Summary: The Finance Act (No. 2) of 2024 introduced Section 128A in the CGST Act, providing taxpayers with an opportunity to waive interest and penalties related to GST demands under Section 73 for the financial years 2017-18, 2018-19, and 2019-20. The waiver, however, is not applicable to cases involving erroneous refunds or demands raised under Section 74. The process is outlined under CGST Rule 164, with further clarifications provided in Circular 238. Eligible taxpayers can apply for the waiver by submitting forms SPL-01 or SPL-02, depending on their case. It is important to note that applications must be made after settling the tax dues, and any ongoing appeals must be withdrawn. The application will only be considered valid once approved by the proper officer, and in some cases, taxpayers may need to submit additional documentation. If no response is received from the proper officer within the stipulated time, the application is automatically approved. Deadlines apply, with the primary application deadline set for June 30, 2025. In certain cases, extensions are allowed for converted notices. Section 128A aims to reduce litigation for early GST periods, but both taxpayers and the department must adhere to timelines to ensure the scheme’s success.
Section 128A:- Conditions, Restrictions and Procedure
Introduction:
Finance Act (No. 2) of 2024 has inserted section 128A in CGST Act allowing waiver for interest and penalty which relates to demands raised under section 73 for financial year 17-18 (i.e. 1st July,2017 to 31st March,2018), 18-19 and 19-20 subject to certain conditions. Subsequent to insertion of section 128A, CGST notification number 20/2024 has inserted rule 164 In CGST rules and Circular 238 has also been issued to provide clarification to certain issues.
In this article, it has been tried to bring the combined effect of section 128A, Rule 164, and circular 238.
Cases where benefit can be availed:-
First thing that is very relevant to avail waiver of interest and penalty is that demand should pertain to section 73 only and not section 74. And in section 73 as well, no waiver of interest and penalty is available if demand pertains to erroneous refund.
Benefit of waiver of interest and penalty can be availed in following three situations:
1. Where is notice or statement under section 73 has been issued but order is yet to be issued. (Referred to as Case-I in this article)
2. Where an order under section 73 has been issued but no order under section 107 by the appellate authority or under section 108 has been passed by. revisional authority. (Referred to as Case-II in this article)
3. Where order under section 107 by appellate authority or under section 108 by the revisional authority has been passed but no order has been passed by the appellate tribunal. (Referred to as Case-III in this article)
Application form:-
In Case-I, an application in form SPL-01 Is to be filed on the common portal but only after paying tax demanded in the notice or statement, in form DRC-03.
In Case-II & Case-III, an application in SPL-02 is to be filed on the common portal but only after paying tax by way of crediting the amount of tax in the electronic liability register. If someone has paid the Tax in form DRC-03 then an application in form DRC-03A Shall be filed by the said person for crediting the said amount in electronic liability register and only after that application in form GSTSPL02 should be filed.
Before filing application in SPL-01 or SPL-02, the applicant has to withdraw his appeal, if any, filed by him. In case, he has applied for withdrawal of appeal but order for withdrawal of his appeal is not yet issued then he has to upload the order within one month of receipt of such withdrawal order.
Worth mentioning here that mere filing of SPL-01/02 will not mean that one is entitled to benefit of section 128A. Such application will require approval from Proper Officer.
Proper officer in case-I will be the same proper officer who is authorised to issue the order as per section 73 And in Case-II and III, proper officer will be the one who has been referred to in section 79 of CGST act.
Cases involving erroneous refund, periods other than 17-18,18-19 & 20-21, and entitlement of ITC due to section 16(5)/16(6):-
There might be cases where notice or statement or order Includes tax, interest, penalty on account of erroneous refund or periods other than financial year 17-18, 18-19 or 19-20, in that case SPL0-1 or SPL-02 should be filed only after paying the full amount of tax demanded in said notice or statement or order.
It is worth mentioning that only tax is to be paid in respect of erroneous refund or periods other than as mentioned above and interest and penalty can be paid later on because no waiver is available on erroneous refund or periods other than for which this section 128A relates to.
However, amount of tax to be paid prior to filing application in SPL-01/02 can be reduced by that amount of the ITC to which applicant has become entitled to due to newly inserted section 16(5) and 16(6).
Additional tax payment:
In case applicant has filed application to avail benefit of section 128A but department has filed application/revisionary proceeding/ challenged in court then if tax is enhanced by such order of appellate authority/tribunal/court then additional tax will be payable within 3 months from the date of such order. If it is not paid then benefit of waiver of interest and penalty will become void.
By when to file application in SPL-01 or SPL-02?
Application in SPL-01 or SPL-02 is to be filed by 30th June,2025. However, there is an exception to this.
There can be a scenario where originally notice was issued under section 74 but due to direction of appellate authority or appellate tribunal or court, the same notice or order is converted into notice or order issued under section 73 then in those cases, this benefit can be availed by filing application in SPL-01 or SPL-02 within six months from the date of such order of appellate authority/ appellate tribunal/court and in that case, date of 30 June 2025 will not apply.
Procedure after filing of application in SPL-01 or SPL-02:-
Moving further with respect to the procedure to application filed in SPL-01 or SPL-02, as the case maybe, if the application is found satisfactory by the proper officer then order to approve the application will be issued in SPL-05.
However, if the proper officer finds that this application is liable to be rejected then he has to issue a notice in SPL-03 within three months from the date of receipt of application received in SPL-01/SPL-02. In case he doesn’t issue any notice within three months, then it will be deemed that application in SPL-01 or SPL-02 has been approved and order in SPL-05 will be issued.
If applicant has received a notice in SPL-03, then he will submit his reply in form SPL-4 within one month from the date of receipt of such notice issued in SPL03. In case applicant hasn’t furnished any reply in SPL-04 then proper officer will issue his order within four months from the date of issue of such notice in SPL-03 and in case applicant has furnished his reply in SPL04, then order will be issued within three months from the date of reply furnished by the applicant.
In case proper officer agrees with the response then he will issue the order in SPL-05 and in case if he is not satisfied then he will reject the application by issuing the order in SPL07.
In case, application filed in SPL-01 or SPL-02 is rejected by way of issue of order in SPL07, then applicant has two options. Either to file an appeal or not to file any appeal against the said order issued in SPL-07. In case he doesn’t file any appeal then his original appeal, if any, filed by applicant which he had been withdrawn to avail benefit of section 128A, shall be restored. However, if he files an appeal against the order issued in form SPL-07 and if his appeal is accepted by the appellate authority then order in SPL-06 will be issued but if appellate authority rejects the appeal filed against order issued in SPL07 then by filing an undertaking in SPL-08 that he will no further appeal against such rejection, his original appeal, if any filed by him, to avail benefit under section 128A shall be restored.
Conclusion: –
From the perusal of the above, we can see that SPL-05 and SPL-06 are the favourable orders in the favour of applicant which substantiate the fact that his application has been approved by the concerned officer. However, if orders issued in SPL-05 or SPL-06 contain any interest or penalty payable on account of erroneous refund or periods other than financial years 17-18, 18-19 or 19-20 then the same interest or penalty will be payable within three months from the date of such order issued in form SPL-05 or SPL- 06 else those will become void.
Section 128A is indeed beneficial for many tax payers and department as well as it will reduce litigation pertaining to initial period of GST introduction but caution is required as far as timelines are concerned both at the end of taxpayer as well as department so as to make this section highly effective, beneficial and useful.
Author Bio
