GST Penalties and Amnesty: Section 122 and 128A of the CGST Act Explained

Section 122 of the CGST Act specifies monetary penalties for GST violations, including fake invoicing, incorrect ITC claims and tax evasion, while Section 128A provides a time-bound amnesty mechanism allowing waiver of interest and penalties for eligible non-fraud cases covering FY 2017–18 to 2019–20.

Understanding both provisions helps businesses manage GST risks, assess past exposures and take advantage of available relief where applicable. While Section 122 operates as an ongoing enforcement tool, Section 128A offers a one-time opportunity to resolve past disputes under Section 73 without interest and penalty liability.

Section 122: Penalty provisions under GST

Section 122 of the CGST Act outlines monetary penalties for various GST violations. These penalties are in addition to the applicable tax and interest liability and vary depending on the nature of the offence.

Penalties for specific offences (Section 122(1))

This provision covers a range of defaults, including:

• Failure to issue a proper tax invoice
• Issuing invoices without actual supply (fake invoicing)
• Incorrect or excess Input Tax Credit (ITC) claims
• Collecting tax but failing to deposit it with the government
• Supplying goods or services without GST registration

The penalty is ₹10,000 or the amount of tax involved, whichever is higher, and applies per offence.

Non-fraud cases (Section 122(2)(a))

Where tax is not paid, short paid, or ITC is wrongly availed for reasons other than fraud, the primary penalty provisions are governed by Section 73 of the CGST Act and not solely Section 122.

Penalty treatment:

• No penalty if tax and interest are paid before the issue of the show cause notice
• Up to 10% of tax or ₹10,000 (whichever is higher) may apply, depending on the timing of payment and proceedings

This typically applies to unintentional errors or procedural lapses.

Fraud or suppression cases (Section 122(2)(b))

In cases involving deliberate intent, such as tax evasion, fake invoicing or suppression of turnover, the penalty framework is primarily governed under Section 74 of the CGST Act, where the penalty can extend up to 100% of the tax amount, with reduced penalties available if dues are paid at earlier stages. Section 74 governs the primary penalty framework in fraud cases, though Section 122 may additionally apply for specific offences.

4. Penalty for abetment (Section 122(3))

Any person who assists or facilitates GST offences may be subject to a penalty of up to ₹25,000.

Section 128A: Waiver of interest and penalties (GST Amnesty Scheme)

Section 128A provides a dispute resolution mechanism by allowing taxpayers to settle certain past tax liabilities with relief from interest and penalties. This provision was introduced via the Finance (No. 2) Act, 2024 and implemented through relevant GST rules (including Rule 164) and CBIC circulars.

Scope and applicability

The scheme applies to:

• Cases involving non-fraud tax demands under Section 73
• Financial years 2017-18, 2018-19 and 2019-20
• Demands arising from show cause notices, statements or orders, including cases pending at adjudication or appeal stages, subject to conditions

Conditions to avail the waiver

To qualify for the waiver:

• The entire tax demand must be paid in full.
• Payment and application must be completed within the timelines prescribed under Rule 164 and related notifications (and not a single fixed date for all cases).
• Any pending appeal, revision or writ must be withdrawn before applying.
• Application must be filed electronically in prescribed forms (such as SPL-01 / SPL-02) on the GST portal.

Upon fulfilment of all conditions, interest and penalties are waived in full and the related proceedings are deemed concluded. 

No refund of already paid amounts

If a taxpayer has already paid interest or penalties, such amounts will not be refunded under this scheme. The benefit applies only to the waiver of unpaid dues. This restriction applies even if payment was made before opting for the scheme.

Special timeline note

The application window under Section 128A was initially time-bound and linked to notified deadlines under GST rules. Its availability depends on government notifications and any extensions issued from time to time.

Taxpayers should verify the latest CBIC notifications to confirm whether the scheme window is open, extended or closed for their specific case. Different timelines may apply in specific scenarios, such as reclassified demands or appellate orders.

Cases not eligible for waiver under Section 128A

The waiver applies only to interest and penalties arising from eligible non-fraud cases under Section 73 and does not cover the following:

• Cases involving fraud, wilful misstatement or suppression of facts (covered under Section 74)
• Penalties under Section 122 arising from fraudulent offences
• Late fees for the delayed filing of GST returns
• Erroneous refund claims
• Unpaid self-assessed tax liabilities, unless such liability is part of a formal Section 73 demand
• Interest related to periods outside the specified financial years

Difference between Section 122 and Section 128A

The table below outlines the main differences between Section 122 penalties and Section 128A waiver provisions under GST:

Practical insights for businesses

Businesses can apply the following practices to minimise GST penalties and manage past disputes effectively.

• Review past disputes: Assess FY 2017-20 cases to determine whether benefits under Section 128A were availed.
• Strengthen ITC controls: Many penalties arise from incorrect ITC claims. Maintaining accurate records and reconciling ITC regularly reduces this risk.
• Maintain documentation: Proper records help avoid penalties under Section 122 and support eligibility for relief under Section 128A.
• Track statutory deadlines: Missing timelines can lead to penalties and loss of available remedies. Monitor CBIC notifications regularly.
• Ensure correct payment methods: Use specified modes for demand settlement to avoid procedural issues that could affect waiver eligibility.

Conclusion

Section 122 enforces discipline by penalising GST violations, while Section 128A offers a limited opportunity to resolve past non-fraud disputes without interest and penalty liability. Businesses should review FY 2017–20 exposures, confirm eligibility based on the latest CBIC updates and act within the notified timelines. Timely tax payment, correct ITC claims and proper documentation remain the most effective ways to avoid penalties and maximise available relief.

TallyPrime helps businesses maintain accurate GST records, track notices, and generate error-free returns, supporting compliance with Section 122 obligations and ensuring the documentation needed for Section 128A applications is readily available.