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COMPOUNDING OF OFFENCES UNDER GST

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..... COMPOUNDING OF OFFENCES UNDER GST - By: - Dr. Sanjiv Agarwal - Goods and Services Tax - GST - Dated:- 16-2-2018 - - The provisions in relation to compounding of offences are provided for in section 138 of the GST Act, 2017 . Rule 162 of the GST Rules, 2017 deal with procedure for compounding of offences. Meaning of Compounding Compounding has not been defined in GST Act or Rules. However, Compounding means payment of monetary compensation or fine, instead of undergoing prosecution for an offence committed, which warrants such prosecution. Section 320 of the Code of Criminal Procedure defines compounding as to forbear from prosecution for consideration or any private motive. Aiyar s Law Lexicon defines it various .....

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..... ly as arranging, coming to terms; condone for money . Compounding is thus, a legally recognized arrangement, whereby the person charged with an offence is offered the option of avoiding prosecution and imprisonment in lieu of monetary considerations by way of penalty; compounding is essentially a contract between the state and the offender whereby the state secures revenue and the offender secures immunity from prosecution. Compounding is nothing but a sort of compromise between the offender and the department to avoid criminal proceedings and is a punishment outside the court proceedings. Oxford Dictionary defines it as forbear from prosecuting in exchange for money or other consideration; condone for money . Compoundable offence is a .....

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..... n offence which the law allows to be compounded between the parties; an offence which is capable of being compounded. The offence of accepting or agreeing to accept consideration for not disclosing information that might assist in convicting or prosecuting someone who has committed an arrestable offence (consideration here does not include reasonable compensation for loss or injury caused by the offence). There is also a special statutory offence of advertising a reward for stolen goods on the basis that no question will be asked or that the person producing the goods will be safe from inquiry ( England) Oxford Law Dictionary, 5th Edn, 2003 ). Compounding is a compromise arrangement between administrator of statute and the person w .....

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..... ho has committed an offence. Compounding involves receipt of consideration in return of non-prosecution of person who has committed an offence (1997) 24 CLA 214 (CLB). Compounding results in dropping of prosecution proceedings and once the offence is compounded, penalty or prosecution proceedings cannot be taken up for same offence. Compounding order cannot be challenged by either of the parties and appeal against such order does not lie. Such matters cannot be revived or reopened. Compounding is not a right but discretion of the compounding authority. In State of Andhra v Ballamkonoda Venkata Subbaiah Another 1956 (12) TMI 35 - ANDHRA PRADESH HIGH COURT , it was held that compounding of an offence at the request of the def .....

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..... aulter party is neither an agreement nor a contract. It is a sort of compromise between the two parties ie defaulter/offender and the revenue department. Offences that can be compounded As per section 138(1) of the GST Act, 2017 , any offence under the 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. Thus, compounding of offences can be done: (a) by the Commissioner, (b) on payment of compounding amount, (c) either before or after the institution of prosecution, (d) in the prescribed .....

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..... manner. It may be noted that payment should be made by the person (accused of the offence) to the Central Government or State Government in respect of CGST or SGST respectively. However, such compounding is subject to certain exceptions and conditions. Rule 162 of the GST Rules, 2017 deal with compounding of offences. Restrictions on compounding of offences Compounding of offences, as per proviso to section 138(1) of the GST Act, 2017 shall not apply in the following cases a) a person who has been allowed to compound once in respect of the specified offences under section 132(1)(a to f) and (l) related to such offences of the GST Act. b) a person who has been allowed to compound once in r .....

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..... espect of any offence [other than those in clause (a) above] under the Act or under the provisions of any other SGST Act or IGST Act or UTGST Act in relation to supplies of value exceeding INR one crore; c) a person who has been accused of committing an offence under the Act which is also an offence under any other Act; 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. Specified offences as mentioned in (a) above are offences mentioned in claus .....

