Complete GST lifecycle on one platform Complete GST lifecycle on one platform
Hyper-automation Hyper-automation
Smart reports & recon Smart reports & recon
Accurate filing Accurate filing

Prosecution, Compounding of Offences

Updated on: Feb 14th, 2023

|

7 min read

In our previous article we mentioned the various offences under GST and their penalties. Now we will discuss prosecution and compounding under GST.

Budget 2023 update (to be notified): 
(1) The minimum and maximum limits for compounding the offences have been reduced to 25% and 100% of the tax involved.
(2) Taxpayers can avail compounding of offences (involving supplies worth more than Rs 1 crore value) more than once.
(3) More offences have been made ineligible for compounding, such as fake ITC claims, possession of goods liable for confiscations, supplying services in contravention to act, obstructing officers from performing duties, tempering evidence, and non-submission of proper information.

Prosecution under GST

Prosecution is the conducting of legal proceedings against someone in respect of a criminal charge.

Offences liable for prosecution

Any person committing the following offences (i.e., deliberate intention of fraud) becomes liable to prosecution, i.e., face criminal charges.

  1. Supplies any goods/services without an invoice in order to evade tax
  2. Issues any invoice without supplying any goods/services- thus taking input credit or refund by fraud
  3. Collects any GST (even if in contravention of provisions) but does not submit it to the government within 3 months.
  4. Obtains refund of any CGST/SGST by fraud.
  5. Submits fake financial records/documents or files fake returns to evade tax
  6. Obstructs the proper officer during his duty (for example, he hinders the officer during the audit by tax authorities)
  7. Acquires/receives any goods/services with full knowledge that it is in violation of GST rules and is liable for confiscation
  8. Destroys any evidence
  9. Does not provide information/gives false information during proceedings
  10. Helps any person to commit fraud under GST

Punishment

The person committing any of the offences above shall be punished as follows:

Tax amount involved100-200 lakhs200-500 lakhsAbove 500 lakhs
Bailable or Non-BailableBailableBailableBailable**
Jail termUpto 1 yearUpto 3 yearsUpto 5 years

**If a person commits the following offences AND the amount involved exceeds 500 lakhs then the offences are non-bailable-

  1. Supplies any goods/services without an invoice in order to evade tax
  2. Issues any invoice without supplying any goods/services- thus taking input credit or refund by fraud
  3. Collects any GST (even if in contravention of provisions) but does not submit it to the government within 3 months.

This is in keeping with the government’s anti-tax evasion stance by bringing in stricter measures.

Punishment for destroying evidence

For destroying evidence, preventing the officer from his duty, falsifying information or helping someone in the same, he is liable for up to 6 months imprisonment with fine

Repeat offenders

If the offense is repeated a second time then punishment can extend up to 5 years with fine. A person can not be prosecuted without the prior sanction of the Commissioner.

Compounding of offences under GST

What is compounding of offences?

Compounding of offences is a shortcut method to avoid litigation. In the case of prosecution for an offence in a criminal court, the accused has to appear before the Magistrate at every hearing through an advocate. Court proceedings are time-consuming and expensive. In compounding, the accused is not required to appear personally and can be discharged on payment of compounding fee which cannot be more than the maximum fine leviable under the relevant provisions. GST Act also allows for compounding of offences.

Non-availability of compounding

Compounding will not be available for-

  • Anyone who has already committed any of the offences mentioned under prosecution above, i.e., second-time offenders will not be allowed to compound.
  • A person who had committed an offence before under GST involving supplies above Rs. 1 crore and has been allowed to compound before. Thus, it stands, any person previously enjoying compounding for goods/services over Rs. 1 crore will not enjoy compounding a second time.*
  • Any person who is also being tried under other acts such as Narcotic Drugs Act, FEMA etc.*
  • Any person convicted by a court under GST.
  • Any person giving false information during proceedings, or preventing the officer from his duty or destroying evidence.*
  • Offences related to fake ITC claims, possession of goods liable for confiscations, supplying services in contravention to act, obstructing officers from performing duties, tempering evidence, and non-submission of proper information.^

*Removed and ^included through Budget 2023. CBIC is yet to notify these changes.

Compounding will be allowed only after payment of all tax, interest and penalty dues.

Amount payable for compounding

The amount payable for compounding of offences shall be 50% of the tax involved subject to a minimum Rs. 10,000. Maximum amount for compounding is 150% of the tax OR Rs. 30,000 -Whichever is higher.

However, Budget 2023 reduced the minimum and maximum limits for compounding the offences to 25% and 100% of the tax involved. CBIC is yet to notify this amendment.

Abatement of further proceedings

On payment of the compounding amount, no further proceedings shall be initiated against the accused person for the same offence and any criminal proceedings, if already initiated, will be abated. Apart from prosecution, the offender can also be arrested. Please read our article on arrest under GST. Thus, we find that GST has severe prosecutions to punish tax evaders and the corrupt thus keeping in mind the government’s anti-tax evasion stance.

Related Articles

inline CTA
India’s Fastest and Most Advanced 2B Matching
Maximise ITC claims, use smart validations to correct your data and complete 2B matching in <1 minute

Public Discussion

Get involved!

Share your thoughts!

summary-logo

Quick Summary

The budget update reduced the limits for compounding offences under GST. Prosecution includes various offenses leading to legal action and penalties. The punishment for these offenses ranges from bailable to non-bailable with jail terms. Compounding of offenses allows certain offenders to settle the case by paying a fee. Guidelines specify ineligible offenses for compounding and the punishable acts under GST laws.

Was this summary helpful?
liked-feedbackliked-feedback

Clear offers taxation & financial solutions to individuals, businesses, organizations & chartered accountants in India. Clear serves 1.5+ Million happy customers, 20000+ CAs & tax experts & 10000+ businesses across India.

Efiling Income Tax Returns(ITR) is made easy with Clear platform. Just upload your form 16, claim your deductions and get your acknowledgment number online. You can efile income tax return on your income from salary, house property, capital gains, business & profession and income from other sources. Further you can also file TDS returns, generate Form-16, use our Tax Calculator software, claim HRA, check refund status and generate rent receipts for Income Tax Filing.

CAs, experts and businesses can get GST ready with Clear GST software & certification course. Our GST Software helps CAs, tax experts & business to manage returns & invoices in an easy manner. Our Goods & Services Tax course includes tutorial videos, guides and expert assistance to help you in mastering Goods and Services Tax. Clear can also help you in getting your business registered for Goods & Services Tax Law.

Save taxes with Clear by investing in tax saving mutual funds (ELSS) online. Our experts suggest the best funds and you can get high returns by investing directly or through SIP. Download Black by ClearTax App to file returns from your mobile phone.

Cleartax is a product by Defmacro Software Pvt. Ltd.

Company PolicyTerms of use

ISO

ISO 27001

Data Center

SSL

SSL Certified Site

128-bit encryption