Analysis of section 128A of CGST Act- Conditional waiver of interest or penalty relating to demands raised under section 73, for certain tax periods.
Background
1. The Government, on the recommendation of GST Council, after considering the difficulties faced by the taxpayers during the initial years of implementation of GST, has inserted section 128A of CGST Act, 2017 for waiver of interest and penalties for demand notices issued under Section 73 of the CGST Act for the FY 2017-18, 2018-19 and 2019-20, in cases where the taxpayer pays the full amount of tax demanded in the notice up to the date notified under said section. In this article salient features of the said scheme discussed.
Insertion of section 128A in the CGST Act.
2. Waiver of interest or penalty or both relating to demands raised under section 73, for certain tax periods. After section 128 of the Central Goods and Services Tax Act, the following section shall be inserted, namely:––
128A. (1) Notwithstanding anything to the contrary contained in this Act, where any amount of tax is payable by a person chargeable with tax in accordance with,––
(a) a notice issued under sub-section (1) of section 73 or a statement issued under sub-section (3) of section 73, and where no order under sub-section (9) of section 73 has been issued; or
(b) an order passed under sub-section (9) of section 73, and where no order under sub-section (11) of section 107 or sub-section (1) of section 108 has been passed; or
(c) an order passed under sub-section (11) of section 107 or sub-section (1) of section 108, and where no order under sub-section (1) of section 113 has been passed,
pertaining to the period from 1st July, 2017 to 31st March, 2020, or a part thereof, and the said person pays the full amount of tax payable as per the notice or statement or the order referred to in clause (a), clause (b) or clause (c), as the case may be, on or before the date, as may be notified by the Government on the recommendations of the Council, no interest under section 50 and penalty under this Act, shall be payable and all the proceedings in respect of the said notice or order or statement, as the case may be, shall be deemed to be concluded, subject to such conditions as may be prescribed:
Provided that where a notice has been issued under sub-section (1) of section 74, and an order is passed or required to be passed by the proper officer in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court in accordance with the provisions of sub-section (2) of section 75, the said notice or order shall be considered to be a notice or order, as the case may be, referred to in clause (a) or clause (b) of this sub-section:
Provided further that the conclusion of the proceedings under this sub-section, in cases where an application is filed under sub-section (3) of section 107 or under sub-section (3) of section 112 or an appeal is filed by an officer of central tax under sub-section (1) of section 117 or under sub-section (1) of section 118 or where any proceedings are initiated under sub-section (1) of section 108, against an order referred to in clause (b) or clause (c) or against the directions of the Appellate Authority or the Appellate Tribunal or the court referred to in the first proviso, shall be subject to the condition that the said person pays the additional amount of tax payable, if any, in accordance with the order of the Appellate Authority or the Appellate Tribunal or the court or the Revisional Authority, as the case may be, within three months from the date of the said order:
Provided also that where such interest and penalty has already been paid, no refund of the same shall be available.
(2) Nothing contained in sub-section (1) shall be applicable in respect of any amount payable by the person on account of erroneous refund.
(3) Nothing contained in sub-section (1) shall be applicable in respect of cases where an appeal or writ petition filed by the said person is pending before Appellate Authority or Appellate Tribunal or a court, as the case may be, and has not been withdrawn by the said person on or before the date notified under sub-section (1).
(4) Notwithstanding anything contained in this Act, where any amount specified under sub-section (1) has been paid and the proceedings are deemed to be concluded under the said sub-section, no appeal under sub-section (1) of section 107 or sub-section (1) of section 112 shall lie against an order referred to in clause (b) or clause (c) of sub-section (1), as the case may be.”.
Scope of section 128A.
3. Section 128Aprovides to waive interest under section 50 and penalties under Act, in respect of demand notices or orders issued under Section 73 of the CGST Act pertaining to tax period 1.7.2017 to 31.03.2020, in the cases where the taxpayer pays the full amount of tax demanded in the notice or orders on or before the date notified under section 128A(1) of the Act and satisfied other prescribed conditions. The waiver does not cover demand of erroneous refunds.
