Section 138 - Compounding of offences
Reviewed by CA Nikhil Gupta and Kajri Singh · Last reviewed 30 August 2026
Finin2min Summary - Section in 2 Minutes
Permits Commissioner-approved compounding before or after prosecution for eligible offences, on payment under the prescribed rule. Statutory exclusions and repeat-offence restrictions must be checked first.
Why Section 138 matters
Section 138 (Compounding of offences) is the section-level control point within Chapter XIX — Offences and Penalties. Penalty, detention, confiscation and prosecution provisions determine consequences when conduct crosses beyond ordinary tax computation into statutory default or offence.
Current-law and amendment control
validation 1 — controlling consolidated Act
India Code — Central Goods and Services Tax Act, 2017. Used for the current chapter/section inventory and consolidated provision status.
validation 2 — independent official cross-check
CBIC Tax Information Portal. Use the Act HTML/PDF and amendment history together with current notifications/circulars.
Transaction-date rule: Never treat today’s consolidated wording, a portal screen or an enacted-but-uncommenced amendment as proof of the law that applied on another date. Fix the relevant tax period first.
Official statutory text
The authoritative provision, footnotes and amendment notes are maintained in the official consolidated Act. This analytical page does not re-typeset amendment markers into the running statutory sentence.
- Open the India Code consolidated CGST Act PDF - as on 11 June 2026
- Open the India Code CGST Act register
- Open the CBIC Tax Information Act explorer
Official-source reference reviewed on 2026-07-28. Apply the version and commencement position relevant to the transaction period.
Clause-by-clause / paragraph-wise decode
Permits Commissioner-approved compounding before or after prosecution for eligible offences, on payment under the prescribed rule. Statutory exclusions and repeat-offence restrictions must be checked first.
Section–Rule–Form–Notification–Circular bridge
The mapping is a legal concordance, not a round-robin related-link list. It is limited to instruments listed in this repository.
Practical example
An eligible accused seeks compounding after prosecution begins. The Commissioner checks exclusions, tax/interest payment, prior offences and rule 162 amount.
Professional alert
Compounding is not available for every offence or repeat offender. Use the current section and rule 162 table, not old fixed-amount guidance.
Linked Rules and current operative controls Rules are read as a consolidated legal layer. Where a rule is legacy or institutionally transitioned, the current status is stated expressly. Rule 138 RULE TEXT / CONSOLIDATED BASE LAYER 138. Information to be furnished prior to commencement of movement of goods andgeneration of e-way bill.-(1) Every registered person who causes movement of goods ofconsignment value exceeding fifty thousand rupees-
(i) in relation to a supply; or
(ii) for reasons other than supply; or
(iii) due to inward supply from an unregistered person, shall, before commencement of such movement, furnish information relating to the said goods as specified in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique number will be generated on the said portal:
Provided that the transporter, on an authorization received from the registered person, may furnish information in Part A of FORM GST EWB-01, electronically, on the common portal along with such other information as may be required on the common portal and a unique number will be generated on the said portal:
Provided further that where the goods to be transported are supplied through an e- commerce operator or a courier agency, on an authorization received from the consignor, the information in Part A of FORM GST EWB-01 may be furnished by such e-commerce operator or courier agency and a unique number will be generated on the said portal: Provided also that where goods are sent by a principal located in one State or Union territory to a job worker located in any other State or Union territory, the e-way bill shall be generated either by the principal or the job worker, if registered, irrespective of the value of the consignment: Provided also that where handicraft goods are transported from one State or Union territory to another State or Union territory by a person who has been exempted from the requirement of obtaining registration under clauses
(i) and
(ii) of section 24, the e-way bill shall be generated by the said person irrespective of the value of the consignment.
Explanation 1. - For the purposes of this rule, the expression "handicraft goods" has the meaning as assigned to it in the Government of India, Ministry of Finance, notification No. 56/2018-Central Tax, dated the 23rd October, 2018, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section
(i), vide number G.S.R 1056 (E), dated the 23rd October, 2018 as amended from time to time.301
Explanation 2.- For the purposes of this rule, the consignment value of goods shall bethevalue, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said 301 substituted vide Notf no. 74/2018-CT dt. 31.12.2018 for "Explanation 1.- For the purposes of this rule, the expression "handicraft goods" has the meaning as assigned to it in the Government of India, Ministry of Finance,
notification No. 32/2017-Central Tax dated the 15th September, 2017 published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section
(i), vide number G.S.R 1158 (E) dated the 15th September, 2017 as amended from time to time." consignment and also includes the central tax, State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods.
(2) Where the goods are transported by the registered person as a consignor or the recipient of supply as the consignee, whether in his own conveyance or a hired one or a public conveyance, by road, the said person shall generate the e-way bill in FORM GSTEWB-01 electronically on the common portal after furnishing information in Part B of FORM GST EWB-01.
(2A) Where the goods are transported by railways or by air or vessel, the e-way bill shall be generated by the registered person, being the supplier or the recipient, who shall, either before or after the commencement of movement, furnish, on the common portal, the information in Part B of FORM GST EWB-01:
Provided that where the goods are transported by railways, the railways shall not deliver the goods unless the e-way bill required under these rules is produced at the time of delivery.
