Compounding of Offences under GST

Compounding of Offences under GST

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Compounding of Offences under GST

Section 138 of the Central Goods and Service Tax Act, 2017 deals with the provisions of compounding of offences under GST, whereas, rule 162 of the Central Goods and Service Tax Rules, 2017 deals with the procedure to be followed for compounding of offences.

The word compounding has not to be defined specifically under GST. However, taking the general meaning, Compounding means payment of monetary compensation / fine, instead of suffering prosecution for an offence committed, which warrants such prosecution. In nut-shell, Compounding is simply a compromise between the offender and the department to avoid proceedings.

Section 138 of the CGST Act, 2017

Section 138 deals with the compounding of offences under GST and the provisions of the same are summarized hereunder:

  • Any offence under the Act can be compounded by the Commissioner.
  • Compounding of offences can be done either before or after the institution of the prosecution.
  • Compounding of offences can be done only on payment of the compounding amount.
  • Compounding of offences is not possible under circumstances –
    • A second time offender wherein the earlier offence had been under any other GST law in respect of supplies of value more than INR 1 Crore.
    • A second time offender of Cognizable offences specified in sub-clause (a) to (f) of section 132 (1).
    • Any person who has been convicted for any offences under CGST Act by a court.
    • Any person who has been blamed of committing an offence under CGST Act which is also an offence under any other law for the time being in force.
    • Any person who has been blamed of committing an offence under sub-clause (g) or (j) or (k) of section 132 (1).
    • Any other prescribed class of persons or offences
  • Compounding amount

Minimum amount payable under compounding of offence is higher of the following:

      • 50% of the tax involved; or
      • INR 10,000

Maximum amount payable under compounding of offence is higher of the following:

      • 150% of the tax involved; or
      • INR 30,000

Procedure for Compounding of Offence

Rule 162 prescribes the procedure to be followed for compounding of offence and the same is summarized hereunder:

  • An applicant can make an application for compounding of offence either before or after the institution of prosecution.
  • An applicant is required to make an application in FORM GST CPD-01 to the Commissioner.
  • For examination of the application so filed by the applicant, the Commissioner shall call for a report from the concerned officer with reference to the particulars furnished in the application or any other relevant information.
  • If the commissioner is satisfied with the full and true disclosure, he may issue an order in FORM GST CPD-02 allowing the application within a period of 90 days.
  • If the commissioner is not satisfied, he may reject the application, however, before rejecting the same he is required to give an opportunity of being heard to the applicant.
  • The applicant is required to pay the compounding amount as mentioned in the order by the Commissioner within a period of 30 days.
  • If the applicant fails to pay the compounding amount within time limit, the order passed by the Commissioner in FORM GST CPD-02 shall be vitiated and be void

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