I don't expect the consequences to really matter here, besides the notion that we are prepared to accept them. The government itself lacks a certain element of stability, and ostracizing us over this potentially costs Cai half the council, including relations with most third realm cultivators in her camp. (Meizhen is upset, Fu Xiang is implicated as is Ling). If we are punished visibly, it erodes Cai's regime incredibly. If she stops our cultivation, she screws herself in the tournament. This means, that Cai's effective options here are to punish Ling Qi in ways that don't hurt our progress and aren't public. More minimalistically, she might cut resources here.
This leaves pain as the easiest means of punishing Ling Qi. That's probably what Cai would go with here, since it doesn't cost her a valuable piece in the tournament, and going by source material for Cai, as well as her own statements, I would think that punishing bad behavior with agony is pretty in line with her expectations of how the world works. Forcing something more sadistic on us, say, demanding we sabotage Suyin's project is possible, if not particularly likely, and would tell us a lot of NOPE on working for Cai.
Alternatively, we might lose something like the White Room, but this seems less likely, since Cai's positioned herself against Liling in the tournament and a weak showing undermine's Cai's year of work.
By contrast, if we do side with Cai, we've not positioned ourselves as contract help, but a friend, someone who would want to be close and trusting with her. To, literally, have been lying to her face about our duties for her in the same conversation that we pushed her to make herself vulnerable and to trust us, something that is probably a pretty big deal for Cai, is setting this up to be a lot worse than it is in terms of the relationship, and both Ling Qi and Cai have built the idea of becoming a vassal of the relationship itself. Moreover, even if we don't out ourselves, we will know that our relationship is largely built on a lie about our conduct. This is likely to have consequences as well.
Ultimately though, I don't want to work for Cai long term. Pragmatically, assuming Cai doesn't already know or suspect the origin of the sabotage, hiding things is probably best for the short term, but it pretty neatly torpedos our relationship with Cai. That said, I think there's another dimension to this. In terms of the person Ling Qi wants to be, accepting punishment for an action she felt was pretty wrong at the time, is probably a solid move. We walked in, demanded Cai, who has every reason to have trust issues, make herself vulnerable to us, and she did. Continuing to lie to her face here is pretty scummy.
This isn't an opportunity to confess to Cai, or not just that. It's also a chance for Ling Qi to take a step closer to being the kind of person she wants to be, someone who does as she believes, rather than acts out of fear of the consequences.
[X]Admit to the deception. Apologize, explain, and accept the consequences.