CBIC Clarifies Waiver of Interest/Penalty under CGST Act

Amnesty For Waiver Of Interest / Penalty On Demands U/S 73 (New Section 128A) Of CGST Law

Summary: The CBIC has issued clarifications on the implementation of new Section 128A of the CGST Act, effective from November 1, 2024. This section allows for the waiver of interest and penalties related to demands under Section 73 of the CGST Act for the financial years 2017-18, 2018-19, and 2019-20, provided certain conditions are met. Taxpayers must pay the full demanded tax by March 31, 2025, to benefit from this waiver, and specific procedures outlined in Rule 164 detail how to apply. Notifications specify that the application for waiver must be made within six months of the re-determination order, and that partial waivers are not permitted. The waiver does not apply to interest from delayed returns or self-assessed liabilities. The guidelines also clarify that amounts recovered on behalf of the taxpayer can count towards the tax paid for waiver purposes, and payments can be made using Input Tax Credit (ITC). Notably, the waiver excludes demands for late fees and other penalties not directly related to tax demands. Taxpayers must ensure all payments are completed within stipulated timelines to retain the waiver benefits, and applications involving pending Supreme Court cases require withdrawal of such petitions prior to applying for the waiver. The guidelines provide a structured approach for taxpayers to navigate the new provisions effectively.

Introduction: CBIC has issued a detailed clarification on applicability and procedure / implementation of new section 128A of CGST Act, 2017 Section 128A is applicable w.e.f. 01.11.2024 to provide for waiver of interest or penalty or both, relating to demands under section 73 of the CGST Act pertaining to Financial Years 2017-18, 2018-19 and 2019-20, subject to certain conditions. Rule 164 has been inserted in the CGST Rules, 2017 with effect from 01.11.2024 vide notification No.20/2024-Central tax dated 8th October 2024, providing for procedure and conditions for closure of proceedings under section 128A of CGST Act.

Vide notification No. 21/2024-Central tax dated 8th October 2024, 31.03.2025 has been notified under sub-section (1) of section 128A of CGST Act as the date on or before which the full payment of tax demanded in the notice/ statement/ order needs to be made by the taxpayer in order to avail the benefit of waiver of interest or penalty or both.

For cases where the application is made as per the first proviso to section 128A(1) of CGST Act, the date on or before which the full payment of tax demanded in the order issued by the proper officer re-determining the tax under section 73 of CGST Act needs to be made by the taxpayer, has been notified as six months from the date of issuance of such order by the proper officer re-determining the tax under section 73 of CGST Act.

CBIC has prescribed the procedure vide Circular No. 238/32/2024-GST dated 15.10.2024 to be followed by the taxpayers and the tax officers to avail and implement the benefit provided under Section 128A. This inter alia, includes:

• filing of application
• payment of tax
• processing of application and issuance of order
• no appeals can be filed against orders issued u/s 164 of CGST Act, 2017 but order rejecting the application for waiver is appealable.

It has also been clarified that:

