Table of Contents
Introduction
The Finance (No. 2) Act, 2024 introduced a game-changing relief measure in the Central Goods and Services Tax (CGST) Act, 2017—Section 128A. Effective from November 1, 2024, this provision aims to ease the financial burden on taxpayers by waiving interest and penalties in specific cases. Covering tax periods from July 1, 2017, to March 31, 2020, Section 128A provides an opportunity to settle past tax liabilities without additional penalties.
This relief mechanism, implemented through Rule 164 of the CGST Rules, 2024, along with relevant notifications and circulars, is designed to expedite dispute resolution, encourage compliance, and streamline tax administration. This article offers a detailed analysis of the amnesty scheme, covering its scope, conditions, procedural aspects, and key clarifications issued by the government.
Decoding Section 128A: Key Provisions and Applicability
Section 128A primarily focuses on tax demands raised under Section 73 of the CGST Act. This provision allows taxpayers to resolve pending disputes by paying only the principal tax liability, with a waiver on interest and penalties.
Who Can Avail the Relief?
The scheme is applicable in the following cases:
✔ Tax Demand Notices Without Final Adjudication:
- If a taxpayer has received a notice under Section 73(1) or a statement under Section 73(3) but no final order under Section 73(9) has been issued.
✔ Orders Passed Under Section 73(9) But Not Further Reviewed:
- If an order under Section 73(9) has been passed, but no subsequent order under Section 107(11) or Section 108(1) has been issued.
✔ Orders Under Section 107(11) or Section 108(1) Without Tribunal Review:
- If an order has been issued under Section 107(11) or Section 108(1), but no further order has been passed under Section 113(1).
Conditions for Availing the Relief
To benefit from the waiver of interest and penalties, the taxpayer must:
✔ Make full payment of the tax demand as per the issued notice, statement, or order before the prescribed deadline.
✔ Ensure compliance with procedural requirements outlined in Rule 164 of the CGST Rules, 2024, and relevant government notifications.
Once these conditions are met, all proceedings related to such tax demands shall be deemed concluded, bringing much-needed relief to businesses and individual taxpayers.
Exclusions: When Does Section 128A Not Apply?
Despite its wide-ranging benefits, Section 128A does not extend relief in the following cases:
✘ Erroneous Refunds:
- If the demand pertains to wrongfully availed or sanctioned refunds, the waiver will not apply.
✘ Pending Appeals or Writ Petitions:
- If the taxpayer has filed an appeal or writ petition against the tax demand and has not withdrawn it before the deadline, the relief is not applicable.
By strategically leveraging this amnesty scheme, taxpayers can resolve long-standing disputes efficiently and avoid unnecessary financial strain. This initiative is a significant step toward reducing litigation and fostering a compliant tax ecosystem in India.
Procedural Roadmap Under Rule 164 of the CGST Rules, 2024
Step-by-Step Compliance Process
1. Filing the Application
Taxpayers seeking relief under Section 128A must submit an application electronically through the GST portal using the appropriate forms:
✔ FORM GST SPL-01 – Applicable where only a notice or statement under Section 73 has been issued, and no final adjudication order exists.
✔ FORM GST SPL-02 – Applicable when an adjudication order under Section 73(9) has already been issued.
2. Tax Payment Requirement
✔ Before submitting the application, taxpayers must pay the full tax demand using FORM GST DRC-03.
✔ If the tax has already been paid using FORM GST DRC-03, an adjustment application in FORM GST DRC-03A must be filed before proceeding with the main application.
3. Withdrawal of Appeals and Legal Proceedings
To qualify for the waiver, taxpayers must:
✔ Withdraw any pending appeals or writ petitions filed before the Appellate Authority, Tribunal, or Court related to the tax demand.
✔ Submit a copy of the withdrawal order along with the amnesty application to confirm compliance.
4. Application Processing and Approval
The jurisdictional GST officer is responsible for verifying and processing the application within three months of submission. The approval process follows these key steps:
✔ If the officer accepts the application, an order in FORM GST SPL-05 is issued, concluding the proceedings.
✔ If the officer rejects the application, a notice in FORM GST SPL-03 is sent to the taxpayer.
✔ The taxpayer then has one month to submit a response using FORM GST SPL-04.