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..... es (a) to (f) and offences under clause (l) of section 132(1) which are relatable to offences in clauses (a) to (f) of section 132(1) of the GST Act, 2017 (i.e. attempt to commit or abet the commission of such offences). The offences listed in section 132(1) are as follows: (a) supplies any goods or services or both without issue of any invoice, in violation of the provisions of this Act or the rules made thereunder, with the intention to evade tax; (b) issues any invoice or bill without supply of goods or services or both in violation of the provisions of this Act, or the rules made thereunder leading to wrongful availment or utilisation of input tax credit or refund of tax; (c) avails input tax credit using such in .....

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..... voice or bill referred to in clause (b); (d) collects any amount as tax but fails to pay the same to the Government beyond a period of three months from the date on which such payment becomes due; (e) evades tax, fraudulently avails input tax credit or fraudulently obtains refund and where such offence is not covered under clauses (a) to (d); (f) falsifies or substitutes financial records or produces fake accounts or documents or furnishes any false information with an intention to evade payment of tax due under this Act; (g) obstructs or prevents any officer in the discharge of his duties under this Act; (h) acquires possession of, or in any way concerns himself in transporting, removing, depositing, keeping, conceal .....

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..... ing, supplying, or purchasing or in any other manner deals with, any goods which he knows or has reasons to believe are liable to confiscation under this Act or the rules made thereunder; (i) receives or is in any way concerned with the supply of, or in any other manner deals with any supply of services which he knows or has reasons to believe are in contravention of any provisions of this Act or the rules made thereunder; (j) tampers with or destroys any material evidence or documents; (k) fails to supply any information which he is required to supply under this Act or the rules made thereunder or (unless with a reasonable belief, the burden of proving which shall be upon him, that the information supplied by him is true) sup .....

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..... plies false information; or (l) attempts to commit, or abets the commission of any of the offences mentioned in clauses (a) to (k) above. Amounts to be paid for compounding Compounding of offences shall be allowed only after payment of tax, interest and penalty in respect of offences being compounded has been made by the taxable person. Conditions of compounding Compounding of offences under section 138 of the GST Act, 2017 shall be subject to the following mandatory conditions: (a) any compounding allowed shall not affect the proceedings if any, instituted under any other law: (b) compounding shall be allowed only after making payment of tax, interest and penalty involved in such offences. Monetary lim .....

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..... it on amount for compounding of offences Under section 138(2) of the GST Act, 2017 , amount of compounding shall be prescribed subject to minimum and maximum monetary limits. Both minimum and maximum amounts have been stipulated in law as under: (a) Minimum: Minimum amount not being less than INR 10,000 or fifty per cent of the tax involved, whichever is greater. (b) Maximum: Maximum amount not being less than INR 30,000 or one hundred and fifty per cent of the tax, whichever is greater. The compounding payment would be between the minimum of INR 10,000 or 50% of the tax involved, whichever is higher and would be subject to a maximum of INR 30,000 or 150% of the tax involved, whichever is higher. What does .....

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..... tax include The term tax shall include- the amount of tax evaded; or the amount of input tax credited wrongly availed or utilized or wrongly taken under: the provisions of GST Act, the State Goods and Services Tax Act, the Integrated Goods and Services Tax Act, or the Union Territory Goods and Services Tax Act, and cess levied under the Goods and Services Tax (Compensation to States) Act. Determination of compounding amount Commissioner under the CGST / SGST / UTGST law will determine the amount for compounding of offences, which shall be within the minimum and maximum amounts as per section 138 (2). Consequences of payment of compounding amount In .....

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..... terms of section 138(3) of the GST Act, 2017 , on payment of such compounding amount as may be determined by the Commissioner, no further proceedings shall be initiated under the 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. Withdrawal of immunity As per rule 162(8) , immunity granted to a person may, at any time, be withdrawn by the Commissioner, if he is satisfied that such person had, in the course of the compounding proceedings, concealed any material particulars or had given false evidence. Thereupon such person may be tried for the offence with respect to which immunity was granted or for any other offenc .....

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..... e that appears to have been committed by him in connection with the compounding proceedings and the provisions the Act shall apply as if no such immunity had been granted. - - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax .....

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