable person" and has not been amended since it came into force on 1 July 2017. The 21 clauses fall into six groups:
| Group | Clauses | What the offence is |
|---|---|---|
| Invoices | (i), (ii), (xix) | Supply without an invoice, or an incorrect or false invoice; an invoice or bill without any supply; an invoice or document issued on another person's GSTIN |
| Tax collected but not paid | (iii), (iv) | Collecting an amount as tax, or collecting tax in breach of the Act, and not paying it for more than three months after it falls due |
| TDS and TCS | (v), (vi) | Not deducting under Section 51 or not collecting under Section 52, short deduction or collection, or not paying over what was deducted or collected |
| Credit and refunds | (vii), (viii), (ix) | Taking or using ITC without receiving the goods or services; obtaining a refund fraudulently; taking or distributing ITC in breach of Section 20 (the ISD rules) |
| Registration and records | (x), (xi), (xii), (xv), (xvi), (xvii) | Falsifying records or filing a false return to evade tax; not registering when liable; false registration details; suppressing turnover; not keeping books; not furnishing information called for, or giving false information in proceedings |
| Goods and officers | (xiii), (xiv), (xviii), (xx), (xxi) | Obstructing an officer; transporting taxable goods without the specified documents; dealing in goods liable to confiscation; tampering with evidence; disposing of goods that have been detained, seized or attached |
What it costs
The closing words of Section 122(1) set the penalty at ₹10,000 or an amount equal to the tax evaded, the TDS or TCS not deducted, collected or paid over, the ITC availed, passed on or distributed irregularly, or the refund claimed fraudulently, "whichever is higher". In practice:
- A small offence costs the ₹10,000 minimum. A business collects ₹8,000 CGST and ₹8,000 SGST on a sale and still hasn't paid it four months after the due date (clause (iii)). The tax under each Act is below ₹10,000, so the floor applies: ₹10,000 under CGST plus ₹10,000 under SGST, ₹20,000 in total.
- A large offence costs the full amount involved. A business takes ₹1,70,000 CGST and ₹1,70,000 SGST of credit on invoices for goods it never received (clause (vii)). The penalty follows the credit: ₹1,70,000 under each Act, ₹3,40,000 in total. Section 4 explains why this usually sits inside a Section 74 or 74A order and isn't charged a second time.
Failing to register when you are liable is clause (xi), so it falls under the same formula: ₹10,000 or the tax evaded, whichever is higher. The 10%-of-tax figure that some guides quote for non-registration comes from Section 122(2)(a). That sub-section applies to a registered person, so it can't govern someone who never registered.
3. Two Penalties That Reach Beyond the Taxpayer
Section 122(1A): the person behind the transaction
Section 122(1A) was inserted by section 126 of the Finance Act, 2020 and came into force on 1 January 2021 (Notification No. 92/2020-Central Tax dated 22 December 2020). It applies to "any person" who retains the benefit of a transaction under clause (i), (ii), (vii) or (ix), where the transaction was conducted at that person's instance. The penalty equals the tax evaded or the ITC availed or passed on. There is no ₹10,000 alternative.
Who counts as "any person", and whether the limb reaches transactions before 2021, is still disputed:
- In Mukesh Kumar Garg v. Union of India & Ors. (SLP(C) No. 18178/2025, order dated 4 August 2025), the Supreme Court granted leave on two questions: whether Section 122(1) can apply to a non-taxable person, and whether Section 122(1A) can apply to 2017–2020. It stayed recovery on deposit of 25% of the demand. The appeal is pending.
- The Bombay High Court, in Amit Manilal Haria & Ors. v. Joint Commissioner of CGST & Central Excise (WP No. 5001 of 2025, 25 February 2026), held that the limb cannot be used against employees who are not taxable persons and did not retain the benefit, and that it does not apply before 1 January 2021.
- The Gauhati High Court, in Mayank Bansal v. Union of India & Ors. (8 June 2026), read "any person" more widely than "taxable person". It held that the limb can be invoked for earlier transactions where it was in force when the show cause notice was issued, because it identifies who is liable rather than creating a new offence.
