Section 132 of GST Act: Punishment for certain offences

Explanation of CGST Section 132(1)

Section 132(1) of the Central Goods and Services Tax (CGST) Act, 2017 deals with the offenses related to GST fraud and prescribes criminal penalties for violations. This section primarily targets tax evasion, fraudulent invoicing, wrongful Input Tax Credit (ITC) claims, and other tax-related offenses.

Key Offenses Under Section 132(1):

1. Supplying Goods or Services Without Issuing an Invoice (Clause a):
   • If a person supplies goods or services but does not issue an invoice (as per GST rules) to evade tax, it is a punishable offense.
2. Issuing Fake Invoices Without Actual Supply (Clause b):
   • Issuing invoices or bills without actually supplying goods/services to fraudulently claim ITC or obtain refunds is a violation.
3. Fraudulent Availment of ITC (Clause c):
   • Claiming ITC based on fake invoices (as per Clause b) or without any invoice at all is a serious offense.
4. Failure to Deposit Collected Tax (Clause d):
   • If a business collects tax from customers but does not deposit it with the government within three months of the due date, it is a criminal offense.
5. Tax Evasion or Fraudulent Refunds (Clause e):
   • If a person evades tax or fraudulently claims a refund, even if not covered under Clauses (a) to (d), they are punishable.
6. Falsification of Financial Records (Clause f):
   • Maintaining fake accounts, falsifying documents, or providing false information to evade tax is an offense.
7. Dealing with Goods Liable for Confiscation (Clause h):
   • If a person knowingly deals with goods that are liable to be confiscated under GST laws (e.g., smuggled goods, tax-evaded stock), they are punishable.
8. Dealing with Illegal Services (Clause i):
   • If a person receives or engages in services that violate GST provisions, they are liable for punishment.
9. Attempting or Assisting in GST Fraud (Clause l):
   • If a person helps or attempts to commit any offense under clauses (a) to (f), (h), or (i), they are also punishable.

Punishments Under Section 132(1):

Key Amendments (Finance Act, 2023):

• Clause (g), (j), and (k) have been omitted, meaning those offenses are no longer punishable under this section.
• The list of punishable offenses for attempts/abetments (Clause l) has been modified to exclude certain clauses.

Section 132(1) serves as a deterrent against tax fraud under the GST regime. It imposes strict penalties, including imprisonment and fines, ensuring compliance with tax laws. Businesses and individuals should ensure they follow GST rules to avoid criminal liability under this section.

Explanation of CGST Section 132(2)

Repeat Offenders Face Stricter Punishment

• If a person is convicted of an offense under CGST Section 132(1) and is later convicted again for a similar offense, they will face harsher penalties.
• For the second and every subsequent conviction, the punishment is:
  • Imprisonment up to 5 years, and
  • A fine (amount not specified in the section).

Key Takeaways

1. No monetary threshold – Unlike Section 132(1), which prescribes different punishments based on the amount of tax evaded, Section 132(2) applies uniformly to all repeat offenses.
2. Stricter punishment – Even if the second offense involves a smaller amount of tax evasion, the imprisonment term can still be up to 5 years.
3. Deterrent for habitual tax evaders – This section aims to prevent repeat violations by imposing severe consequences.

Example:
If a person is first convicted for issuing fake invoices and later convicted again for another GST fraud (e.g., tax evasion or falsifying accounts), they will face up to 5 years of imprisonment and a fine, regardless of the tax amount involved.

Section 132(2) ensures that repeat offenders under GST laws do not escape with lenient penalties. It serves as a strong deterrent against habitual tax fraud and enforces stricter compliance.

Explanation of CGST Section 132(3)

Minimum Imprisonment Requirement

This section establishes a minimum punishment for serious GST offenses under Section 132(1) and repeat offenses under Section 132(2).

Key Provisions:

1. Mandatory Minimum Imprisonment of 6 Months
   • The imprisonment cannot be less than six months for the following cases:
     • Clause (i) of Section 132(1): Tax evasion or fraudulent ITC/refund exceeding ₹5 crore.
     • Clause (ii) of Section 132(1): Tax evasion or fraudulent ITC/refund between ₹2 crore and ₹5 crore.
     • Clause (iii) of Section 132(1): Fraudulent invoicing (Clause b) involving amounts between ₹1 crore and ₹2 crore.
     • Section 132(2): Repeat offenses under Section 132.
2. Exception – Special & Adequate Reasons
   • If the Court finds special and adequate reasons, it may award less than six months of imprisonment, but:
     • The Court must explicitly record these reasons in its judgment.
     • This ensures that leniency is not misused arbitrarily.

Key Takeaways:

• Prevents lenient sentencing for serious GST frauds.
• Judicial discretion is limited—courts must provide clear reasons if awarding a lower sentence.
• Ensures uniform punishment for tax fraud and repeat offenses.

Example:
If a person is convicted for issuing fake invoices worth ₹3 crore, the default imprisonment should be at least six months. However, if there are special circumstances (e.g., the accused played a minor role), the court may reduce the sentence—but must justify it in writing.

Section 132(3) enforces strict minimum imprisonment for major GST frauds and repeat offenders, ensuring that tax evasion and financial fraud under GST laws carry real consequences.

Explanation of CGST Section 132(4)

This section clarifies the nature of offenses under the CGST Act in relation to the Code of Criminal Procedure, 1973 (CrPC).