✔ If the officer determines the taxpayer is ineligible, a rejection order in FORM GST SPL-07 is issued, denying the waiver.
By following this structured framework under Rule 164, taxpayers can ensure their applications are processed efficiently and maximize their chances of benefiting from the scheme.
Notification No. 21/2024 – Critical Deadlines for Tax Payments under Section 128A
To provide clarity on timelines, the government issued Notification No. 21/2024 – Central Tax, dated October 8, 2024. This notification outlines the last dates for making tax payments under the amnesty scheme.
Key Deadlines to Remember
✔ March 31, 2025 – This is the final deadline for making payments in cases where demand notices or orders have been issued under Section 73.
✔ Six-Month Payment Window – If a notice was originally issued under Section 74 but later reassessed under Section 73, the taxpayer has six months from the date of redetermination to make the payment.
Why This Notification Matters?
✔ It ensures taxpayers have a well-defined and legally binding timeframe to settle their dues.
✔ It helps businesses avoid unnecessary litigation by resolving disputes efficiently.
✔ It offers a clear compliance roadmap, reducing ambiguity in tax administration.
By adhering to these deadlines, taxpayers can fully leverage Section 128A and benefit from waivers on interest and penalties, ensuring a hassle-free resolution of past tax disputes.
Clarifications under Circular No. 238/32/2024-GST: Amnesty Scheme for Interest & Penalty Waiver
Circular No. 238/32/2024-GST provides detailed procedural guidelines for taxpayers seeking relief under Section 128A of the CGST Act, 2017, allowing waiver of interest and penalties on tax demands raised under Section 73.
This article offers a comprehensive breakdown of the circular, covering eligibility, procedural framework, tax payment obligations, and key clarifications for taxpayers.
1. Objective and Scope of Circular No. 238/32/2024-GST
The primary objective of the circular is to ensure uniform implementation of the amnesty scheme under Section 128A, allowing taxpayers to settle pending tax liabilities without additional interest or penalties.
1.1 Key Objectives
✔ Provide clarity on the application of Section 128A for tax demands under Section 73.
✔ Define eligibility conditions and outline the procedural framework for taxpayers.
✔ Ensure uniformity across tax jurisdictions in implementing the amnesty scheme.
1.2 Tax Period Covered
The waiver applies to tax demands raised under Section 73 for the period July 1, 2017, to March 31, 2020.
2. Procedural Framework for Availing Amnesty under Section 128A
Taxpayers seeking interest and penalty waiver must follow a structured process as outlined in the circular.
2.1 Filing of Applications
✔ Taxpayers must submit an application electronically on the GST portal using:
- FORM GST SPL-01 (if only a notice or statement under Section 73 has been issued).
- FORM GST SPL-02 (if an adjudication order under Section 73 has been passed).
✔ If an appeal or writ petition has been filed against the demand, the taxpayer must withdraw it before applying for the waiver.
✔ A copy of the withdrawal order must be attached. If the withdrawal order is pending, the taxpayer can submit the withdrawal request document instead.
✔ If multiple tax notices have been issued for different periods, separate applications must be submitted for each notice/order.
2.2 Tax Payment Requirements
✔ Taxpayers must make full payment of the tax demand using FORM GST DRC-03 before filing the waiver application.
✔ If an adjudication order has been issued, payment must be made via the Electronic Liability Register (ELR) – Part II.
✔ If tax was previously paid through FORM GST DRC-03, an adjustment application using FORM GST DRC-03A must be filed.
2.3 Deadline for Tax Payment
The tax payment must be made within the following deadlines:
✔ March 31, 2025 – for cases where demand notices or orders have been issued under Section 73.
✔ Six months from the redetermination order – for cases where an initial notice was issued under Section 74, but later re-determined under Section 73.
3. Clarifications on Eligibility and Scope
3.1 Eligible Cases for Waiver
✔ The waiver is applicable to tax demands raised under Section 73.
✔ If the demand pertains only to interest or penalties, taxpayers can still apply for the waiver.
✔ Cases where a demand was initially issued under Section 74 but later re-determined under Section 73 are eligible for relief.
3.2 Ineligible Cases for Waiver
✖ Erroneous refunds – Demands arising from incorrectly granted refunds are not eligible for the waiver.
