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CA Final · Indirect Tax Laws · Offences and Penalties and Ethical Aspects under GST

Anand Metals Ltd. received a compounding order under rule 162(3) of the CGST Rules, 2017 on 1 March. The company paid the compounding amount only after the thirty-day period had expired, because of a cash crunch. What is the legal position on the order?

The compounding order becomes vitiated and void. The applicant must pay the compounding amount within thirty days of receiving the order and furnish proof of payment. If the applicant fails to pay within that time, the rules declare the order void, with no provision for interest or fee to save it.

  1. AThe order stays valid, but interest is payable on the delayed amount
  2. BThe order is vitiated and voidCorrect
  3. CThe order stays valid if the company pays an additional fee of 25% of the compounding amount
  4. DThe Commissioner must extend the period by thirty days

Explanation

Rule 162(6) requires payment within thirty days of receiving the order and proof of payment to the Commissioner. Under rule 162(7), failure to pay within that time makes the order vitiated and void. The text provides for no interest or fee to save the order.

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