Taxation · E-Way Bill

Inspection, Verification, Detention and Penalty under E-Way Bill Rules

Updated 5 October 2026

Officers may intercept a conveyance and check the e-way bill and documents. The inspection is reported in Form GST EWB-03. If goods move in breach of the rules, they can be detained under section 129 CGST and released on paying the prescribed penalty or furnishing security. Solve by finding whether the goods are taxable or exempt, then applying the penalty rate.

Understand Inspection, Verification, Detention and Penalty

An e-way bill is a movement document. The law lets the tax department check that goods on the road are covered by it and by the invoice. This checking is called inspection and verification. The proper officer can intercept a conveyance to verify the e-way bill and the documents, for both inter-State and intra-State movement. The person in charge of the conveyance must carry the invoice or delivery challan and the e-way bill (or its number), in physical or electronic form.

The officer's work is recorded online in Form GST EWB-03. Part A is a summary of the inspection, recorded within 24 hours. Part B is the final report, recorded within 3 days of the inspection. The form creates a trail, so the same truck is not harassed again and again. Once a conveyance has been physically verified in one place, it should not be physically verified again in that State or in another State or Union territory. The exception is when specific information about tax evasion becomes available later.

Section 129 of the CGST Act applies to goods in transit that are in contravention of the Act or the rules, including the e-way bill rules. Examples are no e-way bill, an expired e-way bill or a mismatch with the goods. The goods and the conveyance can be detained or seized under section 129 and released on payment of the penalty or on furnishing security. This is not the same as confiscation under section 130, which is a more serious step.

Some specified minor discrepancies are treated differently. Under Circular 64/38/2018-GST, proceedings under section 129 are not to be initiated only for those specified minor discrepancies. The listed examples are a wrong PIN code where the address of the recipient is correct and the place of delivery is in the same State, a clerical error in the document number, and an HSN code error beyond the first 6 digits. For these, a nominal penalty under section 125 is levied: ₹250 under CGST and ₹250 under SGST (or ₹500 under IGST for inter-State movement). Not every error that looks small is covered. The relief does not extend beyond the circular's list, so do not apply it to other errors.

Detained goods are released only on payment of a penalty (or on furnishing security). Section 129(1) was substituted with effect from 1 October 2024 (Finance (No. 2) Act, 2024). The old rules that depended on whether the owner comes forward (50% of value less tax, and 5% of value for exempt goods) no longer apply. Now the amount depends only on whether the goods are taxable or exempt:

Taxable goods: 200% of the tax payable.
Exempt goods: the lower of 2% of the value of goods or ₹25,000.

Learn these two cases and the numerical questions become easy.

Key rules to remember

Interception and documents: Person in charge of conveyance must carry: invoice/challan/bill of supply + e-way bill or the e-way bill number in physical or electronic form (Rule 138A); Officer may intercept any conveyance to verify, for inter-State and intra-State movement. RFID applies only where the conveyance is mapped with an RFID device as notified.
Form GST EWB-03: Part A: summary of inspection within 24 hours | Part B: final report within 3 days of inspection; Filed online by the proper officer. It is the verification report, not something the transporter files.
No repeat physical verification: One physical verification of a conveyance in transit is generally enough; Repeat checking is allowed only if specific information about tax evasion is available afterwards.
Section 129 penalty: taxable goods: Penalty = 200% of tax payable on the goods; Applies to the tax on the goods (CGST + SGST, or IGST), whether or not the owner comes forward. Substituted w.e.f. 1 October 2024; the old 50%-of-value rule is repealed.
Section 129 penalty: exempt goods: Penalty = lower of 2% of value of goods or ₹25,000; Compute both and pick the lower. Applies whether or not the owner comes forward. The old 5% rule is repealed.
Release against security: Security (bond + bank guarantee) equal to the amount payable under the penalty rules; Goods can be released on furnishing this security instead of paying the penalty.

How to solve Inspection, Verification, Detention and Penalty questions

Use this order for any theory or numerical question on inspection, detention and penalty.

1Read the facts and find the contravention: no e-way bill, expired e-way bill, wrong vehicle or goods, or a minor error. If the facts show only a discrepancy listed in Circular 64/38/2018-GST (a wrong PIN code, but the address of the recipient is correct and the place of delivery is in the same State; a clerical error in the document number; or an HSN code error beyond the first 6 digits), section 129 proceedings are not initiated; a penalty of ₹250 under CGST and ₹250 under SGST (or ₹500 under IGST for inter-State movement) under section 125 applies. Do not extend this relief beyond the circular's list. Continue with the steps below for a real contravention.
2State the officer's power: the proper officer may intercept the conveyance and verify the e-way bill and documents; the inspection summary goes in Part A of Form GST EWB-03 within 24 hours and the final report in Part B within 3 days.
3Check whether the same conveyance was already physically verified. If yes, say it should not be verified again unless specific information on evasion exists.
4Decide the section: goods in transit in contravention of the CGST Act or rules (including the e-way bill rules) are detained or seized under section 129, with release on penalty or security.
5Classify the goods as taxable or exempt. Whether the owner comes forward does not change the penalty under the current provision.
6Pick the rate and compute it. Taxable goods: 200% of tax payable. Exempt goods: compute 2% of value and ₹25,000, and take the lower.
7State release: on payment of the penalty, or on furnishing security (bond and bank guarantee) of the same amount.
8Write a one-line conclusion with the final amount in rupees.

Quickest way: Two-case penalty rule and written format

When to use it: Use for MCQs on penalty amounts and for 5 to 6 mark written answers where you must compute and conclude.

