Amnesty Scheme under Section 128A of the CGST Act, 2017: A Comprehensive Overview

Introduction

The introduction of Section 128A in the Central Goods and Services Tax (CGST) Act, 2017, by the Finance (No. 2) Act, 2024, aims to provide relief to taxpayers by waiving interest, penalty, or both for certain tax demands. This provision, effective from November 1, 2024, covers tax periods from July 1, 2017, to March 31, 2020, and is implemented through Rule 164 of the CGST Rules, 2024, along with supporting notifications and circulars. The objective behind this provision is to reduce the burden on taxpayers, resolve long-pending disputes, and streamline the tax compliance process.

This article provides an exhaustive overview of the amnesty scheme, covering procedural aspects, implementation, and clarifications provided by the government to ensure uniform application across the country.

1. Key Provisions of Section 128A

Section 128A provides relief from interest and penalties in specific cases where tax demands have been raised under Section 73. This section allows taxpayers to conclude their pending tax disputes by paying the principal tax liability without any additional burden of penalties and interest.
The scheme is applicable in the following cases:

• Where a taxpayer has received a notice under Section 73(1) or a statement under Section 73(3), and no adjudication order under Section 73(9) has been issued.

• Where an order has been passed under Section 73(9) but no further order has been issued under Section 107(11) or Section 108(1).

• Where an order has been passed under Section 107(11) or Section 108(1) but no order has been passed under Section 113(1).

If a taxpayer meets the above conditions and pays the full tax amount as per the notice, statement, or order before the prescribed deadline, the interest and penalty on such amounts shall be waived. Furthermore, all proceedings concerning such tax demands will be deemed to be concluded.
However, Section 128A does not apply in cases where:

• The demand pertains to erroneous refunds.

• The taxpayer has filed an appeal or writ petition that has not been withdrawn before the deadline.

2. Procedural Framework under Rule 164 of CGST Rules, 2024

To implement Section 128A effectively, Rule 164 was inserted in the CGST Rules, 2024, which lays down the procedural guidelines. The key procedural requirements are:

• Filing an Application:

• Taxpayers must file an application electronically through the GST portal using FORM GST SPL-01 (for cases where only a notice or statement under Section 73 has been issued) or FORM GST SPL-02 (for cases where an adjudication order has been passed under Section 73).

• Tax Payment:

• Taxpayers must ensure full payment of the tax demand through FORM GST DRC-03 before filing their application.

• If tax has already been paid using FORM GST DRC-03, an adjustment application in FORM GST DRC-03A is required before submitting the main application.

• Withdrawal of Appeals:

• If the taxpayer has filed an appeal or writ petition before any Appellate Authority, Tribunal, or Court, they must withdraw such appeal before filing for the waiver.

• A copy of the withdrawal order must be submitted along with the waiver application.

• Processing of Applications:

• The tax officer must verify the application and approve or reject it within three months of submission.

• If rejected, a notice will be issued in FORM GST SPL-03, and taxpayers will have one month to respond using FORM GST SPL-04.

• If the officer is satisfied, an order in FORM GST SPL-05 will be issued, concluding the proceedings.

• If the application is deemed ineligible, an order in FORM GST SPL-07 will be issued rejecting the waiver request.

3. Notification No. 21/2024 – Timeline for Tax Payment

Notification No. 21/2024-Central Tax, dated October 8, 2024, provides the deadlines for making tax payments under Section 128A:

• March 31, 2025, is the last date for payment in cases where demand notices or orders have been issued under Section 73.

• For cases where a notice was initially issued under Section 74 but later redetermined under Section 73, the deadline for payment is six months from the date of the redetermination order.

This notification ensures that taxpayers have a well-defined time frame to avail of the benefits of the amnesty scheme.

4. Circular No. 238/32/2024-GST – Comprehensive Clarifications

This article provides an exhaustive analysis of Circular No. 238/32/2024-GST, explaining its key provisions and implications for taxpayers.
1. Objective and Scope of the Circular
The circular aims to:

• Provide clarity on the application of Section 128A for waiving interest and penalties related to tax demands under Section 73.

• Define the eligibility criteria and procedural requirements for availing of the amnesty scheme.

• Ensure uniformity in the implementation of the provision across tax jurisdictions.

The waiver applies to tax periods July 1, 2017, to March 31, 2020, and covers notices, statements, and orders issued under Section 73, subject to specific conditions.
2. Procedural Framework for Availing Amnesty under Section 128A
The circular elaborates on the steps that taxpayers must follow to avail of the waiver of interest and penalties:
2.1 Filing of Applications

• Taxpayers must submit applications in FORM GST SPL-01 or FORM GST SPL-02, depending on the stage of the proceedings.

• Applications should be submitted electronically on the GST portal.

• If the taxpayer has filed an appeal or writ petition regarding the tax demand, they must withdraw the appeal before applying for the waiver.

• Proof of withdrawal must be attached to the application. If the withdrawal order is pending, the taxpayer can submit the withdrawal request document instead.

• Multiple notices for different periods require separate applications for each notice/order.

2.2 Payment of Tax

• Taxpayers must make full payment of the tax demand using FORM GST DRC-03.

• If the demand order has already been issued, payment must be made through the Electronic Liability Register (ELR) - Part II.

• If tax was already paid via FORM GST DRC-03 before applying for the waiver, an adjustment application in FORM GST DRC-03A is required.

• Payments must be completed on or before March 31, 2025, unless an order redetermining tax under Section 73 is issued. In such cases, taxpayers have six months from the date of such order to make payments.

