GST Amnesty Scheme – Section 128A

GST Council in its 53^rd meeting recommended insertion of Section 128A of the CGST Act, giving relief to the registered person from interest and penalties for the financial years 2017-18 to 2019-20 under section 73 of the CGST Act. Subsequently Section 128A was introduced in CGST Act, 2017 vide Section 146 of Finance (No.2) Act, 2024. Further vide Notification No.17/2024 -CT the said section was notified effective from 1^st November 2024.

Rule 164 in the CGST Rules was recommended to be inserted by the 54^th GST Council Meeting along with the relevant forms, prescribing the procedure to be followed for claiming the benefit under the scheme. Rule 164 was inserted vide Notification No. 20/2024 – CT dated 08.10.2024. The Government vide Notification No. 21/2024 – CT dated 08.10.2024 notified 31^st March 2025 as the date, before which the tax shall be paid to get the benefit of the amnesty scheme.

Finally, CBEC issued Circular No. 238/32/2024 – GST dated 15^th October 2024 clarifying various issues with respect to the scheme.

We can summarize as below:

The aim of introducing Section 128A to CGST Act, 2017 is to primarily reduce litigation and provide relief to the taxpayers.

The extract of section 128A of the CGST Act, 2017 is provided as below:

“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, 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 sub-section 108, and where no order under sub-section (1) of section 113 has been passed,

pertaining to the period 1^st July, 2017 to 31^st 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 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 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 or the Revisional Authority, as the case may, 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 applicable.

(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 the Appellate Authority or Appellate Tribunal or a court, as the case may be, and has not 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.”

Rule 164 inserted in CGST Rule 2017 vide Notification No. 20/2024 – CT dated 08.10.2024 (Procedure and conditions for closure of proceedings under section 128A in respect of demands issued under section 73)

The procedures and conditions are as follows:

a) Application in Form GST SPL 01 to be filed in respect of notice or a statement, where no order is passed along with the proof of payment of tax in DRC 03.

b) Application in Form GST SPL 02 to be filed in respect of all other cases along with the proof for payment of tax (preferably to be paid through electronic liability ledger else through DRC 03).

c) Where the notice or order involves partial demand of erroneous refund and for other reasons, then full amount of tax demanded in the said notice or order must be paid along with the interest and penalty pertaining to the demand of such erroneous refund.

d) Where the notice or order involves partial demand for the period covered under the scheme and for period not covered under the scheme, then the taxpayer could opt for this scheme only if the complete tax demanded in the notice or order is paid along with the interest and penalty pertaining to the period not covered under this scheme.

e) Where the notice or order involves issues pertaining to time barred ITC under section 16(4), where relief under section 16(5) and section 16(6) is provided, then the rule prescribes that the taxpayer can pay the tax reducing such demand of tax along with interest and penalty pertaining to such credits where it is eligible for the relief under sub-sections (5) and (6) of section 16 of the CGST Act.

f) The application in SPL 01 or SPL 02 is to be filed within a period of three months form the date notified i.e. 31^st March 2025 except cases which are covered first proviso to sub section (1) of section 128A, where the notice or order is to be passed under section 75(2), the time limit is six months from the date of communication of the order of the proper officer.

g) Any appeal or writ pertaining to such notice or order should be withdrawn before filing the application.

h) The proper officer shall after filing the application, if not satisfied, issue notice in SPL 03 within three months from the date of receipt of the said application. The applicant will file a reply in SPL 04 within one month from the date of receipt of the said notice. If the proper officer is satisfied with the reply, he will issue order in SPL 05 or reject the application by issuing order in SPL 07.

i) If no order is passed within the prescribed time period, the application is deemed to be approved and proceedings concluded.

j) If order for rejection is passed in SPL 07, appeal can be filed under section 107(1), if not then the original appeal if filed and which was withdrawn will be restored.

k) The appellate authority shall issue orders in SPL 06 if it is held that the proper officer has wrongly rejected the application for waiver of interest, or penalty or both.

The salient features of the scheme:

a) The scheme is applicable in cases where tax is payable in accordance with notice issued under section 73(1) or statement issued under section 73(3) and no order is passed, or where order is passed under section 73(9), but no order is passed under section 107(11) or section 108(1), where order is passed under section 107(11) or section 108(1), but no order is passed under section 113(1).

b) Where, originally notice or order is passed under section 74(1), then based on the direction of the Appellate Authority or Appellate Tribunal under section 75(2), such notice or order will also be covered under the scheme.

c) Notices or orders covered for the period July 2017 to March 2020 is covered.

d) Not applicable for notices or orders involving erroneous refunds.

e) Benefits of section 128A is not available for partial waiver of interest or penalty. The full amount of tax demanded in notice or order must be paid.

f) Notices or order demanding only the interest or penalty shall not be applicable for the scheme where such amounts pertain to delay in filing returns or reporting of supply in the return. There is a different thought that these cases will be covered under section 75(12) under self-assessment and there is no need to issue notice to recover such interest and penalty, but recovery can be done under section 79, however considering the notice is issued under section 73, benefits under this scheme should be equally applicable to such cases, though it is debatable.

g) The benefits provided under section 128A will be available for matters involving IGST and compensation cess as well.

h) Late fees, fines are not covered under this scheme.

i) IGST paid in case of imports though as per circular is not covered under this scheme, because IGST is levied as per the Customs Act, though debatable.

j) The time limit to pay the tax under the scheme is 31^st March 2025 and relevant forms to be filed within three months from 31^st March 2025 or six months in certain cases (where notice or order is to be passed as per section 75(2)).

k) Interest and penalty already paid shall not be refunded back.

Issues where still there is no clarity:

1. Where orders are passed and the time limit to file appeal is still not over, should the taxpayer file an appeal and withdraw it before filing an application or can file an application without filing an appeal?

2. Where the time limit to file an appeal is already over (three months plus one month for condonation) and the taxpayer has not preferred an appeal, can he still go ahead and file an application under this scheme?

3. Where a notice or order pertains to multiple years, including the years not covered by this scheme, though circular clarifies that for taxes, interest and penalty for the years not covered under this scheme, must be paid, but given the intention of the scheme, the clarification does not go with that spirit.

4. What happens if the taxpayers opt for the scheme, but later department files an appeal?

5. What will be the status of the application, which gets rejected but the taxes are fully paid? Can he apply for refund? (Since the appeal will be restored or filed)

6. What will happen to cases where the orders are set aside by the courts and remanded back?

Considering the intention of the Government why this scheme was introduced, strict interpretation of the provisions should be avoided to reject the application. The scheme should be read by the officers in true spirit of the scheme and benefits should be given to the maximum, avoiding further litigation on these matters.

Since the scheme is already opened for submission in the portal, we have to see how this scheme will be received by the taxpayers and the officers.