Indirect Tax Laws · Offences and Penalties and Ethical Aspects under GST

Prosecution and Punishment for GST Offences

Updated 5 October 2026

Section 132 of the CGST Act makes serious GST offences, such as fake invoices, fraudulent ITC and non-payment of tax collected, punishable with imprisonment and fine. The term depends on the tax amount involved. To solve a question, identify the offence, find the amount, fix the punishment tier, then decide cognizable or bailable status and arrest power.

Understand Prosecution and Punishment for GST Offences

GST has two kinds of consequences for a default: civil (tax, interest, penalty) and criminal (prosecution). Section 132 deals with the criminal side. It lists the acts that count as offences and links the jail term to the amount of tax evaded, ITC wrongly availed or utilised, or refund wrongly taken.

The listed offences include supplying without an invoice with intent to evade tax, issuing an invoice without any supply, availing ITC on such an invoice, collecting tax but not paying it to the Government beyond three months from the due date, and other evasion, fraudulent ITC or fraudulent refund. They also include falsifying records, obstructing an officer, tampering with evidence, dealing in goods you know are liable to confiscation, and attempting or abetting any of these.

The tiers are the core of the topic. The amount ladder of ₹1 crore, ₹2 crore and ₹5 crore applies to the tax-based offences. The punishment turns on the amount of tax evaded, ITC wrongly availed or refund wrongly taken. Tax amount above ₹5 crore (₹500 lakh): imprisonment up to 5 years and fine. Above ₹2 crore up to ₹5 crore: up to 3 years and fine. Above ₹1 crore up to ₹2 crore: up to 1 year and fine. Three offences stay outside the ladder: falsifying records or giving false information with intent to evade tax (clause (f)), obstructing an officer (clause (g)) and tampering with evidence (clause (j)). They carry up to 6 months, or fine, or both, whatever the amount.

Repeat offenders are covered separately. Under section 132(2), a second or subsequent conviction for an offence under section 132 attracts imprisonment up to 5 years and fine. This sits outside the amount ladder.

Next comes the status of the offence. Only the offences in clauses (a)-(d) are cognizable and non-bailable, and only when the amount exceeds ₹5 crore. These are supply without invoice, fake invoice, ITC on fake invoice and non-payment of collected tax. All other offences are non-cognizable and bailable. This includes clauses (a)-(d) at ₹5 crore or below (the ₹2 crore to ₹5 crore and ₹1 crore to ₹2 crore tiers), and every offence in clauses (e)-(l). Arrest by GST officers under section 69 is available only for the cognizable and non-bailable offences, and only on the Commissioner's authorisation by order. For a non-cognizable and bailable offence, section 69 arrest is not available.

Two more provisions complete the picture. A court cannot take cognizance without the previous sanction of the Commissioner (section 134), and the offences are triable by a Magistrate of the First Class. For companies, section 137 makes persons in charge of the business liable along with the company, unless they prove the offence was without their knowledge or that they used due diligence. Section 135 lets the court presume a culpable mental state, so the accused must prove otherwise. Offences can also be compounded under section 138.

Key rules to remember

Tax amount above ₹5 crore: Amount > ₹500 lakh → imprisonment up to 5 years + fine; Amount means tax evaded, ITC wrongly availed or utilised, or refund wrongly taken. This tier covers the tax-based offences in section 132(1). For clauses (a)-(d), it makes the offence cognizable and non-bailable.
Tax amount above ₹2 crore up to ₹5 crore: ₹200 lakh < Amount ≤ ₹500 lakh → imprisonment up to 3 years + fine; Offence is non-cognizable and bailable. Arrest under section 69 is not available in this tier, because section 69 reaches only cognizable and non-bailable offences (clauses (a)-(d), above ₹5 crore).
Tax amount above ₹1 crore up to ₹2 crore: ₹100 lakh < Amount ≤ ₹200 lakh → imprisonment up to 1 year + fine; Non-cognizable and bailable. The Commissioner's arrest power under section 69 does not reach this tier. This tier covers the tax-based offences, not the offences in clauses (f), (g) and (j), which carry the 6-month punishment.
Lesser offences and repeat offenders: Falsifying records (clause (f)), obstructing an officer (clause (g)), tampering with evidence (clause (j)): up to 6 months, or fine, or both. Repeat conviction (section 132(2)): up to 5 years + fine; The 6-month punishment applies to clauses (f), (g) and (j) whatever the amount. Section 132(2) applies to a second or subsequent conviction for an offence under section 132, separate from the amount ladder.
Cognizable and non-bailable status: Offence in clause (a), (b), (c) or (d) of section 132(1) (supply without invoice, fake invoice, ITC on fake invoice, tax collected but unpaid beyond 3 months), AND amount > ₹500 lakh; All other offences, including those in clauses (e)-(l), are non-cognizable and bailable. Both conditions (clause and amount) must be met.
Arrest power (section 69): Commissioner's order + reason to believe + offence is cognizable and non-bailable (clauses (a)-(d), tax amount > ₹5 crore); The Commissioner must authorise arrest by order. An officer cannot arrest on his own. For offences up to ₹5 crore and for clauses (e)-(l), which are non-cognizable and bailable, section 69 arrest is not available.
Sanction and trial: Prosecution needs the Commissioner's sanction (s.134); trial by Magistrate of the First Class; A court cannot take cognizance without sanction.
Offences by companies (s.137): Person in charge liable unless he proves no knowledge or due diligence; Connivance, consent or neglect by a director, manager, secretary or other officer also makes that officer liable.

