Section 138 of GST – Compounding of offences

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Section 138 of GST – Compounding of offences

Statutory provision

Section 138 of GST

(1) Any offence under this Act may, either before or after the institution of prosecution, be compounded by the Commissioner on payment, by the person accused of the offence, to the Central Government or the State Government, as the case be, of such compounding amount in such manner as may be prescribed:

Provided that nothing contained in this section shall apply to—

  • (a) a person who has been allowed to compound once in respect of any of the offences specified in clauses (a) to (f) of sub-section (1) of section 132 and the offences specified in clause (l) which are relatable to offences specified in clauses (a) to (f) of the said sub-section;
  • (b) a person who has been allowed to compound once in respect of any offence, other than those in clause (a), under this Act or under the provisions of any State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act or the Integrated Goods and Services Tax Act in respect of supplies of value exceeding one crore rupees;
  • (c) a person who has been accused of committing an offence under this Act which is also an offence under any other law for the time being in force;
  • (d) a person who has been convicted for an offence under this Act by a court;
  • (e) a person who has been accused of committing an offence specified in clause (g) or clause (j) or clause (k) of sub-section (1) of section 132; and
  • (f) any other class of persons or offences as may be prescribed:

Provided further that any compounding allowed under the provisions of this section shall not affect the proceedings, if any, instituted under any other law:

Provided also that compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences.

(2) The amount for compounding of offences under this section shall be such as may be prescribed, subject to the minimum amount not being less than ten thousand rupees or fifty per cent. of the tax involved, whichever is higher, and the maximum amount not being less than thirty thousand rupees or one hundred and fifty per cent. of the tax, whichever is higher.

(3) On payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under this Act against the accused person in respect of the same offence and any criminal proceedings, if already initiated in respect of the said offence, shall stand abated.

Analysis and Updates

Introduction

This provision deals with compounding of offences by payment of the prescribed compounding fees

Analysis

(a) Compounding of an offence means payment of a sum of money in monetary terms instead of undergoing prosecution. Application for compounding of an offence can be either before or after institution of the prosecution proceedings.

(b) Compounding of an offence is understood as a comparison between the offender and the tax department and is not an agreement or contract.

(c) Specified offences can be compounded only once.

(d) As per Rule 162 of the GST Law, the application of compounding shall be filed in FORM GST-CPD-01.

(e) On receipt of the application, 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 for the examination of such application

After providing opportunity of being heard to the applicant and taking into account the contents of the application, if satisfied that the applicant has co-operated in the proceedings before him and has made full and true disclosure of facts relating to the case. Commissioner may by order in FORM GST-CPD-02 allow the application indicating the compounding amount and grant him immunity from prosecution or reject such application within 90 days of the receipt of the application stating the grounds of rejection.

However, the application shall not be allowed unless the tax, interest and penalty liable to be paid in case for which the application has been made.

(f) Immunity granted to applicant may , at any time be withdrawn by Commissioner , if he is satisfied that such person had, in the course of compounding proceedings , concealed any material particulars or had given false evidence . Thereupon such person may be tried of the offence with respect to which immunity was granted or for any other offence that appears to have been committed by him in connection with the compounding proceedings and the provision of the act shall apply as if no such immunity has been granted.

(g) The applicant, within a period of 30 days from the date of receipt of order allowing compounding, shall pay the compounding amount as ordered by the commissioner and shall furnish the proof of such payment to him. However, if the applicant fails to pay the compounding amount with in the time specified then the order of commissioner shall be vitiated and be void.

(h) On payment, the proceedings indicated will abate and no criminal proceedings can be launched.

(i) The amount of compounding of offences under this section shall be such as may be prescribed , subject to

  • The minimum amount not being less than Rs. 1000 or 50% of tax whichever is higher and
  • The maximum amount not being less than Rs. 30000 or 150% of tax whichever is higher.

(j) Compounding of offences is not permissible to the following offences:

  • (i) A person who has compounded once in respect of supply value exceeding Rs. One Crore.
  • (ii) A person who is convicted by a Court under this Act.
  • (iii) Prescribed class of persons,
  • (iv) A person permitted to compound offences in terms of section 132.
  • (v) A person who has been accused of committing an offence under this act which is also an offence under this Act which is also an offence under any other law for the time being in force ..
  • (vi) A person who has been accused of committing an offence in section 132(1) (g) or

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