Quick wins for a faster PC:
Repair Windows errors before they cause bigger problemsFix Now →Fix the driver behind crashes, sound loss and screen glitchesFind Drivers →Under section 138 of the Central Goods and Services Tax (CGST) Act, 2017, an accused person can apply to compound an eligible GST offence either before or after prosecution is instituted. The application goes to the Commissioner in FORM GST CPD-01. You must first pay the tax, interest and penalty involved. If the Commissioner allows compounding in FORM GST CPD-02, you must pay the ordered compounding amount and submit proof within 30 days; otherwise, the order becomes void.
Compounding is discretionary, not an entitlement. Eligibility depends on the exact section 132(1) offence, the applicable punishment clause, prior compounding or conviction history, and whether proceedings under another law are involved. The current framework reflects amendments made by the Finance Act, 2023, effective from 1 October 2023.
As an Amazon Associate I earn from qualifying purchases.
What GST compounding does
Compounding is a statutory way to resolve criminal proceedings for a specified offence under the CGST Act by paying an amount determined under the law. Section 138 permits an application before or after prosecution has been instituted. The Commissioner examines the application and may allow it, subject to the statutory exclusions and rule 162 procedure, or reject it after giving the applicant an opportunity to be heard.
Crashes, No Sound, or Screen Glitches?
Random freezes, missing sound and display glitches usually trace back to one bad driver. Find and replace yours safely.Free scan · under a minuteWindows Errors? Fix Them Before They Spread
Repair common Windows errors and clear accumulated junk for a smoother, more stable PC - no reinstall needed.Free scan · no reinstallCompounding is separate from ordinary tax adjudication. Paying the tax, interest and penalty does not itself compound the criminal offence; it is a precondition for the application to be allowed. A further amount, fixed by applying the offence-specific table in rule 162, is payable after the Commissioner issues the compounding order.
#1 Best Overall
The following deadlines and effects are the practical points to track:
| Requirement | Current rule |
|---|---|
| When an application may be filed | Before or after institution of prosecution |
| Application form | FORM GST CPD-01, addressed to the Commissioner |
| Commissioner’s decision | Allow by FORM GST CPD-02 or reject after an opportunity to be heard; rule 162 states a 90-day period for allowing or rejecting the application |
| Payment after an order | Compounding amount must be paid within 30 days of receiving the order, with proof given to the Commissioner |
| Statutory amount boundaries | 25% to 100% of the tax involved, subject to the offence-specific rule 162 table |
| Effect of payment | No further CGST Act proceedings for the same offence; criminal proceedings already instituted for that offence abate |
The 25%–100% figures are boundaries, not a single rate for every case. The actual amount depends on the alleged offence and the punishment category that applies.
Who can apply, and who is excluded
Start with the charge, not with the amount demanded. Identify the precise clause of section 132(1), the punishment clause cited in the notice or complaint, and the status of any prosecution. Those details determine whether section 138 is available and which row of rule 162 applies.
The Tool Desk
Outbyte PC Repair FREERepair Windows errors before they cause bigger problemsFix Now →Outbyte Driver Updater FREEScan for outdated or missing drivers - takes under a minuteDriver Scan →Current statutory exclusions
Section 138 currently excludes the following situations:
- A person who has previously been allowed to compound an offence specified in section 132(1)(a) to (f), (h), (i) or (l).
- A person accused of an offence under section 132(1)(b).
- A person who has been convicted by a court for a GST offence.
These exclusions must be read with the current CGST Act. Older summaries of section 138 may reproduce exclusions that were changed by the Finance Act, 2023, including an earlier reference to an offence under any other law or an earlier repeat-compounding supply-value restriction. Do not rely on those superseded lists.
Other legislation and parallel proceedings
Compounding under section 138 deals with the specified offence under the CGST Act. The Act expressly preserves proceedings under another law. For example, if facts also give rise to action under a separate statute, a CGST compounding order does not automatically terminate that separate matter. Check the applicable SGST, UTGST and IGST provisions as well as any non-GST law before assuming that one order resolves every proceeding.
