Section 138 – Compounding of Offences

Section 138 allows certain GST offences to be settled through compounding instead of undergoing lengthy criminal prosecution. Compounding means the accused pays a prescribed amount and the offence is settled without continuing criminal proceedings.

This facility is available only for eligible offences and subject to conditions prescribed under the law. Certain serious offences and repeat offences may not qualify for compounding. The applicant must make a formal application and pay the compounding amount determined by the competent authority.

Once an offence is compounded, no further criminal proceedings can generally continue regarding that offence. However, compounding does not affect the liability to pay tax, interest, and penalties, which remain payable separately.

The purpose of this section is to reduce litigation, save judicial time, and provide an opportunity for taxpayers to settle disputes while ensuring recovery of government revenue.

Example:
A taxpayer prosecuted for a GST offence applies for compounding, pays the prescribed amount, and settles the matter without facing a prolonged criminal trial.

Key Point:
Compounding settles criminal proceedings but does not waive tax, interest, or penalty liabilities.

In One Line:
Eligible GST offences may be settled through payment of a compounding amount.