Section 122 — Penalty for Specified Offences
Penalty of Rs. 10,000 or the tax amount involved, whichever is HIGHER, for 21 specified offences including:
(a) Supply without invoice or with false invoice
(b) Issuing invoice without supply (fake invoice — the most serious GST offence)
(c) Collecting tax but not depositing with government within 3 months
(d) Availing ITC without actual receipt of goods/services
(e) Obtaining refund fraudulently
(f) Falsifying financial records or producing fake accounts/documents
(g) Obstructing officer in discharge of duties
(h) Transporting taxable goods without documents (e-way bill violations)
(i) Suppressing turnover leading to evasion
Section 132 — Prosecution (Criminal Proceedings)
Prosecution (criminal case in court) can be initiated for offences involving tax amount above specified threshold:
| Offence | Threshold | Punishment |
|---|
| Tax evasion (any of the 21 offences above) | Rs. 2 crore+ | Up to 5 years imprisonment + fine |
| Tax evasion (repeat offender) | Rs. 2 crore+ | Up to 5 years (no minimum) |
| Fake invoice (without supply) | Rs. 5 crore+ | Up to 5 years + fine |
| Fake invoice (without supply) | Rs. 2-5 crore | Up to 3 years + fine |
| Fake invoice (without supply) | Rs. 1-2 crore | Up to 1 year + fine |
| Obstructing officer | Any amount | Up to 6 months + fine |
Section 132 — Arrest Provisions
The Commissioner can authorize arrest of a person who has committed offences under Section 132 involving tax amount exceeding Rs. 5 crore. For amounts between Rs. 2-5 crore: arrest only for cognizable and non-bailable offences (fake invoices). Below Rs. 2 crore: no arrest, only prosecution through court.
Fake Invoice Crackdown
The GST department has identified and prosecuted thousands of fake invoice rackets since 2020. DGGI (Directorate General of GST Intelligence) conducts coordinated nationwide drives. Penalties: 100% of tax + prosecution + arrest. If you receive ITC from a supplier who is later found to be a fake invoicer — your ITC will be reversed, and you may face proceedings even if you were an innocent buyer. Due diligence on suppliers is now a business necessity.
Section 138 — Compounding of Offences
Offences (other than those involving fake invoices above Rs. 5 crore or repeat offenders) can be compounded by paying a compounding fee. Amount: minimum 50% of tax involved, maximum 150% of tax involved. Compounding closes criminal proceedings — no trial, no conviction.
Cannot be compounded: (a) offences involving tax above Rs. 5 crore with fake invoices, (b) repeat offenders who have already compounded once, (c) persons convicted under the Act.
E-Way Bill Violations — Section 129
Transporting goods without a valid e-way bill (or with expired e-way bill) leads to:
(a) Detention of goods and vehicle.
(b) Release on payment of applicable tax + penalty equal to 200% of tax (if owner comes forward) or 50% of value of goods + penalty (if owner does not come forward).
(c) If not released within 7 days: goods may be confiscated through proceedings under Section 130.
This is the most commonly encountered GST penalty in practice — thousands of vehicles are intercepted daily across India for e-way bill violations. Even genuine errors (expired e-way bill by a few hours, Part B not updated after vehicle change) result in detention and penalty.
Disclaimer
This article is for general informational and educational purposes only. Consult a qualified Chartered Accountant, Tax Consultant, or GST Practitioner before acting. TaxClue Consultech Pvt Ltd accepts no liability. All drafts and templates are illustrative only.
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❓ Frequently Asked Questions
What is the penalty for issuing fake invoices under GST?
Issuing invoices without actual supply of goods or services is the most serious GST offence. Consequences: (a) penalty equal to 100% of the tax involved under Section 122, (b) prosecution under Section 132 with imprisonment up to 5 years for amounts above Rs. 5 crore, up to 3 years for Rs. 2-5 crore, (c) arrest without warrant if amount exceeds Rs. 5 crore, (d) ITC reversal for ALL recipients who used the fake invoices, (e) GSTIN cancellation. The government has cracked down heavily on fake invoice rackets — DGGI has detected evasion of over Rs. 1 lakh crore through fake invoices since GST implementation.
Can a GST officer arrest a person?
Yes — under Section 69, the Commissioner can authorize arrest of a person who has committed offences under Section 132 where the tax amount involved exceeds Rs. 5 crore. For cognizable and non-bailable offences (fake invoices): arrest possible even for amounts between Rs. 2-5 crore. The arrested person must be produced before a Magistrate within 24 hours. Bail provisions: for amounts above Rs. 5 crore (non-bailable offence), bail is at the discretion of the court with stringent conditions. For amounts below Rs. 5 crore: bailable offence, bail as a matter of right.
What happens if goods are transported without e-way bill?
The goods and vehicle are detained/seized under Section 129. Release requires payment of: (a) applicable tax + penalty of 200% of tax (if the owner comes forward and pays), or (b) 50% of value of goods as penalty (if owner does not come forward, plus security for the tax). If goods are not released within 7 days: confiscation proceedings under Section 130 are initiated. Even minor violations (expired e-way bill, wrong vehicle number in Part B) attract detention. Genuine mistakes should be documented and argued before the detaining officer.
Can GST offences be compounded?
Yes — under Section 138, most GST offences can be compounded by paying a compounding fee between 50% and 150% of the tax involved. Compounding closes the criminal proceedings without trial or conviction. However, certain offences CANNOT be compounded: (a) fake invoice offences where tax exceeds Rs. 5 crore, (b) repeat offenders who have already compounded once, (c) persons already convicted. Application for compounding is made to the Commissioner, who has discretion to grant or reject.
What is DGGI and what role does it play in GST enforcement?
DGGI (Directorate General of GST Intelligence) is the apex intelligence organization under CBIC responsible for detecting and investigating GST evasion. DGGI officers have powers of search, seizure, and arrest. They conduct: (a) intelligence gathering on evasion patterns, (b) coordinated nationwide drives against fake invoice rackets, (c) investigation of large-scale evasion cases, (d) analysis of data analytics to identify mismatches and suspicious transactions. DGGI has detected evasion worth several lakh crores since GST implementation and is the primary enforcement arm for serious GST fraud.
