Rule 162 GST: Procedure for compounding of offences under GST Act

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  • Last Updated on 28 June, 2021

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Under Section 138 of the CGST Act 2017 and Rule 162 of the CGST Rules states the procedure for compounding of offences. Compounding here simply relates to payment of monetary compensation or some fine instead of undergoing prosecution for an offence committed which may warrant such a prosecution.
 
As per Section 320 of Code of Criminal Procedure, there is a provision of compounding to forbear the prosecution and is defined as “arranging, coming to terms, or condone for money”. Hence, this makes compounding a legally recognized arrangement where a person charge with an offence is offered the option of avoiding any kind of prosecution or imprisonment in lieu of monetary considerations by way of penalty. Compounding is like a contract between the State and the offender where the State secures a form of revenue and offender secures an immunity from prosecution.
 
Compounding is a sort of compromise which an offender makes with the department to any criminal proceedings against the offense that he has committed.
 
Hence, all the offense that can be allowed to be compounded under law are compoundable offence.
 

Offences that can be compounded:

As per section 138(1) of GST Act 2017, any offence under the Act may be compounded by the commissioner on payment by an accused person to the Central Government or the State Government. The compounding of an offence can be done: • By the Commissioner • On Payment of Compounding Amount by the offender • Offence could have been committed either before or after the institution of prosecution • Compounding must be done as per prescribed manner under the GST Act

Restriction on compounding of offences:

Compounding of offence shall not apply to below mentioned cases as per section 138(1) of GST Act 2017-
 
• A person who have already been allowed to compound in respect to a specified offence as per section 132(1) (a) to (f) and (l) under GST Act.
 
• A person who has been allowed to compound once in respect of any offence under GST Act or under provision of any other SGST or IGST Act in relation to value of supplies exceeding one crore rupees.
 
• A person who has been accused of committing an offence under the Act which is also an offence under any other Act
 
• A person why has been convicted for an offence under this act by a court of law.
 
• A person who has been accused for committing an offence as specified in clause (g) or Clause (j) or Clause (k) of sub section (1) of Section 132
 

Amounts to be paid for compounding:

Compounding of an offence is only allowed once the accused have paid all the liable taxes, interests and penalty related to that offence. And as per section 138 of GST Act 2017, any compounding allowed shall not affect the proceedings which is instituted under any other law and compounding shall only be allowed after payments of all the due taxes, interests, and penalty as applicable for such an offence.
 
Minimum amount of compounding cannot be less than ten thousand rupees or fifty percent of tax involved, whichever maybe higher.
 
Maximum amount of computing cannot be less than thirty thousand or one hundred and fifty percent of tax, whichever is higher.
 
Here the word tax would include any amount of tax that is evaded, any amount of input tax credit that is availed wrongly or utilized under the provision of GST Act, or State Goods and Services Tax Act, or the Integrated Goods and Services Tax Act or the Union Territory Goods and Services Tax Act or any cess levied under the Goods and Services Tax Act.
 
The amount of compounding shall be determined by the Commissioner under CGST/ SGST/ UTGST law.

Withdrawal of immunity:

As per rule 162(8) of the GST Rules, the immunity granted to the offender through compounding of offence may be withdrawn at any time by the Commissioner in case he is satisfied that such a person has concealed any material about the offence during proceedings or had produced any false evidences.
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