✖ Interest on delayed return filing – If the interest is due to late return filing or self-assessed tax liability, the taxpayer cannot apply for the waiver.
✖ Non-withdrawal of appeal – If the taxpayer does not withdraw their appeal or writ petition, they cannot claim the amnesty benefit.
3.3 Adjustment of Tax Payments
✔ If tax has already been recovered by the tax officer from another party on behalf of the taxpayer, it is considered a valid payment for the waiver.
✔ Interest or penalty amounts recovered earlier cannot be adjusted against the principal tax liability.
3.4 Impact of Retrospective Amendments to Section 16 (ITC Claims)
✔ If the demand includes disallowed Input Tax Credit (ITC) due to restrictions under Section 16(4), but the taxpayer is now eligible due to retrospective amendments, they can adjust the tax demand accordingly.
✔ In such cases, the taxpayer must:
- Deduct the ineligible ITC amount from the demand.
- Pay only the revised tax amount before submitting the waiver application.
4. Verification and Processing of Amnesty Applications by Tax Authorities
Once taxpayers submit their application for interest and penalty waiver under Section 128A, the tax authorities must follow a structured verification and processing system.
4.1 Timeline for Processing Applications
✔ The tax officer must review the application and issue a decision within three months from the date of submission.
4.2 Application Rejection and Response Mechanism
✔ If the application is rejected, the tax officer will issue a notice in FORM GST SPL-03, stating the reasons for rejection.
✔ Taxpayers will have one month from the date of notice to respond using FORM GST SPL-04.
✔ The response must address all objections and provide supporting documents if required.
4.3 Issuance of Waiver Order or Rejection Order
✔ If the application is approved, the tax officer will issue a waiver order in FORM GST SPL-05, granting full relief from interest and penalties.
✔ If the application is rejected after review, the tax officer will issue a final rejection order in FORM GST SPL-07.
✔ Taxpayers can appeal against the rejection order, following the prescribed appellate mechanism.
5. Departmental Appeals and Withdrawal Process
In certain cases, the tax department itself may have filed an appeal against interest and penalty waivers. The circular provides clear directives on how such appeals should be handled.
5.1 Eligibility of Taxpayers despite Departmental Appeals
✔ If the department has filed an appeal only against the interest or penalty component, the taxpayer is still eligible for the waiver scheme.
✔ The waiver remains valid even if the department challenges the penalty or interest in higher forums.
5.2 Withdrawal of Departmental Appeals by Tax Officers
✔ Tax authorities are directed to withdraw appeals in cases where the principal tax liability has been fully paid.
✔ If a taxpayer qualifies for the amnesty scheme, departmental appeals on interest and penalties must be withdrawn to ensure uniformity in tax administration.
6. Special Considerations and Exceptions under the Amnesty Scheme
While the amnesty scheme under Section 128A provides broad relief, certain special cases require additional clarifications.
6.1 Tax Periods Partially Covered by Section 128A
✔ If a demand notice includes tax periods that fall both inside and outside the eligible period (July 1, 2017 – March 31, 2020), the waiver applies only to the eligible period.
✔ For tax periods beyond the eligible period, the taxpayer must pay the full tax demand before seeking amnesty.
6.2 Cases Involving Erroneous Refunds
✔ If the demand includes tax liabilities arising from erroneous refunds, taxpayers must repay the full tax amount, including the refund component, before applying for the waiver.
✔ The interest and penalty waiver will not apply to the portion of the tax demand related to wrongly availed refunds.
6.3 Restrictions on Appeal Rights
✔ Taxpayers cannot appeal against an order approving the waiver (FORM GST SPL-05).
✔ Appeals are permitted only against rejection orders issued in FORM GST SPL-07.
7. Comprehensive FAQs and Official Clarifications on the Amnesty Scheme
7.1 Applicability of Waiver to Taxpayers Who Paid Before Section 128A
✔ The waiver applies to all interest and penalty amounts paid before March 31, 2025, irrespective of when the principal tax amount was settled.
7.2 Treatment of Tax Collected by Tax Officers on Behalf of Taxpayers
✔ Any tax amount collected or recovered by tax authorities on behalf of a taxpayer qualifies for the waiver, provided it meets the eligibility conditions.