How to solve Prosecution and Punishment for GST Offences questions

Use this order for any prosecution question. It keeps your answer in provision-facts-conclusion form.

1Identify the act in the facts and match it to a section 132 offence: no invoice, fake invoice, ITC on fake invoice, tax collected but unpaid, evasion or fraud, false records, obstruction, and so on.
2Check intent or knowledge. Many offences need intent to evade tax or knowledge that goods are liable to confiscation. Note if the facts show it.
3Find the amount: tax evaded, ITC wrongly availed or utilised, or refund wrongly taken. Total it for the same offence as the question directs.
4If it is a tax-based offence, place the amount on the ladder: above ₹5 crore, above ₹2 crore up to ₹5 crore, or above ₹1 crore up to ₹2 crore. State the term and fine. If it is falsifying records (clause (f)), obstructing an officer (clause (g)) or tampering with evidence (clause (j)), state up to 6 months, or fine, or both. If the facts show a second or subsequent conviction, apply section 132(2): up to 5 years and fine.
5Decide the status: cognizable and non-bailable only if it is one of the offences in clauses (a)-(d) and the amount is above ₹5 crore. Otherwise non-cognizable and bailable.
6Test arrest under section 69: it is available only for a cognizable and non-bailable offence (clauses (a)-(d), above ₹5 crore), and the Commissioner must authorise it by order. If the offence is non-cognizable and bailable, say section 69 arrest is not available.
7Apply the special points: Commissioner's sanction for prosecution, company and officer liability under section 137, and the option of compounding under section 138.
8Write the conclusion in one sentence stating the punishment, the status and whether arrest is possible.

Quickest way: Amount ladder: 1, 2, 5 crore

When to use it: Use it for MCQs and short case questions where the amount and offence type are given.

Write 1 – 2 – 5 (crore) on your rough sheet. 1 to 2 crore means 1 year. 2 to 5 crore means 3 years. Above 5 crore means 5 years. The ladder is for the tax-based offences, judged by the tax, ITC or refund amount. Falsifying records (f), obstructing an officer (g) and tampering with evidence (j) carry up to 6 months, or fine, or both, whatever the amount.
Ask: is it one of the four fraud-type offences, that is, clauses (a)-(d)? If not, it is non-cognizable and bailable regardless of amount.
If yes and above 5 crore, mark cognizable and non-bailable, and arrest is possible with the Commissioner's order. If yes and 2 to 5 crore, mark non-cognizable and bailable, and section 69 arrest is not available.
Then check whether the question mentions a company. If so, add section 137 and the due diligence defence.

Common mistakes in Prosecution and Punishment for GST Offences

Treating every offence above ₹2 crore as cognizable and non-bailable, or allowing section 69 arrest in the ₹2 crore to ₹5 crore tier.
Students link arrest power to the higher punishment tiers and merge the two.
Fix: Cognizable and non-bailable needs an offence in clauses (a)-(d) and an amount above ₹5 crore. Between ₹2 crore and ₹5 crore the offence is non-cognizable and bailable, and section 69 arrest is not available. Offences in clauses (e)-(l) are always non-cognizable and bailable.
Applying the ₹1, ₹2 and ₹5 crore ladder to every offence listed in section 132(1), including falsifying records, obstruction or tampering.
Students treat the ladder as the punishment for the whole section.
Fix: The ladder applies to the tax-based offences, judged by the tax, ITC or refund amount. Falsifying records (clause (f)), obstructing an officer (clause (g)) and tampering with evidence (clause (j)) carry up to 6 months, or fine, or both. A second or subsequent conviction under section 132(2) attracts up to 5 years and fine.
Applying the thresholds to the turnover or the value of supply instead of the tax amount.
Questions give large invoice values and students read them as the relevant amount.
Fix: Use tax evaded, ITC wrongly availed or utilised, or refund wrongly taken. Convert the value to tax first.
Saying any GST officer can arrest.
Students forget the authorisation requirement.
Fix: State that the Commissioner must authorise arrest by order, on reason to believe, and only for cognizable and non-bailable offences.
Ignoring the intent or knowledge element.
Students memorise the tiers and skip the offence wording.
Fix: Quote the key words: intention to evade tax, fraudulently, knows or has reason to believe. Mention that section 135 presumes culpable mental state.
Forgetting that a company's directors and officers can be prosecuted.
The question names only the company and students stop at the entity.
Fix: Add section 137: persons in charge are liable unless they prove no knowledge or due diligence, and officers who consented, connived or neglected are liable too.
Mixing up civil penalty under sections 73/74 with prosecution under section 132.
Both follow the same fraud facts.
Fix: Remember they run separately. Penalty is a civil consequence. Prosecution is criminal and needs the Commissioner's sanction. State both if the question asks for all consequences.

