The introduction of Section 128A in the Central Goods and Services Tax (CGST) Act, 2017, marks a significant step in providing relief to taxpayers facing demands related to interest and penalties. This article explores the key aspects, procedural guidelines, and the recent clarifications issued by the government.
1. Background and Need for Section 128A
With the rollout of the Goods and Services Tax (GST) in July 2017, businesses and tax professionals faced numerous challenges, including procedural complexities, frequent amendments, and technical issues. In the initial years (FY 2017-18 to FY 2019-20), errors in tax payments were common due to misunderstandings of the new taxation system.
Recognizing these difficulties, the 53rd GST Council Meeting proposed the insertion of Section 128A in the CGST Act to offer conditional waiver of interest and penalties for specific cases. The provision was officially introduced through the Finance (No. 2) Act, 2024 and was made effective from November 1, 2024, via Notification 17/2024 – Central Tax.
2. Key Provisions of Section 128A
Section 128A provides a waiver of interest and/or penalty for demands raised under Section 73 of the CGST Act. The provision applies to the financial years 2017-18, 2018-19, and 2019-20, subject to the following conditions:
- The demand must have been raised under Section 73 due to non-payment, short payment, or incorrect availing/utilization of input tax credit.
- The full amount of tax must be paid on or before March 31, 2025 (as notified under Notification No. 21/2024 – Central Tax, dated October 8, 2024).
- The waiver is not applicable in cases involving erroneous refunds or where pending appeals/writs have not been withdrawn.
3. Procedural Framework and Rule 164
To operationalize Section 128A, Rule 164 has been inserted in the CGST Rules, 2017. This rule lays out the procedure for availing the waiver and specifies the necessary forms. The key procedural aspects include:
(A.) Eligibility Criteria for Waiver
Taxpayers eligible for relief under Section 128A include those who:
- Have been issued a Show Cause Notice (SCN) under Section 73(1) or a statement under Section 73(3).
- Have received an adjudication order under Section 73(9).
- Have an order from the Appellate Authority or Revisionary Authority under Sections 107(11) or 108(1).
- Were initially issued a notice under Section 74(1), but the tax was re-determined under Section 73(1) following directions under Section 75(2).
(B.) Payment and Application Deadlines
- Payment of Tax: The last date to make the full tax payment to avail the waiver is March 31, 2025.
- Application for Waiver: Taxpayers must file their applications on or before June 30, 2025 using the prescribed forms.
- Re-determination Cases: If tax is re-determined under Section 73, the application must be filed within six months from the date of the re-determination order.
(C.) Exclusions from the Waiver Scheme
The following cases are not eligible for waiver under Section 128A:
- Demands related to erroneous refunds.
- Cases where the taxpayer has not withdrawn pending appeals or writ petitions.
- Situations where payment is made after the specified deadline.
4. Departmental Appeal Procedure Under Section 128A
To reduce unnecessary litigation, the government has clarified that departmental appeals will be withdrawn in cases where:
- The tax amount has been fully paid under Section 73.
- The department’s appeal is only related to interest and/or penalty (due to wrong interest computation or incorrect penalty imposition).
In such cases, proper officers should withdraw the appeals, and if the case is still under review, they should accept the order instead of pursuing an appeal.
5. Compliance Process and Forms
The application and compliance process involve multiple forms under Rule 164:
| Step | Form | Purpose |
|---|---|---|
| Application for waiver (SCN cases) | GST SPL-01 | Used when a Show Cause Notice under Section 73 is issued. |
| Application for waiver (Demand/Appeal cases) | GST SPL-02 | Used when an adjudication order or appeal order has been passed. |
| Show Cause Notice for rejection | GST SPL-03 | Issued by the department if the application is liable for rejection. |
| Reply to Show Cause Notice | GST SPL-04 | Taxpayer’s response to GST SPL-03. |
| Conclusion of proceedings | GST SPL-05 | Issued if waiver application is approved. |
| Rejection Order | GST SPL-07 | Issued if the application does not meet the requirements. |
6. Key Benefits of Section 128A
The introduction of Section 128A and Rule 164 provides significant benefits for taxpayers:
- Reduction in Litigation: Taxpayers avoid unnecessary legal battles over interest and penalties.
- Faster Resolution: Departmental appeals for interest/penalty disputes will be withdrawn.
- Financial Relief: Substantial waivers help businesses manage their tax liabilities efficiently.
- Simplified Process: Clear procedures and deadlines ensure transparency in compliance.
7. Conclusion
The GST Amnesty Scheme under Section 128A is a welcome move for businesses that faced tax-related disputes in the initial years of GST implementation. By offering a waiver of interest and penalties, the government aims to reduce litigation and ease compliance for taxpayers.
Taxpayers should carefully assess their eligibility, ensure timely payment of tax dues, and file applications before the deadlines to maximize the benefits under this scheme.
For any queries, taxpayers may reach out to their respective GST officers or legal advisors to ensure smooth compliance with Section 128A of the CGST Act.
Disclaimer: This article is for informational purposes only and should not be considered legal advice. Taxpayers should consult with a qualified professional for specific compliance guidance.