• The benefit provided under Section 128A will be applicable to taxpayers who have paid the tax component in full before the date on which the said section has come into effect?
• Amount recovered by the tax officers as tax due from any other person on behalf of the taxpayer, against a particular demand can be considered as tax paid towards the same for the purpose of Section 128A?
• Any amount paid by the taxpayer or recovered by the tax officers, as interest or penalty cannot be adjusted towards the amount payable as tax.
• Where the tax due has already been paid and the notice or demand orders under Section 73only pertains to interest and/or penalty involved, the same shall be considered for availing the benefit of section 128A.
• The benefit of waiver of interest and penalty shall not be applicable in the cases where the interest has been demanded on account of delayed filing of returns, or delayed reporting of any supply in the return, as such interest is related to demand of interest on self-assessed liability and does not pertain to any demand of tax dues and is directly recoverable under section 75(12).
• Section 128A (1) clearly provides that the waiver of interest or penalty or both is only applicable when the full amount of tax demanded in the notice/ statement/ order is paid. Partial waiver is not allowed.
• Taxpayer is eligible to apply for waiver of interest or penalty or both, in such cases where the demand notice/ order spans tax periods covered under Section 128Aand those not covered. However, as per sub-rule (4) of Rule 164, the taxpayer shall be required to pay the full amount of tax demanded in the notice/ statement / order, as the case may be, to avail the benefit of waiver of interest or penalty or both under Section 128A.
• The waiver of interest or penalty or both under section 128A shall only be applicable for the period specified in section 128A, and not for the period not covered under the said section.
• Amount shall be required to be paid by the applicant within three months from the date of issuance of order in FORM GST SPL-05 or FORM GST SPL-06, as the case may be.
• If the amount is not paid within the stipulated time of 3 months, the order of waiver shall become void under rule 164(17).
• Where the notice/ statement/ order issued under Section 73 involves multiple issues and one of them is regarding demand of erroneous refund, an application can be filed for waiver of interest or penalty or both under Section 128A?
• As per the second proviso to section 128A, the conclusion of proceedings in such cases is 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.
• Even in cases where an order in FORM GST SPL-05 or in FORM GST SPL-06 has been issued the conclusion of the said proceedings will be subject to the condition that the taxpayer pays the additional tax amount as determined by the Appellate Authority or the Appellate Tribunal or the court or the Revisional Authority by an order issued in the matter of appeal filed by the department, within a period of three months from the date of the such order enhancing the tax liability.
• In case such additional payment is not done within a period of three months from the date of the said order, then as per sub-rule (16) of Rule 164, the waiver of interest or penalty or both under section 128A as per the order issued in FORM GST SPL-05 shall become void.
• In matters where SLP filed by the applicant is pending before the Supreme Court. The applicant will be required to withdraw the said special leave petition and file an application in FORM GST SPL-01 or FORM GST SPL-02, as the case may be, along with proof of withdrawal of SLP or the copy of the application or any other document filed for withdrawal of SLP, where the order for withdrawal of SLP has not been issued at the time of filing application in FORM GST SPL-01 or FORM GST SPL-02.
• The benefit provided under Section 128A will be available for matters involving IGST and Compensation Cess?
• If the amount of transitional credit has been availed in the period covered under Section 128A and notice for demand of wrongly availed credit is issued under section 73, the same is covered under Section 128A.
• Any penalty, including penalties under section 73, section 122, section 125etc, demanded under the demand notice/ statement/ order issued under section 73, is covered under the waiver provided under Section 128A.
• Late fee, redemption fine etc are not covered under the waiver provided under Section 128A.
• Payment to avail waiver under Section 128A can be made by utilizing ITC?
• The benefit of waiver under Section 128A can not be availed qua import IGST payable under the Customs Act, 1962? In such cases, demand is not issued under section 73 of the CGST Act, but is issued under the provisions of Customs Act, 1962 and therefore, such cases are not covered under waiver of interest or penalty or both under section 128A.
• The amount payable in order to avail the benefit under section 128A, shall be calculated after deducting the amount not payable in accordance with sub-section (5) or sub-section (6) of Section 16, from the amount payable in terms of the notice or statement or order under section 73, as the case may be. The applicant is required to pay only the amount that is payable, calculated after deducting the amount not payable in accordance with sub-section (5) or sub-section (6) of Section 16, from the amount payable in terms of the notice or statement or order under section 73, as the case may be, before submitting the application. Taxpayer is required to ensure that such amount is deducted only where ITC has been denied solely on account of contravention of Section 16(4) of the CGST Act and not on any other grounds.
• Taxpayer should also provide a breakup of the amount not payable by him anymore, as per sub-sections (5) and (6) of section 16, in FORM GST SPL-01or FORM GST SPL-02, as the case may be, to enable the officer to verify the payment easily.
• In case of application in FORM GST SPL-02, where the applicant has paid full or partial amount of tax through FORM GST DRC-03, the said applicant is mandatorily required to file application in FORM GST DRC-03A for such tax amount which he desires to get adjusted against tax demand as per FORM GST DRC-07/ FORM GST DRC-08/ FORM GST APL-04?