GST Amnesty Provision for Waiver of Interest, Penalty, and Regularization of ITC claimed in non-compliance of Section 16(4) of the CGST Act, 2017
Since implementation of GST laws in India, despite its benefits, compliance requirements have posed significant challenges for taxpayers, leading to unclaimed Input Tax Credit (ITC), accumulation of interest and penalties, and unexpected disputes during assessments. To address these issues, the government periodically introduces amnesty schemes to regularize non-compliance and provide relief to taxpayers.
This article delves into the nuances of few amnesty provisions, proposed by 53rd GST Council meeting and introduced by Finance (No. 2) Act, 2024, particularly for waiving interest, penalties, and regularizing availment and utilization of ITC under Section 16(4) of the CGST Act, 2017, The key provision inserted are as under:
- Sub-section (5) & (6) under section 16
- Section 128A & Rule 164 for waiver of interest and penalty.
Remedy for Section 16(4) of the CGST Act, 2017
Section 16(4) of the CGST Act, 2017, limits the time frame for availing ITC. It stipulates that ITC on an invoice or debit note for a particular financial year can only be availed up to the due date of filing the return for September/now 30th November of the following financial year, or the date of filing the annual return, whichever is earlier.
This time restriction was introduced to ensure timely reconciliation of credits and promote discipline in GST compliance. However, the rigidity of this provision has resulted in unintended hardships for taxpayers, particularly those who fail to claim ITC due to technical errors, inadvertence, or delayed filling of returns by suppliers.
In order to address the above concerns and mitigate the unwarranted litigation, the government has introduced sub-section (5) & (6) under section 16 to extend the time limit for availing the ITC pertaining to FY 2017-18, 2018-19, 2019-20 & 2020-21 till 30.11.2021 and to offer an opportunity to avail ITC within 30 days of order of revocation of cancelled registration, for the period from the date of cancellation of registration or the effective date of cancellation of registration, as the case may be, till the date of order of revocation of cancellation of registration.
Further, the government has issued Notification no 22/2024– CENTRAL TAX dated 08.10.2024 to provide for procedure for availing benefit of amnesty provision, which states that application for rectification of order is required to be filed before the jurisdictional officer in the prescribed format. Moreover, in order to address several doubts/concerns of the taxpayer and professionals, the government has issued Circular No. 237/31/2024-GST dated 15.10.2024 to clarify the eligible taxpayer and order, who may enjoy the benefit of these amnesty provision.
It is also mindful to note that the scheme would remain open for a limited period to encourage timely participation and hence the application for availing benefit of this provision is required to be filed on or before 31.03.2025.
Remedy for waiver of interest or penalty or both relating to demands raised under section 73 through insertion of section 128A under CGST Act, 2017
The Finance (No. 2) Act, 2024 has made an insertion of section 128A to provide for conditional waiver of interest or penalty or both against the demand confirmed in section 73 pertaining to FY 2017-18, 2018-19 & 2019-20. However, the demand ascertained on account of erroneous refund is out of the purview of this section and if interest and penalty is already being paid in respect of demand relating aforesaid financial year than no refund shall be granted to any taxpayer.
The above provision is inserted to address issues related to prolong litigation, increase government revenue through collection of tax portion of demand and to provide relief to taxpayer for their bonafide mistakes during the initial implementation years of GST Laws.
The benefit of amnesty provision can be availed against the notice issued but issuance of order confirming demand is pending or the assessment order issued by proper officer confirming demand u/s 73 for the above cited financial years. The benefit of this provision is also extended to order issued by any Appellate authority or any court for the eligible issues. Moreover, if any taxpayer has already challenged the demand order u/s 73 before any appellate authority, then the same is required to be withdrawn before taking benefit of this waiver.
Apart from above, another condition for availing benefit of this provision is to pay full amount of tax ascertained in the demand.
Further, in order to exercise the above waiver of interest/penalty against the order confirming demand, the taxpayer has to get the order rectified by following the procedure prescribed under Rule 164 of CGST Rules, 2017 and it is suggested to take into reference Circular No. 238/32/2024-GST dated 15.10.2024 as the given circular has clarified various doubts and analyzed the aforesaid provision more holistically to address the concerns raised by taxpayers and professionals.
Conclusion
The introduction of amnesty provisions under the Finance (No. 2) Act, 2024, and the recommendations of the 53rd GST Council meeting marks a significant step toward resolving long-standing challenges faced by taxpayers under the GST regime. By addressing issues surrounding ITC availment under Section 16(4) and offering relief through Section 128A for conditional waiver of interest and penalties, the government has demonstrated its commitment to easing compliance burdens, mitigating litigation, and fostering a taxpayer-friendly environment.
The extension of time limits for ITC claims, coupled with mechanisms for rectifying past errors, provides an invaluable opportunity for taxpayers to regularize their compliance. Simultaneously, the waiver of interest and penalties on bona fide errors under Section 73 offers much-needed relief, particularly for the initial years of GST implementation.
However, taxpayers must act promptly, as these amnesty schemes are time-bound, requiring applications to be submitted by March 31, 2025. Moreover, adherence to procedural requirements, including rectification of orders and withdrawal of pending appeals, is critical for availing the benefits.
About the Author
The author is CA Amandeep Singh is a distinguished expert in litigation and advisory services, with a specialized focus on GST and other indirect tax laws. With extensive experience representing clients in complex tax disputes, he has successfully assisted large, medium, and small enterprises in navigating contentious tax matters and achieving favourable outcomes. His deep understanding of tax litigation and strategic approach to resolving disputes makes him a trusted advisor for businesses facing regulatory challenges and compliance issues in indirect taxation.
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