3. Clarifications on Eligibility and Scope
The circular provides the following key clarifications:
3.1 Scope of Section 128A

• The waiver is not available for demands arising from erroneous refunds.

• If the demand pertains only to interest or penalties, taxpayers can still apply for the waiver.

• The waiver does not apply if the interest is related to delayed filing of returns or self-assessed liability.

• Cases where tax demand notices were initially issued under Section 74 but later redetermined under Section 73 are eligible.

3.2 Adjustment of Tax Payments

• Any tax amount recovered by tax officers from another person on behalf of the taxpayer is considered a valid payment for waiver purposes.

• However, interest or penalty amounts recovered cannot be adjusted against tax liability.

3.3 Impact of Retrospective Amendments to Section 16 (ITC Claims)

• If a demand includes disallowed Input Tax Credit (ITC) due to Section 16(4) restrictions, but the taxpayer is now eligible due to retrospective amendments, they can reduce the demanded tax liability accordingly.

• In such cases, taxpayers must deduct the ineligible ITC amount and pay only the revised tax amount before applying for the waiver.

4. Processing of Applications by Tax Authorities

• The tax officer must verify the application and issue a decision within three months.

• If rejected, a notice in FORM GST SPL-03 will be issued, giving taxpayers one month to respond using FORM GST SPL-04.

• If approved, the waiver order will be issued in FORM GST SPL-05.

• If the application is rejected, an order in FORM GST SPL-07 will be issued, and the taxpayer can appeal the decision.

5. Handling of Departmental Appeals

• If the department has filed an appeal only against interest or penalty, the taxpayer is still eligible for the waiver.

• Tax officers are instructed to withdraw departmental appeals in cases where tax has been fully paid.

6. Special Considerations

• Tax Periods Not Covered by Section 128A: If a notice covers tax periods within and beyond the eligible period, the waiver applies only to the eligible period, and taxpayers must pay the full tax demand before seeking relief.

• Demands Including Erroneous Refunds: Taxpayers must pay the entire tax demand, including erroneous refunds, to avail of the waiver.

• Appeal Restrictions:

• No appeal is allowed against an order approving the waiver (FORM GST SPL-05).

• Appeals are permitted only for orders rejecting the waiver (FORM GST SPL-07).

7. Detailed FAQs and Clarifications
The circular provides sixteen detailed FAQs clarifying various doubts. These include:

1. Applicability to taxpayers who paid tax before Section 128A was introduced – The waiver applies to all amounts paid before March 31, 2025, regardless of when the tax was paid.

2. Whether tax recovered by tax officers on behalf of a taxpayer qualifies for waiver – Yes, such payments are eligible.

3. Adjusting recovered interest/penalty against tax liability – Not allowed; interest and penalty cannot be adjusted against tax dues.

4. If a notice pertains only to interest/penalty, can the waiver be availed? – Yes, except for self-assessed liabilities and delayed return filings.

5. Can a taxpayer apply for a partial waiver? – No, full payment of the tax demand is required.

6. Application for tax periods both covered and not covered under Section 128A – The waiver applies only to eligible periods; full tax must still be paid.

7. Cases involving erroneous refunds – Full tax payment required; waiver applies only to non-refund demands.

8. Impact of retrospective amendments to Section 16 – Taxpayers can deduct ITC now available before paying the balance tax.

9. Applicability to IGST and Compensation Cess – Yes, waiver applies to all components.

10. Impact on Import IGST under Customs Act – Not covered under Section 128A.

11. Applicability to irregularly availed transitional credit – Covered if demand falls under Section 73.

12. Waiver of penalties, late fees, and fines – Penalties under Section 73 covered; late fees and fines are not.

13. Utilization of ITC for tax payments – Allowed, except for RCM and erroneous refund demands.

14. Handling of departmental appeals enhancing tax liability – Additional tax must be paid within three months.

15. Special Leave Petition (SLP) withdrawal for waiver eligibility – Required before applying.

16. Filing Form GST SPL-02 when tax is paid through Form GST DRC-03 – Mandatory adjustment through Form GST DRC-03A.

5. Instruction No. 02/2025-GST – Handling of Department Appeals

Issued on February 7, 2025, Instruction No. 02/2025-GST specifically addresses cases where the department has filed appeals against interest and penalty calculations. Key directives include:

• Appeals Filed Only for Interest and Penalty:

• If a taxpayer has fully paid the tax amount, but the department has filed an appeal for interest or penalty due to an alleged miscalculation, the taxpayer remains eligible for the waiver.

• The proper officer must ensure that such taxpayers are not denied relief.

• Withdrawal of Departmental Appeals:

• The instruction directs tax officers to withdraw appeals where the only dispute is interest or penalty and the taxpayer is otherwise eligible for relief under Section 128A.

• In cases where appeals are still under review, officers are advised to accept the waiver applications in the interest of reducing litigation.

Conclusion

The amnesty scheme under Section 128A provides much-needed relief to taxpayers facing long-standing disputes under Section 73 of the CGST Act. By offering a waiver of interest and penalties upon full tax payment, the scheme not only reduces the financial burden on taxpayers but also helps in clearing backlogs of litigation. The procedural clarity provided by Rule 164, along with detailed clarifications in Circular No. 238/32/2024-GST and Instruction No. 02/2025-GST, ensures seamless implementation of the scheme. Taxpayers should carefully assess their eligibility and take timely action to avail the benefits before the deadline.