Remember two cases only: taxable goods = 200% of tax; exempt goods = lower of 2% of value or ₹25,000.
In MCQs, spot the trap first: exempt goods always have the ₹25,000 cap, and taxable goods have no cap.
Remove options that apply a percentage to the value for taxable goods. The 200% is on tax, not value.
Ignore the 'owner comes forward' wording; it no longer changes the rate.
In written answers use this format: Provision (section 129, release conditions), Facts (goods, value, tax), Working (one line per figure), Conclusion (amount and release).
Show each calculation on its own line so you earn step marks even if one figure goes wrong.

Common mistakes in Inspection, Verification, Detention and Penalty

Applying 200% to the value of goods instead of the tax.
Students remember '200%' and forget what it is applied to.
Fix: Write 'tax payable' beside 200% every time. For taxable goods, the base is the tax, not the value.
Forgetting the lower-of rule for exempt goods.
Students compute 2% of value and stop there.
Fix: Always compute both amounts and choose the lower of the percentage figure and ₹25,000.
Saying Form GST EWB-03 is filed by the transporter.
Most e-way bill forms are filled by suppliers or transporters.
Fix: Remember that EWB-03 is the officer's verification report, with Part A (24 hours) and Part B (3 days).
Mixing up section 129 and section 130.
Both deal with goods in contravention.
Fix: Section 129 is detention and seizure of goods in transit, with release on payment of penalty or security. Section 130 is confiscation. Use 129 for goods in transit in contravention of the Act or rules, including e-way bill violations.
Using the old owner-comes-forward rates (50% of value less tax, or 5% for exempt goods).
Older notes and books show the pre-October-2024 provision.
Fix: Use the substituted section 129(1): 200% of tax for taxable goods and the lower of 2% of value or ₹25,000 for exempt goods, in every case.
Allowing repeated physical verification of the same vehicle.
Students think officers in every State can check again.
Fix: State the rule: once physically verified, no further physical verification unless specific evasion information is available later.
Treating every minor or clerical error as free from section 129 detention.
Students remember the nominal penalty under section 125 and assume it covers any small mistake.
Fix: Apply the relief in Circular 64/38/2018-GST only to the discrepancies it lists: a wrong PIN code where the address of the recipient is correct and the place of delivery is in the same State, a clerical error in the document number, or an HSN code error beyond the first 6 digits. Do not extend the relief beyond that list.

Worked examples

Example 1

A truck carrying taxable goods of ₹10,00,000 (taxable value) is intercepted on an inter-State route without an e-way bill. IGST at 18% was charged on the invoice. Compute the penalty to release the goods under section 129.

Show the solution

Contravention: goods moved without the e-way bill, so section 129 applies.
Goods are taxable, so penalty = 200% of tax payable.
Tax payable (IGST) = 18% × ₹10,00,000 = ₹1,80,000.
Penalty = 200% × ₹1,80,000 = ₹3,60,000.
Release is on payment of this penalty, or on furnishing security (bond and bank guarantee) for the same amount.

Answer: Penalty is ₹3,60,000, payable for release (or security of the same amount).

Example 2

Exempt goods of value ₹4,00,000 are detained in transit for a violation of the e-way bill rules. Compute the penalty, whether or not the owner comes forward.

Show the solution

Goods are exempt, so the penalty is the lower of 2% of value and ₹25,000.
2% × ₹4,00,000 = ₹8,000.
₹8,000 is lower than ₹25,000, so penalty = ₹8,000.
The result is the same whether or not the owner comes forward.
Release is on payment of the penalty, or on security of the same amount.

Answer: Penalty is ₹8,000 in both cases.

Exam tips

Learn the two penalty cases by heart: taxable = 200% of tax; exempt = lower of 2% of value or ₹25,000. Most numerical MCQs are one of these.
In written answers, always begin with the provision (section 129) before the working. Provision-facts-conclusion earns more marks than the number alone.
Check the 24-hour and 3-day timings for Form GST EWB-03 and say which part is which; this is a favourite one-mark MCQ.
Read the question for the word 'exempt'. It decides the formula.
Keep section 129 (detention, release on penalty) separate from section 130 (confiscation) in theory answers.
If the question describes only a discrepancy listed in Circular 64/38/2018-GST, such as a wrong PIN code with the recipient's address correct and the place of delivery in the same State, or a clerical error in the document number, do not apply section 129. Cite the circular and state the ₹250 penalty each under CGST and SGST (or ₹500 under IGST) under section 125. Do not extend this relief beyond the circular's list.

Practice questions from E-Way Bill

Inspection, Verification, Detention and Penalty: frequently asked questions

What is Form GST EWB-03?

It is the report in which the proper officer records the inspection of goods in transit. Part A is a summary recorded within 24 hours of the inspection. Part B is the final report recorded within 3 days of the inspection.

What is the penalty under section 129 for moving taxable goods without an e-way bill?

Section 129(1), as substituted w.e.f. 1 October 2024, sets the penalty at 200% of the tax payable on the goods. It does not matter whether the owner comes forward. Goods can also be released on furnishing security of the same amount.

What is the penalty for exempt goods detained under section 129?

It is the lower of 2% of the value of the goods or ₹25,000. The same rule applies whether or not the owner comes forward. The earlier 5% rule is no longer in force.

Can the same vehicle be checked again after verification?

Generally no. Once a conveyance has been physically verified in one place, it should not be physically verified again in that State or any other State or Union territory. The exception is when specific information about tax evasion becomes available afterwards.

What is the difference between detention and confiscation?

Section 129 applies to goods in transit in contravention of the CGST Act or rules, including the e-way bill rules. The goods are detained or seized and released on payment of the penalty or on furnishing security. Confiscation under section 130 is a stricter action under which the goods can be taken over by the Government, with the owner allowed to pay a fine in lieu of confiscation where the law permits.