(3) Where the e-way bill is not generated under sub-rule
(2) and the goods are handed over to a transporter for transportation by road, the registered person shall furnish the information relating to the transporter on the common portal and the e-way bill shall be generated by the transporter on the said portal on the basis of the information furnished by the registered person in Part A of FORM GST EWB-01:
Provided that the registered person or, the transporter may, at his option, generate and carry the e-way bill even if the value of the consignment is less than fifty thousand rupees:
Provided further that where the movement is caused by an unregistered person either in his own conveyance or a hired one or through a transporter, he or the transporter may, at their option, generate the e-way bill in FORM GST EWB-01 on the common portal in the manner specified in this rule: Provided also that where the goods are transported for a distance of upto fifty kilometers within the State or Union territory from the place of business of the consignor to the place of business of the transporter for further transportation, the supplier or the recipient, or as the case may be, the transporter may not furnish the details of conveyance in Part B of FORM GST EWB-01.
Explanation 1.-For the purposes of this sub-rule, where the goods are supplied by anunregistered supplier to a recipient who is registered, the movement shall be said to be caused by such recipient if the recipient is known at the time of commencement of the movement of goods.
Explanation 2.- The e-way bill shall not be valid for movement of goods by roadunless the information in Part-B of FORM GST EWB-01 has been furnished except in the case of movements covered under the third proviso to sub-rule
(3) and the proviso to sub-rule(5).
(4) Upon generation of the e-way bill on the common portal, a unique e-way bill number
(EBN) shall be made available to the supplier, the recipient and the transporter on the common portal.
(5) Where the goods are transferred from one conveyance to another, the consignor or the recipient, who has provided information in Part A of the FORM GST EWB-01, or the transporter shall, before such transfer and further movement of goods, update the details of conveyance in the e-way bill on the common portal in Part B of FORM GST EWB-01:
Provided that where the goods are transported for a distance of upto fifty kilometers within the State or Union territory from the place of business of the transporter finally to the
place of business of the consignee, the details of the conveyance may not be current in the e- way bill.
(5A) The consignor or the recipient, who has furnished the information in Part A of FORMGST EWB-01, o
Finin2min decision path
- Identify the exact alleged act or omission.
- Separate civil tax demand, penalty, detention/confiscation and prosecution provisions.
- Check mens rea/fraud elements where the statute requires them.
- Preserve documents, movement records and statements.
- Evaluate payment, release, appeal and compounding routes separately.
Practical case studies
Accounting, ERP & portal touchpoints
Exception controls should flag e-way bill/document failures, machine-registration obligations and repeat compliance breaches before they become enforcement matters.
Control: keep the legal conclusion separate from system configuration; document every tax-code/master change and its effective date.
Notice, litigation & evidence risk
Penalty and prosecution cases require disciplined evidence and statement control. Do not casually admit legal characterisations not established by facts.
Evidence hierarchy: source transaction → books/ERP → statutory return/form → portal acknowledgement → legal working → correspondence/order.
Judicial position — how to read precedent
Start with binding Supreme Court authority, then the jurisdictional High Court, other High Courts and GSTAT where applicable. AAR/AAAR rulings are fact- and jurisdiction-sensitive and should not be presented as universal law. Always check whether a decision has been stayed, reviewed, distinguished or overtaken by amendment.
Open the Finin2min provision citator · Open the connected GST case-law module
Common mistakes to avoid
- Conflating tax, penalty and prosecution.
- Treating detention and confiscation as the same proceeding.
- Ignoring statutory conditions for a specific penalty.
- Failing to preserve transport and e-way bill evidence.
Questions professionals actually ask
- What GST penalty can apply to this default?
- Apply section 138 to the exact facts and period, then verify the linked delegated law and official implementation material before concluding.
- What happens when goods are detained under GST?
- Apply section 138 to the exact facts and period, then verify the linked delegated law and official implementation material before concluding.
- When can goods or a vehicle be confiscated?
- Apply section 138 to the exact facts and period, then verify the linked delegated law and official implementation material before concluding.
- Can a GST offence be compounded?
- Apply section 138 to the exact facts and period, then verify the linked delegated law and official implementation material before concluding.
Related law and practical resources
Implementation checklist
- Fix the transaction, taxable period and jurisdiction.
- Read every subsection, proviso, explanation and omission marker.
- Open the mapped Rule, form, notification and circular.
- Test State/UT variation and portal version.
- Preserve evidence, approvals, working papers and acknowledgements.
- Record the conclusion, assumptions, source date and reviewer.
Evidence and retention checklist
- Contract, purchase order, invoice or underlying transaction document.
- Registration, return, ledger, challan and portal acknowledgement.
- Official Act/Rule/notification version used and effective date.
- Internal tax position paper, computation and management approval.
- Correspondence, notices, replies, orders and appeal papers where applicable.
Practical Q&A
- What does section 138 regulate?
- It regulates compounding of offences. Read the exact text, conditions, exceptions and transaction date together.
- Which subordinate law should be checked?
- No direct CGST Rule has been listed in this repository. Notifications, circulars, forms and the corresponding SGST/UTGST layer may also apply.
- What evidence should be retained?
- Preserve the contract or transaction record, invoice or form, portal acknowledgement, payment/ledger evidence, correspondence, legal working and the official source version used.
- Can portal behaviour override the statute?
- No. Portal functionality is operational evidence; legal entitlement and liability remain controlled by the Act, Rules, notifications and binding decisions.