GST Update : Amnesty scheme for FY 17-18, 18-19 & 19-20 :Section 128A

The Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 21/2024–Central Tax on 8th October 2024, alongside Circular No. 238/32/2024-GST dated 15th October 2024, introducing Section 128A of the Central Goods and Services Tax (CGST) Act. This new provision, aimed at offering relief to taxpayers by waiving interest and penalties, focuses on tax periods spanning from 1st July 2017 to 31st March 2020. The issuance is a significant move, as it facilitates the conclusion of pending cases under certain conditions, providing much-needed clarity and relief for taxpayers dealing with demands under Section 73 of the CGST Act.

Understanding Section 128A

Section 128A of the CGST Act allows for the waiver of interest and penalties in certain cases where demands have been raised for specific tax periods. The relief offered under this section applies to demands raised under Section 73 and its related subsections, which deal with demands where tax has been short paid, not paid, or erroneously refunded.

Key provisions of Section 128A include:

1. Waiver Scope: The waiver applies to interest and penalties for tax demands arising for the period between 1st July 2017 and 31st March 2020. The taxpayer must pay the full tax amount as per the notice, statement, or order on or before the date notified by the government.
2. Proceedings Deemed to be Concluded: Once the tax amount is paid, all proceedings concerning the notice or order are deemed concluded, subject to conditions prescribed by the government.
3. Conditions for Waiver: The waiver does not apply if:

• The amount is payable due to erroneous refunds.
• Appeals or writ petitions are pending and not withdrawn before the notified date.
• Interest pertains to delayed filing of returns or reporting delays, as such interest is directly recoverable under Section 75(12).

1. Limitations of Appeal: Where the proceedings are deemed concluded under Section 128A, no further appeal is allowed under Sections 107 or 112 of the CGST Act.

Eligibility and Conditions

The following situations are eligible for the waiver of interest and penalties under Section 128A:

• Tax Periods: The waiver covers tax periods from 1st July 2017 to 31st March 2020. If a notice pertains to these periods, the taxpayer can avail the waiver by paying the tax due.
• Applicability Across Sections: The waiver applies to:
• A notice or statement issued under Section 73(1) or Section 73(3) for which no final order has been passed.
• An order passed under Section 73(9) where no appeal order has been passed under Section 107(11) or Section 108(1).
• Appeals or revisional proceedings that have not resulted in an order under Section 113(1).
• Payment Deadline: The taxpayer must pay the full tax amount by the date specified by the government, which could be up to 31st March 2025 or within six months from the date of the redetermined order, depending on the notice type.
• Exclusions: Taxpayers cannot avail of the waiver in cases involving:
• Erroneous refunds.
• Pending appeals or writ petitions that have not been withdrawn.
• Import IGST payable under the Customs Act, 1962, or IGST collected by electronic commerce operators under Section 9(5).

Key FAQs and Clarifications

The CBIC Circular No. 238/32/2024-GST also provides important clarifications through FAQs to ensure a proper understanding of the new provision:

• Waiver for Previously Paid Taxes: Taxpayers who have already paid the tax before the introduction of Section 128A can still avail the waiver of interest and penalties.
• Recovery Adjustments: Amounts recovered by tax officers towards tax demands, interest, or penalties for the specified periods can be adjusted against the tax due.
• Benefit for Penalty-Only Orders: If a taxpayer has already paid the tax and the notice pertains solely to penalties or interest, the taxpayer can still avail the waiver. However, interest due to delayed return filing is excluded from this benefit.
• Multiple Tax Periods: When a notice covers periods both inside and outside the specified waiver period (2017-2020), the waiver will only apply to interest and penalties for the specified period, though the tax due for the entire period must be paid.
• Procedure for Ongoing Appeals: If the taxpayer has ongoing appeals, writ petitions, or special leave petitions, they must withdraw these to avail the benefit of Section 128A.
• Payment Method: The tax to avail the waiver can be paid using Input Tax Credit (ITC), except for tax under Reverse Charge Mechanism (RCM) or by electronic commerce operators under Section 9(5), which must be paid from the electronic cash ledger.

Conclusion of Proceedings: Conditions and Exceptions

The conclusion of proceedings under Section 128A is subject to a few conditions:

• In cases where additional tax is payable due to an appellate or tribunal order, the taxpayer must pay the additional tax within three months of the order to conclude the proceedings.
• If the proceedings are deemed concluded, no further appeals against the original order are permitted, thereby providing finality to the process.

However, if there is any demand related to erroneous refunds or IGST under the Customs Act, the waiver is not applicable.

Impact and Practical Implications

The introduction of Section 128A and the accompanying waiver benefits come as a significant relief to taxpayers who have been dealing with interest and penalty-related demands under Section 73 for tax periods as far back as 2017. This provision offers a clear path for concluding long-pending cases, with the incentive of having interest and penalties waived if the taxpayer complies with the conditions.

Taxpayers facing notices under Section 73, or who have orders pending appeal, should take prompt action to determine if they are eligible for the waiver. For those with ongoing litigation, a strategic decision must be made on whether to withdraw appeals and avail of the benefit under Section 128A or to continue contesting the demands.

As the government continues to introduce measures for tax compliance, Section 128A serves as an important mechanism to ease the burden on businesses and individuals alike, while encouraging timely payment of taxes.

Taxpayers are advised to review their cases, consult with tax professionals, and take appropriate steps to benefit from the provisions of Section 128A before the deadlines expire.