Key Provisions:

1. Most GST Offenses are Non-Cognizable & Bailable
   • “Non-cognizable” means that police cannot arrest a person without prior approval of the court.
   • “Bailable” means that the accused has the right to obtain bail as a matter of legal entitlement.
   • This applies to all offenses under CGST, except those mentioned in Section 132(5) (which deals with serious tax frauds).
2. CrPC Override
   • This provision overrides the CrPC, meaning that even if CrPC might classify certain offenses as cognizable or non-bailable, under GST law, they remain non-cognizable and bailable, except as provided in Section 132(5).

Key Takeaways:

• Protection from arbitrary arrest – Since most offenses under CGST are non-cognizable, the police or GST officers cannot arrest a person without court permission.
• Right to Bail – The accused can secure bail as a right, preventing unnecessary detention.
• Exception for Serious GST Crimes – Only offenses under Section 132(5) are treated differently (cognizable and non-bailable).

Section 132(4) ensures fair legal treatment by making most GST offenses non-cognizable and bailable, reducing the risk of arbitrary arrests. However, serious tax fraud cases (as per Section 132(5)) are treated more strictly, allowing immediate arrest and denying automatic bail.

Explanation of CGST Section 132(5)

This section identifies serious GST offenses that are treated as cognizable and non-bailable, meaning they carry stricter legal consequences.

Key Provisions:

1. Which Offenses Are Covered?
   • The following offenses from Section 132(1) are considered serious if the tax amount involved exceeds ₹5 crore (as per Clause (i) of Section 132(1)):
     • Clause (a): Supplying goods/services without issuing an invoice to evade tax.
     • Clause (b): Issuing invoices without actual supply, leading to fraudulent ITC or refund claims.
     • Clause (c): Availing ITC fraudulently using fake invoices or without an invoice.
     • Clause (d): Collecting GST from customers but failing to deposit it with the government for more than 3 months.
2. Cognizable & Non-Bailable Classification
   • Cognizable: Law enforcement (e.g., police or GST authorities) can arrest the accused without prior court approval.
   • Non-bailable: The accused does not have an automatic right to bail and must apply to the court, which may grant or deny bail based on the case’s severity.

Key Takeaways:

• Stricter Enforcement for Large-Scale GST Fraud – Tax evasion exceeding ₹5 crore is considered a serious economic offense.
• Immediate Arrest Possible – Unlike other GST offenses (which require court approval for arrest), authorities can directly arrest offenders under this section.
• No Automatic Bail – The accused must approach the court for bail, which may be denied if the offense is severe.

Example:
If a person issues fake invoices worth ₹6 crore to fraudulently claim ITC, they can be arrested immediately, and bail is not guaranteed.

Section 132(5) ensures strict legal action against large-scale GST fraud, preventing significant revenue loss to the government. By making such offenses cognizable and non-bailable, it acts as a strong deterrent against high-value tax evasion and fraud.

Explanation of CGST Section 132(6)

This section establishes a mandatory approval process before initiating a prosecution under CGST Section 132.

Key Provisions:

1. Prosecution Requires Prior Sanction from the Commissioner
   • A person cannot be prosecuted for offenses under Section 132 unless the Commissioner of GST (or an authorized officer) gives formal approval.
   • This ensures that legal action is taken only after careful scrutiny and prevents arbitrary or unjustified prosecutions.
2. Who is the Commissioner?
   • The Commissioner refers to the Commissioner of Central Tax or State Tax, as applicable.
   • The Commissioner may delegate this authority to subordinate officers, but such delegation must be officially authorized.

Key Takeaways:

• Prevents Unnecessary Litigation – Ensures that prosecution is initiated only in genuine cases of tax fraud.
• Checks on Misuse of Power – Protects taxpayers from arbitrary or harassment-based legal action by requiring high-level approval.
• Ensures Due Process – The Commissioner’s sanction acts as an additional safeguard before criminal proceedings start.

Example:
If a person is accused of fraudulently availing ₹3 crore of ITC, the GST department cannot directly prosecute them. First, the Commissioner must review the case and approve prosecution before legal action can proceed.

Section 132(6) ensures fair enforcement by requiring Commissioner’s approval before prosecuting GST offenses. This acts as a safeguard against misuse of prosecution powers, ensuring that only serious and well-investigated cases move forward legally.

Explanation of “Tax” in CGST Section 132

This explanation clarifies what is meant by “tax” in the context of offenses and penalties under CGST Section 132.

Key Provisions:

1. Broad Definition of “Tax”
   • The term “tax” under Section 132 includes:
     • Tax evaded – Any GST amount not paid to the government.
     • Wrongful Input Tax Credit (ITC) availed or used – Claiming or utilizing ITC without proper eligibility (e.g., using fake invoices).
     • Wrongful refund taken – Fraudulently obtaining a GST refund that was not actually due.
2. Applicable Across Multiple GST Laws
   • The definition of “tax” includes amounts under:
     • Central Goods and Services Tax (CGST) Act
     • State Goods and Services Tax (SGST) Act
     • Integrated Goods and Services Tax (IGST) Act
     • Union Territory Goods and Services Tax (UTGST) Act
     • GST Compensation Cess Act (for revenue sharing with states).

Key Takeaways:

• Covers all GST-related tax frauds – The law applies regardless of whether the fraud happens under CGST, SGST, IGST, or UTGST.
• Includes multiple types of violations – Not just direct tax evasion, but also fraudulent ITC claims and refund scams.
• Ensures strict enforcement – Prevents businesses from exploiting different GST laws to escape penalties.

Example:
If a business in Maharashtra fraudulently claims ₹5 crore of ITC under IGST, the offense still falls under CGST Section 132, and strict penalties apply.

This explanation expands the scope of GST offenses, ensuring that all forms of tax fraud (evasion, ITC misuse, refund fraud) across different GST laws are punishable under Section 132. It closes loopholes and strengthens enforcement against GST violations.