Eligibility precedes the percentage calculation
CGST section 138 and Rule 162 provide the compounding framework. A correct percentage does not make an excluded person or offence eligible. Checked on 28 October 2026, this guide focuses on the category-and-payment working, not FEMA compounding or automatic immunity for every GST dispute. Record the actual offence, applicable punishment clause, prior compounding history and statutory exclusions before applying any model. ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162.
Use the operative category table
Rule 162(3A) contains specific bands rather than one universal rate. For its section 132(1)(a), (c), (d) and (e) rows, the clause (i) punishment column uses 50%–75%, and clause (ii) uses 40%–60%, of the specified applicable base. Its other listed rows use 25% on the stated base in the displayed clause (i) and clause (ii) columns. Establish that the case actually falls in a displayed punishment column: clause (i) requires an amount exceeding ₹500 lakh, while clause (ii) requires an amount exceeding ₹200 lakh but not exceeding ₹500 lakh. Do not silently extend those columns to a different punishment category. Match the particular offence and column to the actual case; do not infer eligibility for section 132(1)(b), which section 138 excludes in its stated terms. ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162.
Reconcile the base before selecting a rate
The table refers as applicable to tax evaded, specified wrongly availed or utilised credit, or wrongly taken refund. Identify the legally relevant base and any overlap between allegations. Do not add all labels as separate rupee exposures without determining whether they represent the same amount. Where an offence falls within multiple categories, the table's proviso directs the higher prescribed compounding amount, not an automatic addition of category amounts. The models stipulate the classifications and bases. ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162.
Application and prerequisites are separate controls
Rule 162 specifies CPD-01 to apply and CPD-02 for the decision. It provides the stated officer-report process, full and true disclosure, hearing/rejection safeguards and ninety-day decision period. Tax, interest and penalty payable in the case must be paid before allowance; the compounding amount is separate. An application, a tax challan and an order are not interchangeable completion evidence. ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162.
Control payment after the order
Sub-rule (6) requires the ordered compounding amount to be paid within thirty days of receipt of the order, with proof furnished. Sub-rule (7) makes failure within that period vitiate the order and render it void. Diary actual receipt separately from the date printed on the order. Do not treat a proposed amount, partial payment or an internal approval as proof of timely full payment. The calendar example excludes the receipt date and assumes no applicable special relief. ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162.
Keep the scope of immunity precise
Section 138 addresses the stated same-offence proceedings under the Act and preserves proceedings under other laws. Rule 162 also addresses withdrawal where material particulars were concealed or false evidence given. Preserve eligibility analysis, accurate disclosure, the actual decision, prerequisites and final payment proof. None of the examples establishes offence guilt, decides prosecution eligibility or guarantees that the Commissioner must grant an application. ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162.
Applicable primary references
ICAI GST Act(s) and Rule(s), April 2026: section 138 and Rule 162
Six worked illustrations
All facts and amounts below are fictional. Assumptions describe the model, not additional statutory rules.
Illustrative example 1: Clause (i) band
Assume an independently eligible section 132(1)(a) case falls in the table's clause (i) column, with verified base ₹600 lakh. The 50%–75% range is ₹300–₹450 lakh. The actual ordered amount must be established separately.
Illustrative example 2: Clause (ii) band
Assume an independently eligible section 132(1)(c) case falls in the clause (ii) column, with verified base ₹300 lakh. The 40%–60% range is ₹120–₹180 lakh; do not reuse the other punishment column.
Illustrative example 3: Fixed-percentage row
Assume an independently eligible section 132(1)(f) case with a verified tax-evaded base of ₹300 lakh, properly falling within punishment clause (ii). The table specifies 25%, giving ₹75 lakh. In contrast, a base of exactly ₹200 lakh does not meet clause (ii), which requires an amount exceeding ₹200 lakh, or clause (i), which requires an amount exceeding ₹500 lakh. Although 25% of ₹200 lakh is arithmetically ₹50 lakh, that arithmetic alone does not establish the applicability of either table column. Determine the legally applicable punishment and compounding basis before using the table.
