The section begins by defining the offences that will result in a penalty, in addition to the requirement to pay tax and applicable interest. Some of the offences listed in this section may also be prosecuted under Section 132, depending on the gravity of the offence defined in that section: 

The section is divided into 3 main parts: 

Section 122(1): a list of 21 types of offences that will lead to a penalty of

Tax amount involved 
OR  
Rs. 10,000 (CGST)  
[WHICHEVER IS HIGHER] 

  1. ‘Supply in Black’ refers to the provision of goods or services, or both, without or with a false invoice. 
  2. ‘Bogus Invoicing’ Issuing invoices without providing goods or services. 
  3. Collecting GST as per the tax laws but failing to pay it to the government within three months of the due date. 
  4. Collecting GST in contravention of the law but failing to pay it to the government within three months of the due date. 
  5. Failure to deduct under Section 51 (TDS) or deduction of less than the required tax amount 
  6. Failure to deduct under Section 52 (TCS) or deduction of less than the required tax amount 
  7. ITC is obtained or used without the actual receipt of goods or services. 
  8. Fraudulent Refund Claim 
  9. Distribution of ITC through Input Service Distributor under section 20  
  10. falsifies or replaces Accountancy records 
  11. When liable under Section 22, failure to obtain registration is a crime. 
  12. False information about registration particulars is provided. 
  13. Hinders an officer that is performing necessary duties 
  14. Transports any taxable goods without the use of a document cover 
  15. Reduces turnover, which leads to tax evasion. 
  16. Failure to keep proper books and records 
  17. Failure to provide proper books and records as directed by the officers 
  18. Providing or transporting goods that are subject to confiscation under the law 
  19. Uses the registration number of another registered person to issue an invoice or document. 
  20. Any material evidence or document is tampered with or destroyed. 
  21. Disposes of or tampers with goods that have been seized or attached 

Section 122(1A): If a person retains or passes on the benefit obtained through the bogus transactions mentioned in Offence Points (1), (2), (7), and (9) above, that person is penalized at 100% of the tax amount obtained through such bogus transactions. 

Penalty: 100% of the Tax Amount 

Section 122(2): this subsection focuses on the intention behind the offence I.e. 

  • Fraud, Willful Misstatement or Suppression of Facts is NOT Involved (Subject to Section 73) 

10% of the Tax Amount Involved 
OR 
Minimum Rs. 10,000 of Penalty 
[WHICHEVER IS HIGHER] 

  • Fraud, Willful Misstatement or Suppression of Facts is Involved (Subject to Section 74) 

100% of the Tax Amount Involved 
OR 
Minimum Rs. 10,000 of Penalty 
[WHICHEVER IS HIGHER] 

Section 122(3): If a person assists, abets, or aids in the commission of an offence but is not directly involved in the offence or is a party to the offence, or if a person avoids summons or fails to produce documents. 

Penalty: Up to Rs. 25,000 

Section 125: Offenses that are not mentioned above or in any other penalty section but in some way harm the law, affect the Government’s GST revenue stream, or are morally wrong will be dealt with in this section under the heading of General penalty. This section states that a flat-rate penalty of Rs. 25,000 is levied on the tax payer following the confirmation of the offence. 

Penalty: Up to Rs. 25,000 

A normal, regular, and honest tax payer has nothing to worry about because the situation described above involves the intent to defraud the department for personal benefits, which is prohibited by law. The proper maintenance of books and documents to provide a legitimate audit trail when required, as well as accurate ITC reconciliation, can be the two driving forces behind regular GST compliance. 

Because both tasks are in the hands of the taxpayer, manual errors are unavoidable when analysing data. Finsights steps in and eliminates the possibility of manual errors by automating the entire bookkeeping and ITC reconciliation process. Furthermore, it ensures that the process time is reduced by more than half and that it is user-friendly so that anyone can access and trust it for their complaint needs. Take advantage of the free trial today.

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