The basic objectives of setting up of the Settlement Commission are:‑

i. to provide an alternate channel for dispute resolution for the taxpayer;

ii. to expedite payment of GST involved in disputes by avoiding costly and time consuming litigation process;

iii. to provide an opportunity to tax payers to come clean who may have evaded payment of tax;

iv. to serve as a forum for the taxpayer to apply for settlement of their cases, on the basis of true and complete disclosure of their tax liability;

v. to encourage quick settlement of disputes and save the business from the worries of prosecution in certain situations.

In the Model GST Law, the provisions for Settlement Commission are incorporated only under the IGST Act (sections 11 to 26). This implies that cases cannot be settled in relation to tax liability of CGST/SGST Act. However, there is a possibility that those state tax administrations which want to constitute Settlement Commission can do so on the basis of the template provided under the IGST Act and the CGST Act can have an enabling provision drawing from the IGST Act for such states.


Section 11 of the IGST Act deals with some important definitions which are as follows:

S.No. Term Definition
1 Bench It means a bench of Settlement Commission
2 Case

It means any proceeding under the IGST Act for levy, assessment and collection of IGST before an IGST officer or before a First Appellate Authority in connection with such levy, assessment or collection of IGST pending on the date on which an application for settlement is made.

Case will also mean an order passed by an adjudicating authority for which the period of appeal has not expired.

It is clarified in the definition that an appeal filed after the expiry of the period of appeal or a case remanded by a higher judicial authority to a lower one will not be treated as a proceeding pending and therefore no application for settlement can be made in such cases.

3 Designated officer

It means an officer of the IGST appointed in the Settlement Commission to conduct inquiry or investigation for the purposes of the chapter on Settlement Commission.

4 Member

It means a Member of the Settlement Commission and includes the National/State Chairman.

5 Settlement Commission

It means the National Goods and Services Tax Settlement Commission constituted under section 12 of IGST Act.

Reverse Charge under GST

Constitution of National Goods and Services Tax Settlement Commission and decision making

Section 12 of the IGST Act provides that the central government shall constitute a National Goods and Services Tax Settlement Commission. This shall be done on the recommendation of the GST Council. It shall be headed by a national Chairman.

It shall have benches called State Settlement Commission each to be headed by a State Chairman. One bench of State Settlement Commission may cover one or more states. Every State Settlement Commission shall consist of Chairman and such number of Members as may be prescribed. These will be called Technical Members and will be drawn from the CGST administration. The State Settlement Commissions shall be the body to hear and dispose of the applications. Each application for settlement shall be heard by a bench presided over by the State Chairman and shall consist of two other members.

It is provided that the National and State Chairman shall be a person who is either sitting or a retired judge of a high court. However, the other qualifications, eligibility conditions, the manner of selection and appointment of the National Chairman, the State Chairman, and the Members shall be prescribed in the Model GST Rules. The powers and functions of the National and the State Chairman shall also be prescribed in the Model GST Rules. Keeping in view that some state governments may also choose to set up a Settlement Commission, in order to ensure a uniform approach, it is provided that qualification, eligibility etc. shall be prescribed on the recommendations of the GST Council.

Section 14 of the IGST Act provides that where the members of a bench of Settlement Commission differ on any point, the decision shall be taken on the basis of the majority opinion. It is provided that a decision can also be taken by a bench consisting of only two members, if the third member is not available due to factors like absence, illness or vacancy. If there is a difference of opinion between such two members, the matter will then be referred to a third member, and decision will be taken by the majority opinion.

Who can apply for settlement

As per section 15 of the IGST Act, any taxable person can apply for settlement of a case in relation to which he has been issued one or more show cause notice(s) under the IGST

Act and the same is pending before the adjudicating authority or the First Appellate Authority.

His application should contain full and true disclosure of:

i. tax Liability which has not been disclosed to the proper officer of IGST;

ii. manner of deriving such tax liability;

iii. additional amount of tax which he accepts to be payable;

iv. other particulars such as mis-classification, exemption notification because of which he admits to short payment

Conditions which must be fulfilled before application for settlement can be accepted

As per section 15 of the IGST Act, the following conditions must be fulfilled before an application for settlement of a case can be accepted:

(a) the applicant has furnished the return(s), which he is or was required to furnish under the IGST Act or this requirement has been waived by the Settlement Commission after recording the reasons that it was satisfied that certain valid circumstances existed for not filing the return(s);

(b) the applicant has received a show cause notice for demand of tax or has received an order confirming the demand of tax issued by the IGST officer and the same is pending before the First Appellate Authority;

(c) the additional amount of tax accepted by the applicant in his application exceeds five lakh rupees; and

(d) the applicant has paid the additional amount of tax accepted by him along with the interest due thereon under section 36 of the CGST Act.

