Compounding of Offences under GST

Compounding of Offences under GST

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

Other Related Guides

GST – Goods Sent for Exhibition GST – Goods Sent for Exhibition Due to a lot of confusion prevailing in the trade and industry about, documentation and tax applicability of goods se...
Related Company Services under GST Related Company Services under GST Para 2 of Schedule I of the Central Goods and Service Tax Act, 2017 states that supply of goods or services or bot...
GSTR-3B and GSTR-1 Reconciliation GSTR-3B and GSTR-1 Reconciliation Goods and Service Tax (GST) is a destination based levy and introduction of the same has subsumed various Central t...
Advance Ruling for Registered Taxpayers Advance Ruling for Registered Taxpayers Advance ruling is an official opinion by an Authority, mostly comprising of a high-level body presided over b...
GST Turnover Limit for Supplier of Goods GST Turnover Limit for Supplier of Goods The Central Board of Indirect Taxes and Customs have recently come up with two notifications through which t...

Post by Arnold Thomas

IndiaFilings is India's largest online compliance services platform dedicated to helping people start and grow their business, at an affordable cost. We were started in 2014 with the mission of making it easier for Entrepreneurs to start their business. We have since helped start and operate tens of thousands of businesses by offering a range of business services. Our aim is to help the entrepreneur on the legal and regulatory requirements, and be a partner throughout the business lifecycle, offering support at every stage to ensure the business remains compliant and continually growing.