Nature and extent of waiver of interest and penalty.
4. There is no waiver to amount of tax payable. Said section provides that if taxable person pays full amount of tax payable as per notice or order on or before notified date then no interest u/s 50 and penalties under the Act shall be payable. In other word in such cases there is 100 % waiver to the amount of interest and penalty irrespective to the amount of tax disputed or not.
Persons eligible to waiver of interest and penalty.
5. As provided in said section, any person chargeable with tax , is eligible to waive of interest and penalty after making full payment of specified amount of tax. In other word even unregistered person is also eligible if satisfies the prescribed conditions.
Duration of payment of tax payable.
6. Taxpayer, who wish avail waiver, shall require to pay amount of such tax payable for specified period from the date of insertion of said section till the date of notification issued u/s 128A (1). It appears that the GST council has recommended such date as 31.03.2025. Government has not yet issued such notification.
Eligibility Conditions.
First – Relevant demand should pertain to tax period FY 17-18, 18-19 or 19-20 or part thereof.
7. In view of section 128A (1) of the Act, waiver of interest or penalty or both relating to demands raised under section 73, is admissible for only tax period 1.7.2017 to 31.03.2020 or part thereof. Benefit of waiver contemplated under said section can not be granted to the demands of periods other than said specified period.
Second- Only demands raised under section 73 are eligible to waive interest or penalty.
8. It is clear from the said section that only demands raised under section 73 of the Act are eligible for waiver of interest or penalty after payment of specified amount of tax. In other words, demands raised under other sections, such as 52,62,63,64, 74,75 or 76 etc for specified period are not eligible for such waiver of interest or penalty.
Third- Mandatory payment of full amount of tax payable before notified date.
9. In order to avail benefit of waiver of interest and penalty, taxpayer should make payment of full amount of tax payable as per notice or order on or before the date notified under section 128A(1) of the Act . This is mandatory condition.
Fourth– Mandatory unconditional withdrawal of pending appeal.
10. In accordance with provisions of section 128A(3) no benefits of waiver of interest and penalties shall be available to the taxpayer unless withdraw pending appeal before Appellate Authority or Appellate Tribunal or court in respect of such notices or orders for the said periods. Therefore, tax payer should withdraw to such pending appeals on or before the date notified under section 128A(1) of the Act , to avail such benefits of waiver.
Types of demand eligible to waiver of interest and penalty.
First- Demand as per notice u/s 73(1) of the Act where no order under sub-section (9) of section 73 has been issued.
Section 73 provides for determination of tax liability where taxable person has not paid tax or short tax or erroneously refunded or input tax credit wrongly availed for any reason other than fraud etc and proper officer issue notice for demand of such tax liability along with interest u/s 50 and penalties under the Act. Such type of demands, where no order under sub-section (9) of section 73 has been issued, are eligible to waiver. In such cases, before issue of order u/s 73(9), taxable person shall pay the full amount of tax payable as per said notice and avail the benefit of such waiver of consequential interest or penalty or both. Where, taxpayer disputes tax amount payable as per notice and make part payment of tax, in such cases also benefit of waiver can be availed after issue of order u/s 73(9) and making remaining payment of tax.. However, such order and payment should be within the date notified under section 128A(1) of the Act.
Second – Demand as per order in original u/s 73(9) of the Act.
11. As per provisions of section 128 A (1) (b), demands raised as per an order passed under sub-section (9) of section 73, and where no order under sub-section (11) of section 107 or sub-section (1) of section 108 has been passed, are eligible for waiver of interest or penalty subject to withdraw appeal if pending under the provisions of the Act. Taxpayer can avail benefit of waiver, even after passing of appeal order by Appellate Authority, by considering relief in the such appeal order and by making payment of modified tax on before the date notified under section 128A(1) of the Act. However, such appeal order and payment of full tax should be within the date notified under section 128A(1) of the Act.
Third – Demand as per first appeal order u/s 107(11) of the Act.
