Summary: Section 128A of the CGST Act, introduced via the Finance Act 2024, proposes a GST amnesty scheme to waive interest and penalties for taxpayers addressing tax disputes from July 1, 2017, to March 31, 2020. Taxpayers must pay the full disputed tax amount to conclude proceedings under specified conditions. However, the scheme has several concerns. First, it mandates full tax payment for all issues within a notice, leaving no room for selective dispute settlement, which discourages genuine cases from availing the relief. Second, the coverage period creates ambiguity when notices span periods beyond the scheme’s scope, necessitating government clarification. Third, transitional credit issues remain unresolved, adding uncertainty for taxpayers disputing its status. Lastly, clarity is lacking on whether tax paid under this scheme qualifies as Input Tax Credit (ITC) for buyers, as Section 17(5) restricts ITC eligibility for taxes paid under certain provisions. Additionally, procedural guidance for issuing tax invoices and GST return disclosures is missing. While the scheme offers a potential pathway for dispute resolution, its restrictive conditions and ambiguities may hinder its adoption and effectiveness in providing genuine relief to taxpayers.
First let us dive into the section wordings as presented in the Finance Act 2024:
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 73, 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 section 108, and where no order under sub-section (1) of section 113 has been passed, pertaining to the period from 1st July, 2017 to 31st 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 the proceedings in respect of the said notice 99 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 subsection (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 the 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 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:
Provided also that where such interest and penalty has already been paid, no refund of the same shall be available. (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 Appellate Authority or Appellate Tribunal or a court, as the case may be, and has not been 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.”.
Now let us understand the key features of the scheme:
– Covers taxpayers who have received notices or orders under Section 73 (excluding fraud cases) or those who have filed appeals against such orders. Scheme covers period from 1st July, 2017 to 31st March, 2020.
– Offers a waiver of interest and penalty upon full tax payment.
However, the major concerns are the shortcomings of the scheme which have been stated as follows:
1. Full Tax Payment Requirement:
The scheme insists on full tax payment for all disputed issues within a notice or order. Taxpayers often faces multiple issues in a single notice, each with varying degrees of merit. For instance, common issues like an invoice missing in GSTR-2A/2B but available with the taxpayer or taxing PAN India turnover of the taxpayer in one state leave taxpayers with no choice but to continue litigation. This inability to settle disputes selectively prevents taxpayers from taking advantage of the scheme for genuine cases while contesting those with stronger grounds.
For example: If the taxpayer has received a notice for mismatch in GSTR2B vs GSTR3B, and he has fulfilled all conditions pertaining to Section 16 of CGST Act 2017, if then also he cannot contest the tax amount, then what remains the benefit of such scheme?
2. Coverage Period is Ambiguous:
The scheme covers tax matters arising between July 1, 2017, and March 31, 2020. However, if a single SCN is issued under Section 73 for a period beyond this coverage, it raises questions about the scheme’s applicability. Clarification from the government is still needed to resolve this ambiguity. Ideally the scheme period should be extended.
3. Transitional Credit Issues:
The scheme’s ambiguous stance on transitional credit issues is concerning. The legal status of transitional credit as input tax credit is still debated. While some advance rulings deny its eligibility, tax authorities have issued notices demanding its recovery under Section 73. The scheme’s silence on this matter creates uncertainty for taxpayers facing disputes related to transitional credit.
4. Input Tax Credit (ITC) Eligibility:
It’s still unclear whether tax paid under this scheme is eligible as ITC to the buyer. Section 17(5) restricts ITC to the buyer if the tax is paid by the supplier under Section 74. The scheme is designed for SCNs issued under Section 73, not under Section 74. Additionally, clarification is needed on when a tax invoice for payment of tax should be issued and how it should be disclosed in GST returns.
CONCLUSION:
To summarize, while the GST amnesty scheme is a step in the right direction and it is a commendable step towards taxpayer relief, its scope and design present several shortcomings that could hinder its effectiveness.
Addressing these issues is crucial to ensure the scheme’s effectiveness and provide genuine relief to taxpayers.
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The author is a practicing DISA Qualified Chartered Accountant & Partner in Naveen Jain & Co. She can be reached at [email protected] your queries.
DISCLAIMER: The views expressed are strictly of the author. The contents of this article are solely for informational purpose. It does not constitute professional advice or recommendation of firm. Neither the author nor firm and its affiliates accepts any liabilities for any loss or damage of any kind arising out of any information in this article nor for any actions taken in reliance thereon.
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