The GST regime provides for prosecution of serious offences under Section 132 and a compounding mechanism under Section 138. Compounding allows an accused to avoid prosecution by paying a compounding amount. Understanding both provisions is essential for anyone facing prosecution.
This article explains the prosecution and compounding framework.
Prosecution Under Section 132
Section 132 provides for imprisonment and fine for serious offences:
- Tax evasion: Imprisonment up to 5 years and fine.
- Fake invoicing: Imprisonment up to 5 years and fine.
- Fraudulent ITC: Imprisonment up to 5 years and fine.
- Obstruction: Imprisonment up to 6 months.
The offence is cognizable and non-bailable where the amount exceeds ₹5 crore.
Compounding Under Section 138
Section 138 allows any offence under the Act to be compounded by the Commissioner, either before or after the institution of prosecution. The application is made in Form GST CPD-01.
Compounding Amount
The compounding amount is prescribed based on the offence:
- For offences under Section 132(1)(i), (ii), and (iii): 50% of the tax involved, subject to a minimum of ₹10,000.
- For other offences: 50% of the tax involved, subject to a minimum of ₹10,000.
Procedure
- File Form GST CPD-01 with the Commissioner.
- The Commissioner may allow compounding after hearing the applicant.
- The compounding amount must be paid within the specified time.
- On payment, immunity from prosecution is granted in Form GST CPD-02.
Restrictions on Compounding
Compounding is not available:
- Where the offence involves supplies of value exceeding ₹1 crore.
- Where the person has been accused of committing an offence under any other law.
- Where the person has been previously convicted for an offence under GST.
Practical Steps
- If facing prosecution, evaluate whether compounding is available.
- File Form CPD-01 before or after prosecution is instituted.
- Pay the compounding amount within the specified time.
- Ensure compliance with all conditions.
Conclusion
Compounding provides a way to avoid prosecution by paying a prescribed amount. The application must be made in the prescribed form and is subject to the Commissioner’s approval.
At Anuj Desai & Associates, we provide expert representation services for GST prosecution and compounding matters. Our team can help you navigate the process and secure the best outcome.
For a confidential consultation, contact us at office@anujdesaiassociates.com or call 9619456656. Visit our website at https://anujdesaiassociates.com or connect with our founder on LinkedIn at linkedin.com/in/ca-anuj-desai-122547230.