12. As per provisions of section 128 A (1) (c), demands raised as per appeal order passed under sub-section (11) of section 107 or review order subsection (1) of section 108, and where no order under sub-section (1) of section 113 has been passed, are eligible for waiver of interest or penalty subject to withdraw appeal if pending with Appellate Tribunal under the provisions of the Act. Taxpayer can avail benefit of waiver, after passing of appeal order by Appellate Authority, by considering relief in the such appeal order and by making payment of modified tax on before the date notified under section 128A(1) of the Act. However, such appeal order and payment of full tax should be within the date notified under section 128A(1) of the Act
Fourth – Demand as per review order u/s 108(1) of the Act
13. As per provisions of section 128 A (1) (c), demands raised as per appeal order passed under sub-section (11) of section 107 or review order subsection (1) of section 108, and where no order under sub-section (1) of section 113 has been passed, are eligible for waiver of interest or penalty subject to withdraw appeal if pending with Appellate Tribunal under the provisions of the Act. In such case, taxpayer requires to pay tax payable as per said revision order and to withdraw appeal if filed on or before the date notified under section 128A(1) of the Act.
Fifth – Demand as per order of Appellate Tribunal is not eligible to waiver of interest or penalty.
14. Section 112 of the Act provides for filing of an appeal to the Appellate Tribunal against order passed by the Appellate authority u/s 107(11) or revisional authority u/s 108 . Where, the Taxpayer has filed such appeal to the Appellate Tribunal for specified period and wish avail waiver of interest or penalty under section 128A of the Act, requires to withdraw such appeal on or before the date notified under section 128A(1) of the Act. Section 128A makes clear that tax payer can avail such waiver in respect of order passed under sub-section (11) of section 107 or sub-section (1) of section 108 only when no order under sub-section (1) of section 113 has been passed. In other words demands as per order of Appellate Tribunal u/s 113(1) are not eligible to waiver of interest or penalty
Demands raised u/s 74 are not eligible to waiver except contingencies specified in first proviso to section 128A (1) .
15. Section 75(2) of the Act state that where any Appellate Authority or Appellate Tribunal or Court concludes that notice issued u/s 74(1) is not sustainable for the reason that charges of fraud or any wilful misstatement or suppression of facts to evade tax has not been established against the person to whom notice was issued , the proper officer shall determine the tax payable by such person, deeming as if the notice were issued u/s 73(1). In order to grant benefit of waiver of interest or penalty, first proviso inserted in the section 128(A) of the Act.
16. It is provided in first proviso said that where a notice has been issued under subsection (1) of section 74, and an order is passed or required to be passed by the proper officer in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court in accordance with the provisions of sub-section (2) of section 75, the said notice or order shall be considered to be a notice or order, as the case may be, referred to in clause (a) or clause (b) of this sub-section. Accordingly, such notices or orders also eligible to avail benefits of waiver even though issued by Proper officer under section 74.
The waiver does not cover demand of erroneous refunds.
17. As per provisions of section 128A (2) demand on account of erroneous refund is not eligible to waiver of interest or penalty even though otherwise eligible. Thus, amount of interest and penalty payable as per order passed under section 73 to recover refund erroneously allowed, is not eligible to waiver.
No refund of interest or penalty already paid.
18. Third proviso to section 128A (1) states that where such interest and penalty has already been paid, no refund of the same shall be available. This proviso clearly prohibit to grant refund of interest or penalty has already been paid. However, where taxpayer wrongly pays tax along with interest and penalty payable or proper officer recover it u/s 79, after insertion of said section, he may be eligible to claim refund of interest and penalty paid if satisfies all prescribed conditions. Section 54 of the Act, also provides for refund of excess payment of interest. Co joint reading of provisions of section 128A and 54 of the Act indicates that taxpayer who has paid tax payable along with interest and penalty after insertions of said section and if satisfies of prescribed conditions, then he can claim of refund of such interest and penalty , it cannot be said that amount has been already paid. Amount paid before insertion of said section can only be said that has already been paid.