Worked examples

Example 1

Alpha Traders Pvt. Ltd. supplied goods to unregistered buyers without issuing invoices, with the intention of evading tax. The Department establishes tax evasion of ₹3,20,00,000. Discuss the punishment, whether the offence is cognizable and bailable, and whether arrest is possible.

Show the solution

Offence: supply of goods without invoice with intention to evade tax. This is a section 132 offence and one of the four fraud-type offences in clauses (a)-(d).
Amount: ₹3,20,00,000 is above ₹2 crore and not above ₹5 crore.
Punishment: imprisonment up to 3 years and fine.
Status: cognizable and non-bailable status needs an amount above ₹5 crore. It is not met, so the offence is non-cognizable and bailable.
Arrest: section 69 arrest applies only to cognizable and non-bailable offences. This offence is non-cognizable and bailable, so the Commissioner cannot authorise arrest under section 69.
Company: persons in charge of the company's business are also liable under section 137, unless they prove lack of knowledge or due diligence.

Answer: Up to 3 years' imprisonment and fine. The offence is non-cognizable and bailable, and arrest under section 69 is not available. Prosecution needs the Commissioner's sanction, and the persons in charge of the company are also liable under section 137.

Example 2

Beta Enterprises issued tax invoices without any supply of goods, and its associate, Gamma Ltd., availed ITC of ₹6,00,00,000 on those invoices. Explain the offences, punishment, status of the offence and the arrest position.

Show the solution

Beta's act: issuing invoices without supply, leading to wrongful availment or utilisation of ITC. This is a section 132 offence.
Gamma's act: availing ITC using such invoices. This is a separate offence of the same fraud type.
Amount: ITC wrongly availed is ₹6,00,00,000, which is above ₹5 crore.
Punishment: imprisonment up to 5 years and fine for each person who committed the offence.
Status: the offences are in clauses (a)-(d) and the amount is above ₹5 crore, so they are cognizable and non-bailable.
Arrest: the Commissioner may authorise arrest of the persons concerned under section 69 on reason to believe. The arrested person must be informed of the grounds and produced before a Magistrate within 24 hours.
Procedure: prosecution requires the Commissioner's sanction under section 134, and the matter is tried by a Magistrate of the First Class. Compounding is a separate option under section 138, subject to its conditions.

Answer: Both Beta and Gamma commit offences punishable with up to 5 years' imprisonment and fine. The offences are cognizable and non-bailable, arrest can be authorised by the Commissioner under section 69, and prosecution needs his sanction.

Exam tips

Learn the 1, 2, 5 crore ladder with the term for each tier, and remember it applies to the tax-based offences, not to clauses (f), (g) and (j). Questions usually give an amount and ask for the punishment.
Always tie the amount to tax, ITC or refund, not invoice value. Convert if needed.
In status questions, check two conditions together: the offence must be in clauses (a)-(d) and the amount must be above ₹5 crore.
For arrest questions, first decide whether the offence is cognizable and non-bailable. If it is not, section 69 arrest is not available.
In case scenarios with companies, add a line on section 137 and the due diligence defence.
Close with the process points: Commissioner's sanction under section 134, trial by a Magistrate of the First Class and the compounding option under section 138.

Practice questions from Offences and Penalties and Ethical Aspects under GST

Prosecution and Punishment for GST Offences: frequently asked questions

What is the punishment under section 132 of the CGST Act?

For the tax-based offences, it depends on the tax amount. Above ₹5 crore, up to 5 years and fine. Above ₹2 crore up to ₹5 crore, up to 3 years and fine. Above ₹1 crore up to ₹2 crore, up to 1 year and fine. Falsifying records (clause (f)), obstructing an officer (clause (g)) and tampering with evidence (clause (j)) carry up to 6 months, or fine, or both. On a second or subsequent conviction, section 132(2) provides up to 5 years and fine.

Which GST offences are cognizable and non-bailable?

Only the offences in clauses (a)-(d) of section 132(1), that is, supply without invoice, issuing a fake invoice, availing ITC on it, and not paying tax collected beyond three months, and only when the amount exceeds ₹5 crore. All other GST offences, including those in clauses (e)-(l), are non-cognizable and bailable.

Who can order arrest under section 69 of the CGST Act?

Only the Commissioner, by an order authorising a CGST officer. He must have reason to believe that the person committed a cognizable and non-bailable offence, that is, a fraud-type offence involving tax above ₹5 crore. For non-cognizable and bailable offences, section 69 arrest is not available. The arrested person must be dealt with as required, including being produced before a Magistrate.

What is the difference between cognizable and non-cognizable offences under GST?

A cognizable offence allows arrest without a warrant. A non-cognizable offence ordinarily requires a warrant. Under GST, only the specified high-value fraud offences in clauses (a)-(d) (tax above ₹5 crore) are cognizable and non-bailable, and arrest also needs the Commissioner's authorisation under section 69.

Can directors be prosecuted for a company's GST offence?

Yes. Under section 137, persons in charge of the company's business are liable along with the company. They can escape liability only by proving the offence was committed without their knowledge or that they exercised due diligence.