Section 122A of CGST explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 122A of the CGST Act, 2017 imposes a penalty of ₹1 lakh for every machine not registered by a manufacturer of notified goods (such as pan masala, gutkha and specified tobacco products) who is required to register packing machines under the special procedure. In addition, every unregistered machine is liable to seizure and confiscation, though it will not be confiscated if the penalty is paid and the machine is registered within three days of the confiscation communication.
What Section 122A Says — In Plain English
Section 122A was inserted by the Finance Act, 2024 to strengthen compliance in the pan masala and tobacco sector. It provides that where a registered person, engaged in the manufacture of goods notified under the special procedure prescribed under Section 148, acts in contravention of that special procedure by failing to register a machine used in the manufacture, he shall be liable to a penalty of ₹1 lakh for every machine not so registered.
Put simply: if you make pan masala or notified tobacco products and you run packing machines, each machine must be declared to the department. Every machine you leave undeclared costs you ₹1 lakh and can be seized. Sub-section (2) further provides that every such unregistered machine shall be liable for seizure and confiscation. However, the machine will not be confiscated if the penalty under sub-section (1) is paid and the machine is registered in accordance with the special procedure within three days of the receipt of the communication of the order of confiscation.
Clause / Sub-section Breakdown
| Provision | Effect |
|---|---|
| Sub-section (1) | ₹1 lakh penalty per unregistered machine. |
| Sub-section (2) | Each unregistered machine liable to seizure and confiscation. |
| Escape from confiscation | Pay the penalty and register the machine within 3 days of the confiscation order. |
| Governing procedure | Special procedure under Section 148; details in Form GST SRM-I. |
| Inserted by | Finance Act, 2024 (anti-evasion measure). |
Applicability & Scope
Section 122A applies specifically to manufacturers of goods notified under the special procedure issued by the Government (through Notification No. 04/2024-Central Tax and related notifications) for packing machines used in the manufacture of pan masala, unmanufactured tobacco, hookah/chewing tobacco, jarda scented tobacco, gutkha and similar products. Such manufacturers must furnish details of their packing machines in Form GST SRM-I and comply with the special procedure. Failure to register any machine triggers the penalty and confiscation provisions of Section 122A. Manufacturers outside these notified goods are not touched by this section.
Worked Examples
Example 1. Suppose a pan masala manufacturer operates five packing machines but registers only three of them in Form GST SRM-I, leaving two machines unregistered in breach of the special procedure.
| Particulars | Detail |
|---|---|
| Machines operated | 5 |
| Machines registered | 3 |
| Machines unregistered | 2 |
| Penalty rate | ₹1,00,000 per machine |
| Total penalty under Section 122A | ₹2,00,000 |
The manufacturer faces a penalty of ₹2,00,000 (2 machines × ₹1 lakh). Both unregistered machines are liable to seizure and confiscation, but they will escape confiscation if the ₹2,00,000 penalty is paid and both machines are registered within three days of receiving the confiscation order.
Example 2. A jarda scented tobacco maker adds a new packing machine mid-year and starts using it without declaring it in SRM-I. On inspection, that single machine is found unregistered. The penalty is ₹1,00,000 (1 × ₹1 lakh), and the machine is liable to seizure. If the maker pays ₹1,00,000 and files the SRM-I registration for that machine within three days of the confiscation order, confiscation is avoided though the ₹1 lakh penalty still stands.
Step-by-Step in Practice
1. Identify every packing machine used for notified goods. 2. Declare each machine in Form GST SRM-I before use, including make, capacity and electricity rating. 3. Report production and clearance in Form GST SRM-II as required. 4. If any machine is found undeclared, expect a ₹1 lakh-per-machine penalty and a seizure/confiscation notice. 5. To save the machine, pay the penalty and complete SRM-I registration within three days of the confiscation communication. 6. Keep SRM records current whenever machines are added, removed or altered.
Common Mistakes & Practical Notes
- Treating the ₹1 lakh penalty as a single flat amount — it is per unregistered machine.
- Adding or replacing a machine without updating Form GST SRM-I before use.
- Assuming paying the penalty alone saves the machine — you must also register it within three days to avoid confiscation.
- Overlooking that the section only covers Section 148 notified goods (pan masala, tobacco and similar), not all manufacturers.
- Neglecting SRM-II production/clearance reporting alongside SRM-I machine registration.
Penalties, Timelines & Related Sections
The core penalty is ₹1 lakh per unregistered machine, plus liability to seizure and confiscation; the critical timeline is the three-day window after the confiscation order to pay and register and thereby avoid confiscation. Machine details go in Form GST SRM-I and production/clearance in SRM-II. Related provisions: Section 148 (special procedure for certain processes), Section 122 (general penalty for offences), Section 130 (confiscation of goods or conveyances), Section 129 (detention and seizure), and the special-procedure notifications carrying Forms GST SRM-I and SRM-II.
Recent Amendments & Context
Section 122A was inserted by the Finance Act, 2024 as part of a targeted crackdown on evasion in the high-risk pan masala and tobacco sector. It complements the Section 148 special procedure notified in early 2024 (Notification No. 04/2024-Central Tax and follow-ups), which mandated machine-level registration through Forms SRM-I and SRM-II. Together, the machine-registration procedure and the Section 122A penalty create a strong deterrent against running undeclared capacity in these commodities.