Clarification on CGST Payment Deadline Extension under Section 128A

Clarification on Notification No. 21/2024–Central Tax: Extension of Payment Deadlines under Section 128A of the CGST Act

Summary: The Ministry of Finance issued Notification No. 21/2024–Central Tax on 8th October 2024, extending payment deadlines for tax, interest, and penalties under Section 128A of the CGST Act. This notification primarily affects registered taxpayers who have received notices or orders under Sections 73 (non-fraud cases) and 74 (fraud or misstatement cases). The notification allows these taxpayers to settle their liabilities by 31st March 2025 or within six months of receiving a redetermination order. The notification’s key purpose is to clarify extended timelines and provide relief by waiving or reducing penalties and interest if payments are made within the specified period. Section 128A empowers the government to offer such waivers to facilitate compliance and reduce burdens on businesses. However, the relief is conditional; failure to meet the new deadlines could result in additional penalties. The notification is effective from 1st November 2024, giving businesses and taxpayers time to adjust and settle their outstanding dues without facing further liabilities. This extension provides critical flexibility for taxpayers involved in legal disputes or appeals, allowing them to fulfill their tax obligations and avoid the risk of further penalties.

Introduction

On 8th October 2024, the Ministry of Finance issued Notification No. 21/2024–Central Tax (S.O. 4372(E)), which pertains to extending the deadlines for making payments of tax, interest, or penalty for certain registered taxpayers under the Central Goods and Services Tax Act, 2017 (CGST Act). The notification has been issued in exercise of the powers conferred under Section 128A of the CGST Act, which deals with the waiver or reduction of interest, penalty, or both under certain circumstances.

This article provides a detailed explanation of the key aspects of the notification and its implications for registered taxpayers.

Context and Purpose of the Notification

Section 128A of the CGST Act provides the Central Government with the authority to notify special provisions for the waiver of interest, penalty, or both for certain classes of registered persons. This waiver can be applied to cases where:

• A notice has been issued under Section 73 (related to determination of tax in cases other than fraud or willful misstatement), or
• A notice or order has been issued under Section 74 (determination of tax in cases involving fraud, willful misstatement, or suppression of facts).

The purpose of this notification is to provide clarity on the extended timelines for payment of taxes (including interest or penalty) as per notices, statements, or orders issued under Section 128A, giving registered persons the opportunity to comply within a specific deadline without incurring further liabilities.

Key Provisions of the Notification

The notification lays out the respective dates up to which payment can be made for waiving interest, penalty, or both, under Section 128A. These dates are specified in a table format, which outlines the different classes of registered persons and the corresponding payment deadlines.

Table Overview: Deadline for Payment of Tax, Interest, and Penalty

Explanation of Key Clauses in the Table

1. Class of Registered Persons (Sl. No. 1):

• This applies to taxpayers who have received a notice, statement, or order under any of the following clauses of Section 128A:
  • Clause (a): This refers to situations where the taxpayer has been issued a notice for failing to pay tax within the due date.
  • Clause (b): This covers cases where the taxpayer has been issued an order determining tax liability, penalty, or interest after an audit or investigation.
  • Clause (c): This pertains to situations where the taxpayer has been issued an order for redetermination of tax following the discovery of discrepancies in returns or statements.
• These taxpayers can now make the necessary payments for tax, interest, and penalty by 31st March 2025 in order to avail the waiver or reduction of interest and penalties.

2. Class of Registered Persons (Sl. No. 2):

• This clause applies to taxpayers who have received a notice under Section 74(1) (which deals with cases involving fraud or intentional misrepresentation) for a certain period.
• In such cases, if the Appellate Authority, Tribunal, or Court directs the proper officer to redetermine the tax liability, the taxpayer has six months from the date of the redetermination order under Section 73 to make the necessary payments to avail the waiver.
• Essentially, this provides flexibility for taxpayers who are involved in legal proceedings and have received directions from appellate bodies.

Key Clarifications

1. Extension of Payment Deadline: The most significant feature of this notification is the extension of the payment deadline. For registered persons who fall within the specified categories, the deadline to make payments for the tax, interest, or penalty is extended to 31st March 2025, or six months from the issuance of the redetermination order. This provides relief for businesses and taxpayers by giving them more time to settle their dues without incurring additional penalties or interest.
2. Waiver of Interest and Penalty: The notification emphasizes that the waiver of interest or penalty is contingent upon the timely payment of the tax dues. Taxpayers must make the required payments within the specified deadlines to avoid further penalties. This means that if the taxpayer does not adhere to the new timelines, the opportunity to avail the waiver may be lost, and further penalties could be imposed.
3. Section 128A Reference: The notification operates under Section 128A, which deals specifically with the powers of the government to reduce or waive penalties and interest under certain conditions. This section is often invoked to provide relief to taxpayers, especially in cases where procedural or administrative delays have caused the non-payment or delayed payment of taxes.
4. Effectiveness from November 1, 2024: The notification will come into effect from 1st November 2024. Taxpayers need to ensure they are aware of the new timelines and make arrangements to fulfill their tax liabilities within this period.

Practical Implications for Taxpayers

This notification offers substantial relief to businesses and registered taxpayers by extending the time frame to make payments and providing a clear mechanism for the waiver of interest and penalties. Here are some practical takeaways for taxpayers:

• Monitor notices and orders carefully: Ensure that any notices or orders issued under Section 128A or Section 74(1) are carefully reviewed. Understand the timelines and assess how the notification impacts your payment obligations.
• Settle dues by the deadline: To benefit from the waiver, it is crucial to settle tax, interest, and penalties by 31st March 2025 (or the respective six-month window). Delaying payment beyond these dates may result in the waiver being forfeited.
• Consult with tax professionals: If you’re involved in legal proceedings or appeals, it is advisable to consult with a tax professional or legal advisor to ensure that you meet all deadlines and fulfill your obligations under the new provisions.

Conclusion

Notification No. 21/2024–Central Tax (S.O. 4372(E) is a significant step by the Ministry of Finance to provide relief to registered taxpayers who have received notices or orders under 73 and 74 of the CGST Act. As per Section 128A By extending the payment deadline and providing a mechanism for the waiver of interest and penalties, the government aims to reduce the burden on businesses and encourage compliance. However, it is important for taxpayers to stay informed and act within the prescribed timelines to avoid potential penalties and legal complications.