7.3 Adjustment of Interest and Penalty against Tax Liability
✔ Taxpayers cannot adjust interest or penalty amounts against existing tax dues. The waiver applies separately, and adjustments are not permitted.
7.4 Waiver Eligibility When a Notice Only Covers Interest and Penalty
✔ If a GST demand notice pertains only to interest and penalty, the waiver is available unless it relates to:
- Self-assessed tax liabilities
- Delayed filing of returns under Section 39
7.5 Can a Partial Waiver Be Availed?
✔ No. The taxpayer must fully settle the tax liability before claiming a waiver on interest and penalties.
7.6 Treatment of Tax Periods Partially Covered Under Section 128A
✔ If a demand spans both eligible and non-eligible periods, the waiver is limited to the eligible period (July 1, 2017 – March 31, 2020).
✔ Tax for non-eligible periods must be paid in full before applying for relief.
7.7 Demands Related to Erroneous Refunds
✔ If a demand includes erroneous refunds, taxpayers must repay the full tax amount, including the wrongly availed refund, before seeking a waiver.
7.8 Impact of Retrospective Amendments to Section 16 (ITC Provisions)
✔ Taxpayers can adjust Input Tax Credit (ITC) now available, provided it was eligible at the time of amendment, before making the final tax payment.
7.9 Applicability of Waiver to IGST and Compensation Cess
✔ The amnesty scheme covers all tax components, including:
- Integrated GST (IGST)
- Compensation Cess under the GST regime
7.10 Waiver Applicability to Import IGST Under the Customs Act
✔ IGST levied under the Customs Act, 1962 is not covered under Section 128A and remains payable in full.
7.11 Waiver for Irregularly Availed Transitional Credit
✔ If the demand is issued under Section 73, the taxpayer can claim the waiver for interest and penalty.
7.12 Exclusions: Late Fees, Fines, and Certain Penalties
✔ The waiver covers penalties under Section 73, but does not apply to:
- Late fees for delayed return filing
- Fines imposed under other provisions
7.13 Use of Input Tax Credit (ITC) for Tax Payments
✔ ITC utilization is allowed, except for:
- Reverse Charge Mechanism (RCM) liabilities
- Erroneous refund recoveries
7.14 Handling of Departmental Appeals Increasing Tax Liability
✔ If a departmental appeal enhances the tax liability, the taxpayer must pay the additional tax within three months to remain eligible for waiver benefits.
7.15 Special Leave Petition (SLP) Withdrawal Requirement
✔ If a taxpayer has filed an SLP before the Supreme Court, they must withdraw it before applying for a waiver.
7.16 Filing of Form GST SPL-02 When Tax is Paid via Form GST DRC-03
✔ If tax is paid through Form GST DRC-03, taxpayers must file Form GST DRC-03A for proper adjustment before availing of the waiver.
Instruction No. 02/2025-GST – Guidelines for Handling Departmental Appeals
Treatment of Appeals Filed for Interest and Penalty Only
✔ If the taxpayer has fully paid the tax amount, but the department has filed an appeal contesting interest or penalty calculations:
- The taxpayer remains eligible for the waiver.
- The proper officer must not deny relief based on the pending departmental appeal.
Mandatory Withdrawal of Departmental Appeals
✔ Tax officers must withdraw appeals where:
- The only dispute is regarding interest or penalty, and
- The taxpayer qualifies for relief under Section 128A.
✔ In cases where appeals are still under review, officers are instructed to:
- Accept waiver applications from eligible taxpayers.
Prioritize withdrawal of interest and penalty disputes to reduce litigation.
Final Takeaways
The GST Amnesty Scheme under Section 128A offers significant relief to taxpayers facing disputes under Section 73 of the CGST Act. By providing a waiver on interest and penalties upon full tax payment, the scheme helps taxpayers reduce their financial burden while also minimizing prolonged litigation.
The procedural framework outlined in Rule 164, along with Circular No. 238/32/2024-GST and Instruction No. 02/2025-GST, ensures clarity and smooth implementation. Taxpayers must carefully evaluate their eligibility and act before the deadline to maximize the benefits of this scheme.
For expert guidance on GST compliance and amnesty benefits, stay updated with TaxGroww—your trusted partner in tax and legal solutions!