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

Anand Steels Pvt. Ltd. was earlier allowed to compound an offence under section 132(1)(d). Later it is accused of a fresh offence under section 132(1)(f) involving tax evaded of Rs 8,00,000, punishable under clause (i). It has no conviction, and applies to compound. Which view is correct under section 138 of the CGST Act?

Compounding cannot be allowed. Section 138 bars a person who has already been allowed to compound once for any offence in clauses (a) to (f), (h), (i) and (l) of section 132(1). Since the earlier clause (d) and the present clause (f) are both in that list, the application fails.

  1. ACompounding cannot be allowed, because a person already allowed to compound once for offences in clauses (a) to (f), (h), (i) and (l) is barredCorrect
  2. BCompounding is allowed at 25% of tax evaded, i.e. Rs 2,00,000, as clause (f) carries a flat rate
  3. CCompounding is allowed only if prosecution has not yet been instituted
  4. DCompounding is allowed after paying 100% of the tax evaded as the compounding amount

Explanation

The first proviso to section 138(1)(a) excludes a person who has been allowed to compound once for any offence in clauses (a) to (f), (h), (i) and (l). Both offences fall in that list, so the second application is barred. The 25% rate in option B would apply only if the person were eligible.

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