Rank #2
How the compounding amount is determined
The Act sets the statutory floor and ceiling at 25% and 100% of the tax involved. Rule 162 then provides offence-specific amounts. It distinguishes categories by the offence and by whether the conduct is punishable under section 132(1)(i) or section 132(1)(ii). Consequently, the offence title alone is not enough to calculate the amount.
Before estimating exposure, assemble these inputs:
| Input | Why it matters |
|---|---|
| Exact section 132(1) clause | Some offences are excluded outright, while others map to different rows in rule 162. |
| Tax, input-tax-credit or refund figure involved | The statutory percentage boundaries and the rule table use the amount involved in the offence. |
| Applicable punishment clause | Rule 162 differentiates the amount by the punishment category, including the section 132(1)(i) and (ii) classifications. |
| Prior compounding record | Earlier compounding of specified offences can trigger an exclusion. |
| Conviction history | A court conviction for a GST offence is a statutory bar. |
Do not quote a universal “GST compounding rate” or apply 25% automatically. The Commissioner applies the current rule 162 table to the established offence facts. The Telangana Commercial Taxes Department’s December 2025 handbook reproduces the amended Act and rules, but the controlling assessment remains the current statutory text and the facts of the case.
Step-by-step application process
1. Establish the offence and procedural status
Read the show-cause notice, adjudication order, complaint or prosecution papers and record the exact section 132(1) clause. Note whether prosecution has merely been contemplated, has been instituted, or is already pending. Section 138 allows an application at either side of institution, but the procedural record affects the information you must provide and the way the Commissioner assesses the matter.
Also check every person’s history separately. A company, partner, director or other accused person may have different allegations, prior orders or convictions. Do not assume that one person’s eligibility extends to all accused persons.
2. Pay the tax, interest and penalty involved
Rule 162 states that an application cannot be allowed unless the tax, interest and penalty involved in the offence have been paid. Reconcile the figures with the relevant assessment or demand and retain challans, electronic liability-register entries and other payment evidence. If a figure is disputed, obtain advice on the effect of payment before filing; the rule’s prerequisite still has to be satisfied for compounding to proceed.
3. Prepare FORM GST CPD-01
File the application in FORM GST CPD-01 to the Commissioner. GST Council form material identifies fields that generally include:
- GSTIN or temporary identification number.
- Name, address and contact details of the applicant.
- The alleged offence and the relevant section 132(1) clause.
- Adjudication, order, notice, complaint or prosecution particulars.
- Tax, interest and penalty amounts and proof of payment.
- Details of any previous compounding application or order.
- Information about proceedings contemplated or taken under another law.
Those published fields are a preparation guide, not a substitute for the version currently accepted by the Commissioner or GST portal. Confirm the current presentation, attachments and filing channel with the relevant authority before submission, especially where the prosecution is already before a court.
4. Submit the application and respond to requests
The Commissioner may call for a report from the concerned officer. Respond to factual queries consistently with the notice, adjudication record and payment evidence. Keep a dated copy of the application, annexures and acknowledgement. Rule 162, as reproduced in the current text, provides 90 days for the Commissioner to allow or reject the application; a request for additional information can affect the practical timetable.
5. Receive the decision in FORM GST CPD-02
If satisfied, the Commissioner issues FORM GST CPD-02, states the compounding amount and may grant immunity from prosecution. If the application is rejected, the applicant must first have been given an opportunity to be heard, and the rejection must record the grounds.
The current rule text does not retain the former cooperation condition sometimes quoted in older explanations. Use the operative rule rather than an old checklist when assessing what the Commissioner may require.
6. Pay within 30 days and submit proof
After receiving the order, pay the amount stated in it within 30 days and provide proof to the Commissioner. The 30-day period runs from receipt of the order. Missing it makes the compounding order void, so diarise the deadline immediately and preserve the payment acknowledgement.
7. Protect the immunity
Immunity is not unconditional. It may be withdrawn if material particulars were concealed or false evidence was given. Ensure that the application discloses relevant prior compounding, convictions, related proceedings and the complete payment position. A later discovery of deliberate concealment can undo the protection the order provided.