With the High Courts divided, a director or partner served under Section 122(1A) has arguments either way, and they turn on facts.
Section 122(1B): e-commerce operators
Section 122(1B) applies to an e-commerce operator liable to collect tax at source under Section 52. It came into force on 1 October 2023 (inserted by section 155 of the Finance Act, 2023, Notification No. 28/2023-Central Tax dated 31 July 2023). Its opening words were substituted, with effect from the same date, by section 144 of the Finance (No. 2) Act, 2024. It penalises an operator that allows a supply through its platform by an unregistered person who isn't exempt, allows an inter-State supply by someone not eligible to make one, or files wrong details in its Section 52(4) statement for supplies by persons exempt from registration.
The penalty is ₹10,000 or the tax that would have been payable had a registered person (not a composition taxpayer) made the supply, whichever is higher. Our Section 9(5) guide covers cases where the platform pays the tax itself.
4. Tax Short Paid or Wrong ITC: Section 122(2) and the No-Double-Penalty Rule
Section 122(2) covers a registered person who has not paid tax, short-paid it, received an erroneous refund, or wrongly availed or used ITC. It treats fraud and non-fraud cases separately.
Without fraud, wilful misstatement or suppression
Section 122(2)(a): ₹10,000 or 10% of the tax due, whichever is higher.
With fraud, wilful misstatement or suppression
Section 122(2)(b): ₹10,000 or the tax due, whichever is higher.
For tax relating to FY 2024-25 onwards, Section 74A(5) sets the penalty at 10% of the tax due or ₹10,000, whichever is higher, for non-fraud cases, and at the full tax due for fraud cases. Periods up to FY 2023-24 stay with Sections 73 and 74. Section 74A came into force on 1 November 2024 (Notification No. 17/2024-Central Tax dated 27 September 2024).
Section 75(13): "Where any penalty is imposed under section 73 or section 74 or section 74A, no penalty for the same act or omission shall be imposed on the same person under any other provision of this Act."
Circular No. 171/03/2022-GST dated 6 July 2022 applies this to fake invoices. A supplier who issues an invoice without any supply is not a person from whom tax is demanded under Section 73 or 74, because nothing was supplied. The supplier is liable to a penalty under Section 122(1)(ii). A buyer who availed and used credit on that invoice faces a demand, interest and penalty under Section 74, and Section 75(13) then bars a second penalty for the same act. So in the ₹3,40,000 example above, the buyer pays the penalty once, through the demand order, not twice.
On who decides the penalty, the Delhi High Court held in Rohit Garg v. Union of India & Ors. (W.P.(C) 8829/2026, judgment pronounced 7 September 2026) that where a contravention is adjudicated under Section 73 or 74, the related Section 122 penalty forms part of the same adjudication, so the officer deciding the demand can decide it too.
5. The Smaller Penalties: Section 122(3), Section 123 and Section 125
| Provision | Who or what | Penalty (CGST Act) |
|---|---|---|
| Section 122(3) | Aiding or abetting any of the 21 offences; dealing in goods you know or believe are liable to confiscation, or in services you know or believe breach the Act; not appearing when summoned; not issuing an invoice as the rules require, or not recording an invoice in your books | Up to ₹25,000 (a ceiling) |
| Section 123 | Not furnishing an information return under Section 150 within the period in the notice | ₹100 a day if the officer so directs, capped at ₹5,000 |
| Section 125 | Any breach of the Act or rules for which no penalty is separately provided | Up to ₹25,000 (a ceiling) |
Section 122(1) says "whichever is higher", which sets a floor. Sections 122(3) and 125 say "may extend to", which sets a maximum, and the officer can levy less. Where the invoice and e-way bill are with the goods, Circular No. 64/38/2018-GST dated 14 September 2018 directs a Section 125 penalty for a few listed minor e-way bill errors in place of detention. Our Section 129 detention guide lists them.
6. Your Protections: Section 126 and the Hearing
Section 126(1) bars a penalty for minor breaches or easily rectifiable documentation mistakes made without fraudulent intent or gross negligence. Its Explanation calls a breach "minor" where the tax involved is less than ₹5,000, and a mistake "easily rectifiable" where it is an error apparent on the face of the record. The penalty must also match the severity of the breach (Section 126(2)), cannot be imposed without a hearing (Section 126(3)), and must name the breach and the provision (Section 126(4)). Disclosing a breach before the officer finds it may count in your favour (Section 126(5)).
