Sec 126 of CGST Act with regard to Penalties

[Krishna Murthy]

Sir, Sec 126 of CGST Act, General disciplines related to penalty, Sub Sec 6 says that the provision does not apply to a case where penalty is fixed as percentage or fixed amount. But, what could be a case where penalty is not fixed as percentage or fixed amount as penalty is always certain percentage of tax or fixed based on default committed.

[Alkesh Jani]

Shri

Can you please elaborate by way of illustration if possible.

[KASTURI SETHI]

By way of sub-section 6 of Section 126 of CGST Act, Govt. has widened the scop of imposing penalty upon the defaulter. Sub-section 6 isolates Section 126 from all other Sections meant for imposing penalties i.e. Section 73, 74, 122 to 125.

[Krishna Murthy]

Sir, thanks for your response. Penalties are normally imposed as a percentage of tax as in the case of Sec 73 and 74 in few instances and as a fixed sum as in the case of Sec 125. When Sec 126(6) overrides these two instances, where could the application of Sec 126 be made. What could be a situation when Sec 126 be applicable.

[DR.MARIAPPAN GOVINDARAJAN]

Section 126 of the Act prescribed the procedure to be followed in imposing penalty. Penalty shall not be imposed straightaway. Even in minor breaches penalty has been imposed. Such things shall not be done. Where penalty is not fixed as percentage, it is at the discretion of the Authority to impose penalty considering the facts and circumstances of the case. If there is a fixed rate of penalty then there is no other go except to impose the fixed penalty.

[KASTURI SETHI]

I support the views of Dr.Govindarajan, Sir. Section 126 is a sea and this Section gives vast powers to the department for imposition of penalty which is not covered in other Sections meant for imposition of penalty.

AI Summary

Discretionary penalty under Section 126 requires procedural compliance and applies where penalty is not a fixed percentage or amount. Section 126(6) governs cases where no fixed percentage or fixed amount of penalty is prescribed, enabling the authority to impose a discretionary penalty subject to the specific procedural requirements of the section, and distinguishing such cases from other provisions that mandate fixed penalties.