Prove the statutory trigger before calculating exposure
Section 122B of the CGST Act addresses a person referred to in section 148A(1)(b) who contravenes that section. Section 148A depends on notified goods and notified persons or classes dealing with or possessing them. This is not an automatic penalty on every goods business. This guide isolates the enacted formula after applicable notification coverage and contravention are established; it does not certify that any named product or company currently falls within a notification. ICAI 2026 bare law: CGST sections 122B and 148A.
Map the actual track-and-trace requirement
Section 148A provides the framework for a unique identification-marking system, information and records, relevant machinery details and prescribed system amounts. Before concluding default, identify the actual applicable notification, rules, goods, person, period and obligation. Preserve the specific evidence of non-compliance. A machine-registration issue under section 122A is not automatically the same contravention; do not copy that provision's unit count or safeguard into section 122B. ICAI 2026 bare law: CGST sections 122B and 148A.
Use tax payable on the relevant goods
Section 122B specifies the higher of ₹1 lakh and 10% of tax payable on such goods. A working must therefore reconcile the goods population to a legally supported tax-payable amount. Sales value, machine purchase price and the taxpayer's total unrelated tax ledger are not interchangeable with that base. The examples stipulate the correct relevant tax base; they do not establish an HSN classification or an unverified product tax rate. ICAI 2026 bare law: CGST sections 122B and 148A.
Compare the alternatives instead of adding them
Calculate ten per cent of the supported tax base and compare it with ₹1 lakh. Equality occurs when the base is ₹10 lakh. The provision uses whichever is higher, not the sum of both alternatives. Where the percentage exceeds the floor, ₹1 lakh is not a cap. Where it falls below the floor, using only the percentage understates the statutory formula on the stipulated eligible facts. ICAI 2026 bare law: CGST sections 122B and 148A.
Keep other penalties and proceedings distinct
The provision states that its penalty is additional to a penalty under Chapter XV or the provisions of its Chapter. Another amount still needs its own legal basis and computation. Do not create a second penalty merely because the statute permits an additional one, or assume payment of one concludes every proceeding. Section 122B does not itself reproduce section 122A's per-machine amount and three-day registration/confiscation safeguard. ICAI 2026 bare law: CGST sections 122B and 148A.
Reconcile the outcome and preserve the scope conclusion
Keep the coverage analysis, relevant-goods tax working, formula, order and credited payments together. Review disputed base items separately and show how the result changes if they are accepted or excluded. Do not assume a floor applies once for a whole company, once per machine or once per package without analysing the actual contravention and order. The calculations concern the central Act only; any separate State-law result requires its own basis. ICAI 2026 bare law: CGST sections 122B and 148A.
Applicable primary references
ICAI 2026 bare law: CGST sections 122B and 148A
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Tax base below the equality point
Assume established section 122B conditions and relevant tax payable ₹6 lakh. Ten per cent is ₹60,000; comparison with ₹1,00,000 gives penalty ₹1,00,000 under this formula. The floor exceeds the percentage by ₹40,000.
Illustrative example 2: Equality
With valid relevant tax payable ₹10 lakh, ten per cent is ₹1 lakh. Both alternatives are equal; the formula gives ₹1 lakh, not their ₹2 lakh sum.
Illustrative example 3: Percentage exceeds the floor
With valid relevant tax payable ₹15 lakh, ten per cent is ₹1.5 lakh. The formula gives ₹1.5 lakh, exceeding the floor by ₹0.5 lakh; ₹1 lakh is not a maximum.
Illustrative example 4: Goods value is not the tax base
Assume the relevant goods' supported value is ₹50 lakh but their correctly determined tax payable is ₹14 lakh. Ten per cent of tax is ₹1.4 lakh, which exceeds the floor. Ten per cent of goods value would instead be ₹5 lakh, overstating this model by ₹3.6 lakh. No product tax rate is prescribed by this illustration.
Illustrative example 5: Separate unrelated tax
Assume the company-wide tax working totals ₹25 lakh, comprising ₹12 lakh correctly attributable to the relevant goods and ₹13 lakh unrelated to this contravention. The percentage limb is ₹1.2 lakh, not ₹2.5 lakh, and exceeds the floor. The population reconciliation prevents a ₹1.3 lakh excess in this model.
Illustrative example 6: Another independently established penalty
Assume relevant tax payable ₹20 lakh, giving a section 122B amount ₹2 lakh, and another independently valid penalty ₹75,000. The stipulated combined amount is ₹2,75,000. The second penalty's validity is an assumption, not a conclusion created by the arithmetic.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Open the applicable notification | Establish relevant goods and notified persons or class. |
| 2 | Fix the period and obligation | Identify the actual section 148A requirement in force for the facts. |
| 3 | Document the contravention | Preserve evidence rather than inferring default from business type. |
| 4 | Define the relevant goods population | Separate unrelated goods and transactions. |
| 5 | Validate tax payable | Support classification, valuation and the actual tax base independently. |
| 6 | Calculate the percentage limb | Apply 10% to that supported tax amount. |
| 7 | Compare with ₹1 lakh | Select the higher amount rather than adding alternatives. |
| 8 | Separate other penalties | Retain independent provisions, orders and computations. |
| 9 | Reconcile payments | Match valid credits to the relevant imposed amounts. |
| 10 | Preserve the review record | Keep the scope conclusion, disputed items and final order history. |
Sixteen practitioner FAQs
1. Does section 122B apply to every goods business?
No. Establish the notified section 148A scope and contravention.
2. Does this guide establish a product's current notification coverage?
No. Open the applicable notification and rules for the actual facts.
3. What alternatives does the formula compare?
₹1 lakh and 10% of tax payable on the relevant goods.
4. Are the alternatives added?
No. Select whichever is higher.
5. Where do they become equal?
At relevant tax payable of ₹10 lakh.
6. Is ₹1 lakh an overall maximum?
No. The percentage can exceed it.
7. Is goods value the percentage base?
No. The wording uses tax payable on such goods.
8. Is total company tax always the base?
No. Reconcile the relevant-goods amount.
9. Do the examples verify an HSN rate?
No. The relevant tax-payable amounts are explicit valid assumptions.
10. Is this a ₹1 lakh per-machine formula?
That is not section 122B's stated formula; do not import section 122A's unit count.
11. Does section 122A's safeguard automatically apply here?
Do not transplant that separate provision's conditions into section 122B.
12. Can other penalties be relevant?
The section expressly provides for an additional penalty, subject to the other's legal basis.
13. Does that justify inventing another amount?
No. Establish the independent liability.
14. Can the unit of contravention be decided just by arithmetic?
No. Review the actual facts, governing requirements and order.
15. Should the result automatically be doubled for State law?
No. Check the separate enactment and proceedings.
16. What is the key review control?
A traceable relevant-goods tax base linked to established scope and the higher-of comparison.
Conclusion
Once notified coverage and a section 148A contravention are established, section 122B compares ₹1 lakh with 10% of tax payable on the relevant goods. Do not substitute turnover, goods value or a per-machine calculation.