Circumstances in which application for settlement cannot be entertained

As per section 15 of the IGST Act, in the following circumstances, Settlement Commission will not accept an application for settlement:

i. If the case involved in the application is pending with the Appellate Tribunal or any Court.

ii. If the application involves determination of any question having a bearing on the rate of tax or determination of liability to pay tax on goods and/or services.

iii. If the fees as prescribed has not been paid.

It is to be noted that once an application has been made, it cannot be allowed to be withdrawn by the applicant.

Procedure to be followed by the Settlement Commission after receipt of application

As provided under section 16 of the IGST Act, the Settlement Commission shall follow the following procedure after the receipt of an application for settlement of a case:


  • Issue a notice to the applicant to explain in writing why the application should be allowed to be proceeded with.
  • This must be done within seven days of the date of receipt of the application.


  • After considering the explanation, it may accept or reject the application.
  • This must be done within forty five days from the date of notice and if not done within this time period, the application shall be deemed to have been allowed


  • Send a copy of the order accepting or rejecting the application to the applicant and to the jurisdictional IGST officer.
  • An application shall not be rejected without hearing the applicant.


  • Where application is allowed, Settlement Commission to call for a report and relevant records from the jurisdictional IGST officer.
  • This must be done within seven days of the issue of an order at step 2 above


  • The jurisdictional IGST officer to furnish the required report to Settlement Commission within sixty days of receipt of communication.
  • If no report sent, Settlement Commission shall proceed without the report.


  • Settlement Commission may ask for further inquiry or investigation by the designated officer of IGST appointed in Settlement Commission for this purpose.
  • This must be done within fifteen days of the receipt of the jurisdictional officer’s


  • Designated officer to make further inquiry or investigation and furnish a report to the Settlement Commission within ninety days of receipt of such direction.
  • If no report is furnished within this time period, Settlement Commission shall pass an order without such report.


  • Settlement Commission to pass the order after examining the records submitted by the Applicant and the reports of the jurisdictional officer and the Designated officer and after hearing the applicant.
  • The order must be passed within one year from the month in which the application was made and failing that, the settlement proceedings shall abate.

payment of penalty can be withdrawn where it finds later that the applicant had concealed any facts or had given any false evidence or if he has failed to pay the sum specified in the settlement order in the prescribed time. (section 20)

Who cannot use Settlement Commission

i. No person can avail the facility of settlement more than twice. (section 23)

ii. A person cannot apply for settlement in any other matter where after passing of a settlement order, a person was convicted of any offence under the IGST Act in relation to that case or where due to lack of cooperation from the applicant, the Settlement Commission has sent back the case to the relevant adjudicating authority. (section 23)

Powers of Settlement Commission

The powers and procedures of Settlement Commission are given in sections 25 and 26 of IGST Act. It is vested with the powers of a civil court under the Code of Civil Procedure, 1908, for discovery and inspection, enforcing the attendance of a person and examining him on oath, and compelling production of books of account and other records. Settlement Commission is deemed to be a civil court for the purposes of section 195 of the Code of Criminal Procedure, 1973. Any proceeding before it shall be deemed to be a judicial proceeding under section 193 and 228 and for the purpose of section 196, of the Indian Penal Code, 1860. The Settlement Commission also has the power to regulate its own procedure.

Section 193 of IPC, 1860 contains penal provision for giving false evidence under summons and section 228 of IPC, 1860 contains penal provisions for intentionally insulting or interrupting the Officer sitting in summons proceedings. Accordingly these provisions of IPC can be invoked where the person summoned gives false evidence or interrupts the proceedings of the Settlement Commission.

Section 24 of the IGST Act gives power to Settlement Commission to amend its order to rectify any mistake apparent from the record within a period of three months from the date of the order. Such mistake may be noticed by the Settlement Commission on its own accord or may be brought to its notice by the applicant or the jurisdictional IGST officer. If a rectification has the effect of enhancing the tax liability or reducing the quantum of input tax credit, the applicant must be heard before the order is passed.

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