What the order resolves—and what it does not
Once the ordered compounding amount is paid, section 138 provides that no further proceedings under the CGST Act are to be initiated against the accused for the same offence. Criminal proceedings already instituted for that offence stand abated. This effect is tied to the same offence; it is not a blanket release from every tax or criminal issue involving the taxpayer.
Compounding also does not erase proceedings under another law. Separate action under applicable SGST, UTGST, IGST or non-GST legislation must be examined on its own terms. If multiple statutes or multiple offences are cited, map each one before treating the CGST order as final.
Timing scenarios
Application before prosecution
You may apply after the alleged conduct and related tax proceedings are identified but before a prosecution is instituted. Include the notice, adjudication and payment details available at that stage, and state any prosecution contemplated under another law. Early filing does not guarantee acceptance; the same exclusions, payment prerequisite and rule 162 amount apply.
Application after prosecution has started
Section 138 expressly permits an application after prosecution has been instituted. Identify the complaint number, court, parties and procedural stage in CPD-01, and do not omit the court papers. A pending prosecution does not remove the need to pay tax, interest and penalty or to satisfy the exclusions.
Previous conviction or prior compounding
A court conviction for a GST offence is an exclusion. Previous compounding of the specified section 132(1) offences can also bar a later application. Check orders for each accused person rather than relying on an informal statement that no one has compounded before.
Do these 3 things before closing this tab:
1Clear out junk files and repair common Windows errors2Fix the driver behind crashes, sound loss and screen glitches3Repair Windows errors before they cause bigger problemsDocuments and internal checks
A complete file should normally contain the following, matched to the facts of the case:
- Notice, adjudication order, demand and payment records.
- Complaint, summons or prosecution institution details, if applicable.
- A clause-by-clause analysis of the section 132(1) allegation and punishment category.
- Calculation of tax, interest and penalty involved, with proof that each has been paid.
- GSTIN or temporary ID and identity and address documents for the applicant.
- Details and copies of earlier compounding orders, applications or court convictions.
- Disclosure of related proceedings under another law.
- Signed CPD-01, annexures, acknowledgement and later CPD-02 and payment proof.
For a live prosecution, have an Indian tax lawyer or other qualified professional review the charge, exclusions and payment consequences before filing. The statutory forms do not replace case-specific legal analysis.
Common mistakes and how to avoid them
Using an old exclusion list
Web pages copied from the pre-2023 text can wrongly state that additional categories are automatically barred. Check the post-1 October 2023 section 138 wording and the current rule 162 instead.
Assuming the amount is always 25%
Twenty-five percent is the statutory lower boundary, not a guaranteed quote. Match the offence and punishment clause to the rule 162 table before discussing the amount.
Filing before paying the prerequisite dues
An application that does not establish payment of tax, interest and penalty cannot be allowed under rule 162. Reconcile payments first and attach reliable evidence.
Treating the Commissioner’s role as automatic
Submission of CPD-01 starts the process; it does not create an entitlement. The Commissioner may seek a report, grant the application or reject it after a hearing.
Missing the 30-day payment deadline
Payment after the 30-day period makes the order void. Record the receipt date, arrange funds in advance and send proof promptly.
Assuming every related case disappears
The statutory effect covers the same offence under the CGST Act. It does not terminate proceedings under another law or necessarily address a different offence in the same investigation.
Free tools Windows power users keep installed
One-click scans. No signup required.
Practical decision checklist
Before signing CPD-01, answer each question in writing:
- What exact section 132(1) clause is alleged, and which punishment category applies?
- Is the person excluded because of prior compounding, a section 132(1)(b) allegation or a court conviction?
- Have the tax, interest and penalty involved been paid and documented?
- Which rule 162 row applies, and what amount does it produce?
- Has prosecution been instituted, and are the complaint and court details included?
- Are there SGST, UTGST, IGST or non-GST proceedings that remain outside section 138?
- Who will monitor the Commissioner’s decision and the 30-day payment deadline?
If any answer is uncertain, resolve that uncertainty from the current Act, rule 162 and the case record before presenting the application. That approach prevents the two most costly errors: applying for an unavailable remedy and allowing an order to lapse unpaid.
Quick Recap
Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