Illustrative example 4: Multiple categories are not automatically additive
Assume a legally established same-offence multiple-category case has applicable category amounts ₹80 lakh and ₹50 lakh, on properly reconciled bases. The proviso selects the higher ₹80 lakh, not their ₹130 lakh sum. Do not extend this isolated model to unrelated offences without analysis.
Illustrative example 5: Thirty-day receipt diary
Assume CPD-02 is received on 1 October 2026. With the stipulated receipt-date-excluded count and no special relief, thirty days ends on 31 October 2026. Verify the actual receipt and applicable filing/payment arrangements; the printed order date alone is not substituted.
Illustrative example 6: Separate prerequisite and compounding cash
Assume independently payable tax ₹300 lakh, interest ₹20 lakh and penalty ₹30 lakh are paid, and the separate compounding order requires ₹150 lakh. Prerequisite payments total ₹350 lakh; total including compounding is ₹500 lakh. The ₹350 lakh is not automatically a credit against the ordered ₹150 lakh.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Identify the actual offence | Relevant section 132 clause and facts |
| 2 | Screen statutory exclusions | Section 138 history, accusation/conviction and prescribed restrictions |
| 3 | Establish the punishment column | Clause (i)/(ii) and current applicable law |
| 4 | Reconcile the relevant base | Tax/credit/refund with overlap removed |
| 5 | Select the table row and amount | Correct band or specified percentage |
| 6 | Review multiple-category treatment | Higher applicable amount, with supported case scope |
| 7 | Prepare CPD-01 and disclosure | Complete facts, officer-report and hearing record |
| 8 | Verify prerequisites and CPD-02 | Tax, interest, penalty and actual decision |
| 9 | Diary receipt and pay in full | Thirty-day control and furnished proof |
| 10 | Confirm the resulting legal status | Same-offence scope, other laws and no concealment/false evidence |
Sixteen practitioner FAQs
1. Does section 138 allow every applicant to compound?
No. Screen all statutory exclusions and actual case conditions first.
2. Is there one universal compounding percentage?
No. Rule 162(3A) differentiates offence rows and punishment columns.
3. What is the stated clause (i) band for the identified main rows?
50%–75% of the applicable table base, after correct classification.
4. What is the corresponding clause (ii) band?
40%–60% for those identified rows; do not interchange the columns.
5. Do the other listed rows necessarily use that band?
No. The table specifies 25% for its stated other rows and bases in the displayed clause (i)/(ii) columns. Verify the punishment column and its threshold; an offence label or a percentage calculation alone is insufficient.
6. Can section 132(1)(b) be assumed eligible through a percentage calculation?
No. Section 138's stated exclusion must be respected.
7. Can the same amount be added as tax, credit and refund without analysis?
No. Establish the actual base and whether allegations overlap.
8. What happens under the multiple-category proviso?
Apply the higher prescribed amount for the case within that proviso, not an automatic sum.
9. What is the application form?
FORM GST CPD-01 under Rule 162.
10. What records the decision?
FORM GST CPD-02, with the actual order and its terms.
11. Are tax, interest and penalty replaced by compounding?
No. The stated prerequisite payments and the separate compounding amount must be reconciled.
12. What decision period does the rule state?
Ninety days from receipt of the application, within the stated procedure.
13. What payment period follows receipt of the order?
Thirty days, with proof of the ordered payment furnished.
14. What is the stated consequence of missing that payment period?
Sub-rule (7) provides that the order is vitiated and void.
15. Does immunity eliminate proceedings under every other law?
No. Section 138 expressly preserves the stated other-law proceedings.
16. Can concealment or false evidence matter after allowance?
Yes. Rule 162 provides for withdrawal of immunity on its stated grounds.
Conclusion
Check section 138 eligibility first, apply the correct Rule 162 category and punishment band, and reconcile the ordered amount separately from tax, interest and penalty.