There is a catch. Section 126(6) says the section does not apply where the penalty is "either a fixed sum or expressed as a fixed percentage". The discretionary penalties in Sections 122(3) and 125 are clearly within Section 126. Whether it can bring a Section 122(1) penalty below the ₹10,000 floor is arguable, and the Act doesn't settle it.
Where a penalty isn't covered by proceedings under Sections 62, 63, 64, 73, 74, 74A, 129 or 130, Section 127 lets the proper officer levy it by order, again after a hearing.
7. Appealing a Penalty-Only Order
An appeal to the first appellate authority needs a pre-deposit. For an order that demands a penalty without any tax, the proviso to Section 107(6) requires 10% of the penalty. That proviso was substituted with effect from 1 October 2025 by section 129 of the Finance Act, 2025 (Notification No. 16/2025-Central Tax dated 17 September 2025).
The date of the show cause notice matters. In Rohit Garg, the Delhi High Court held that the substituted proviso does not govern appeals arising from show cause notices issued before 1 October 2025, even where the order came later. Those appeals follow Section 107(6) as it stood when the notice was issued. That is one High Court's ruling, so check your own jurisdiction. Our Section 107 appeal guide covers the time limits and the GSTAT route.
8. Two Special Penalties for Notified Goods
Section 122A (in force 1 October 2024, Notification No. 16/2024-Central Tax dated 6 August 2024) charges ₹1 lakh for each machine a manufacturer fails to register under a special procedure notified under Section 148. Section 122B (in force 1 October 2025, Notification No. 16/2025-Central Tax dated 17 September 2025) charges ₹1 lakh or 10% of the tax payable on the goods, whichever is higher, for breaching the track and trace mechanism under Section 148A. Both come on top of other penalties, and neither touches a business that doesn't deal in goods notified under those sections.
Key Takeaways
- Section 122(1) lists 21 offences. Each costs ₹10,000 or the tax involved, whichever is higher, under the CGST Act, with a matching amount under the State GST Act.
- ₹10,000 is a floor. Where the tax, credit or refund involved is larger, the penalty follows that amount.
- Section 75(13) bars a second penalty for the same act once a Section 73, 74 or 74A penalty is imposed. A buyer of fake-invoice credit pays the penalty through the demand order, not again under Section 122.
- Section 122(1A) can reach directors, partners and others who retain the benefit, but its reach to non-taxable persons and to pre-2021 periods is pending before the Supreme Court.
- Sections 122(3) and 125 cap lesser breaches at ₹25,000; Section 126 lets you argue for less.
- Appealing a penalty-only order needs 10% of the penalty where the notice was issued on or after 1 October 2025 (the Delhi High Court applies the old rule to earlier notices).
Frequently Asked Questions
What is the penalty under Section 122 of GST?
For the 21 offences in Section 122(1), ₹10,000 or the tax, credit or refund involved, whichever is higher, under each of the CGST and State GST Acts. Lesser breaches under Section 122(3) carry up to ₹25,000.
What is the GST penalty for not registering?
Failing to register when liable is clause (xi) of Section 122(1). The penalty is ₹10,000 or the tax evaded, whichever is higher, under each of the CGST and State GST Acts.
Can I be penalised under both Section 74 and Section 122 for the same fake invoice?
No. Section 75(13) bars a second penalty for the same act or omission once a penalty is imposed under Section 73, 74 or 74A. Circular No. 171/03/2022-GST dated 6 July 2022 applies this to a buyer who used credit on invoices without supply.
Can a company director be personally penalised under GST?
Under Section 122(1A), yes, if the director retained the benefit of a fake-invoice or wrong-credit transaction and it was conducted at their instance. High Courts disagree on non-taxable persons and on periods before 1 January 2021, and the Supreme Court is hearing the question in Mukesh Kumar Garg.
⚠️ For informational purposes only.
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