What does this section say?

Section 122 is one of the most important penalty provisions under the CGST Act. It prescribes penalties for various offences committed by taxable persons as well as other persons who assist or participate in GST violations. The primary objective of this section is to ensure compliance with GST laws and discourage tax evasion, fraudulent transactions, fake invoicing, and wrongful claims of Input Tax Credit (ITC).

The section covers a wide range of offences. These include supplying goods or services without issuing a tax invoice, issuing invoices without actual supply of goods or services, collecting GST but failing to deposit it with the Government, wrongfully availing or utilizing ITC, obtaining refunds through fraud, failing to obtain mandatory GST registration, falsifying records, destroying evidence, and obstructing GST officers during inspection, search, or investigation proceedings.

For most offences, the penalty is ₹10,000 or the amount of tax involved, whichever is higher. In cases involving fraud, fake invoices, or wrongful ITC claims, the penalty may be equal to the tax evaded. Persons who knowingly aid, abet, or facilitate such offences may also be penalized. The provision is frequently invoked in cases involving fake ITC rackets and fraudulent billing arrangements.

Section 122 plays a critical role in protecting government revenue and maintaining the integrity of the GST system. It acts as a deterrent against deliberate non-compliance while encouraging taxpayers to maintain proper records, issue genuine invoices, and comply with all GST requirements.

A taxable person commits an offence under Section 122 if he:

1. Supplies goods/services without issuing a tax invoice or issues a false/incorrect invoice.
2. Issues an invoice without actual supply of goods or services (fake invoice).
3. Collects GST but does not deposit it with the Government within 3 months.
4. Collects tax illegally and fails to pay it to the Government within 3 months.
5. Fails to deduct TDS, short deducts TDS, or deducts TDS but does not deposit it.
6. Fails to collect TCS, short collects TCS, or collects TCS but does not deposit it.
7. Avails or utilizes Input Tax Credit (ITC) without actual receipt of goods/services.
8. Fraudulently obtains GST refund.
9. Wrongly distributes or passes ITC in violation of GST provisions.
10. Manipulates financial records, creates fake accounts/documents, or furnishes false information to evade tax.
11. Fails to obtain GST registration despite being liable for registration.
12. Furnishes false information while obtaining or amending registration.
13. Obstructs a GST officer in discharge of official duties.
14. Transports taxable goods without prescribed documents (e.g., invoice/e-way bill).
15. Suppresses turnover leading to tax evasion.
16. Fails to maintain prescribed books of account and records.
17. Fails to furnish information/documents called for by an officer or furnishes false information.
18. Supplies, transports, or stores goods that are liable for confiscation.
19. Issues invoices/documents using another person's GSTIN.
20. Tampers with or destroys material evidence or documents.
21. Disposes of or tampers with goods that have been detained, seized, or attached by the department.

Practical Categorization of Section 122 Offences

Penalty under Section 122

The penalty is ₹10,000 or the amount of tax involved (tax evaded, ITC wrongly availed, refund wrongly claimed, TDS/TCS not paid), whichever is higher.

Memory Trick

"I-T-T-I-R-O-M-E"

• I – Invoice offences
• T – Tax collected not paid
• T – TDS/TCS defaults
• I – ITC violations
• R – Registration defaults
• O – Obstruction of officers
• M – Movement of goods violations
• E – Evidence tampering & tax evasion

Example

A business issues fake invoices worth ₹50 lakh without actual supply and passes fraudulent ITC to another company. The penalty may be equal to the tax amount involved.

Key Points

• Covers major GST offences and frauds.
• Penalty is ₹10,000 or tax amount involved, whichever is higher.
• Applies to fake invoices and wrongful ITC.
• Can also penalize persons assisting in tax evasion.

One-Line Summary

Section 122 imposes significant penalties for GST offences, tax evasion, and fraudulent transactions.