February 25, 2023

Prosecution, Compounding of Offences

Prosecution and compounding of offences are two legal terms that have a significant impact on the Indian tax system. The Goods and Services Tax (GST) is a comprehensive tax reform that has been implemented in India since July 1, 2017. The GST regime has various provisions to deal with offences committed by taxpayers.

The Central Board of Indirect Taxes and Customs (CBIC) is the apex authority for administering GST in India. It has the power to prosecute and compound offences under GST. In this article, we will discuss the basics of prosecution and compounding of offences under GST.

Prosecution under GST

Prosecution is the legal process of initiating criminal proceedings against a taxpayer who has committed an offence under GST. The offences under GST are categorized as follows:

  1. Offences involving fraud, tax evasion, and willful misstatement of facts
  2. Offences not involving fraud, tax evasion, or willful misstatement of facts

The penalties for these offences vary depending on the nature and severity of the offence. If a taxpayer is found guilty of an offence under GST, he/she can be punished with imprisonment for up to five years and a fine.

The prosecution process under GST is initiated by the GST authorities. The taxpayer will be given notice of the offence and an opportunity to respond. If the GST authorities are not satisfied with the response, they can initiate criminal proceedings against the taxpayer.

Compounding of Offences under GST

Compounding of offences is a way to settle a case without going through the prosecution process. The taxpayer can pay a certain amount of money to the GST authorities to settle the case. The compounding process can be initiated by the GST authorities or the taxpayer.

The compounding fees for different offences under GST are prescribed under the law. The taxpayer can choose to compound the offence within a certain time limit. If the offence is compounded, the taxpayer will not be prosecuted for the offence.

The compounding process under GST is a quick and easy way to settle a case. However, it should be noted that compounding is not an option for serious offences such as fraud, tax evasion, and willful misstatement of facts.


Prosecution and compounding of offences under GST are important legal provisions that help to maintain the integrity of the tax system. Taxpayers should be aware of these provisions and comply with the law to avoid legal action.


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