No appeal against passed u/s 73(9) or appeal order u/s 107(11) after availing benefit of such waiver is not appealable.
19. It is provided in section 128A (4) of the Act that notwithstanding anything contained in this Act, where any amount specified under sub-section (1) has been paid and the proceedings are deemed to be concluded under the said sub-section, no appeal under sub-section (1) of section 107 or sub-section (1) of section 112 shall lie against an order referred to in clause (b) or clause (c) of sub-section (1), as the case may be. In other word Order passed u/s 73(9) or appeal order u/s 107(11) after availing benefit of such waiver is not appealable under the provisions of sub-section (1) of section 107 or sub-section (1) of section 112. In other words the taxpayer can not file appeal in respect of orders on benefit of waiver has availed.
Whether, order of waiver of interest or penalty issued u/s 128A(1) is appealable.
20. Section 107 of the Act provides that any person aggrieved by the any order passed by the adjudicating authority under the provisions of the Act may file appeal to the Appellate Authority against the said order within prescribed period. Said order of waiver of interest or penalty issued u/s 128A (1) is appealable being order under the provisions of the Act.
Whether proportionate benefit is admissible in case of short payment.
21. In some cases, tax payers could not pay full amount of tax payable as per notice of such orders. There is no provisions in the said section to waive proportionate interest or penalty to the extent of payment of tax.
All the proceeding in respect of said notice or order shall be deemed to be closed
22. It is provided in the section 128A (1)( c ) that after payment of full taxes on or before notified date no interest u/s 50 and penalty under the Act shall be payable and all the proceeding in respect of said notice or order shall be deemed to be closed subject payment of tax liability within three month, which arising out proceeding incorporated in the following second proviso to section 128A (1) (c ) of the Act.
23. “ Provided further that the conclusion of the proceedings under this sub-section, in cases where an application is filed under sub-section (3) of section 107 or under sub-section (3) of section 112 or an appeal is filed by an officer of central tax under sub-section (1) of section 117 or under sub-section (1) of section 118 or where any proceedings are initiated under sub-section (1) of section 108, against an order referred to in clause (b) or clause (c) or against the directions of the Appellate Authority or the Appellate Tribunal or the court referred to in the first proviso, shall be subject to the condition that the said person pays the additional amount of tax payable, if any, in accordance with the order of the Appellate Authority or the Appellate Tribunal or the court or the Revisional Authority, as the case may be, within three months from the date of the said order: “
Conclusion.
24. During initial phase of GST, due to various reasons, there were certain mistakes in the self assessments made by the taxpayers. During the scrutiny of returns under section 61 of the Act, some taxpayers has accepted some discrepancies and paid taxes where ever possible, in respect of undisputed issues. However, some taxpayer has not accepted some discrepancies and disputed tax liability and filed appeals against order passed under section 73 of the Act. In some the cases taxpayers could not filed appeals and those appeal are now barred by limitation and legal remedy is available. These cases mainly involves disputes on the issue of disallowance of input tax credits due to various reasons. In this background said scheme of conditional waiver of interest and penalty in respect of demand notices issued under section 73 of the said Act for the Financial Years 2017-18, 2018-19 and 2019-20, is introduced by inserting section 128A. It is beneficial to both taxpayers and the Government. It is good remedy and opportunity to the taxpayers to avail benefit of waiver of interest or penalty , and may take such decision after considering chances of relief in the appeal. on the other hand large number of cases involving outstanding dues and litigations are pending with respective authorities. Said scheme will also beneficial to the Government to unlock the amount involved in the outstanding dues and to reduce old pending litigations, to nip dispute at the bud, to curtail fresh disputes and to settle disputes those started in the initial phase Government.
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Motiram Kanadje | Retired Joint Commissioner of State Tax |
Author can be reached via email Email [email protected]
Disclaimer: Nothing contained in this document is to be construed as legal opinion or view of author whatsoever and the content is to be used strictly for informational and educational purposes. While due care has been taken in preparing this article, certain mistakes and omissions may creep in. The author does not accept any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this article nor for any action taken in reliance thereon.
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