Introduction

The Indian government introduced Section 128A in the Central Goods and Services Tax (CGST) Act, 2017 through the Finance (No. 2) Act, 2024. This section offers an amnesty scheme for taxpayers by waiving interest and penalties on specific tax demands. Effective from November 1, 2024, the scheme covers tax periods from July 1, 2017, to March 31, 2020. It is implemented via Rule 164 of the CGST Rules, 2024, along with corresponding notifications and circulars.

The primary objectives of this scheme are to:

* Reduce the tax burden on businesses.

* Settle long-standing disputes.

* Streamline tax compliance.

This article provides a detailed overview of the scheme, including eligibility, procedural aspects, notifications, and clarifications issued by the government.

1. Key Provisions of Section 128A

Section 128A offers waiver of interest and penalties in cases where tax demands have been raised under Section 73 of the CGST Act. Taxpayers can settle pending disputes by paying the principal tax liability without additional penalties and interest.

Eligibility for Amnesty

The scheme applies in the following cases:

* Taxpayer has received a notice (Section 73(1)) or statement (Section 73(3)) but no adjudication order has been issued under Section 73(9).

* An order has been passed under Section 73(9), but no further order has been issued under Section 107(11) or Section 108(1).

* An order has been passed under Section 107(11) or Section 108(1), but no order has been passed under Section 113(1).

Cases Where Amnesty is Not Applicable

* Demands related to erroneous refunds are not covered.

* Taxpayers with pending appeals or writ petitions that have not been withdrawn are not eligible.

2. Procedural Framework under Rule 164 of CGST Rules, 2024

To implement Section 128A, the government introduced Rule 164 in the CGST Rules, 2024, outlining the following procedural steps:

Step 1: Filing an Application

* Taxpayers must apply electronically via the GST portal using:

* FORM GST SPL-01 (if only a notice/statement under Section 73 is issued).

* FORM GST SPL-02 (if an adjudication order under Section 73 is issued).

Step 2: Tax Payment

• Taxpayers must pay the full tax amount via FORM GST DRC-03 before filing the application.
• If tax is already paid using FORM GST DRC-03, an adjustment application (FORM GST DRC-03A) is required before submission.

Step 3: Withdrawal of Appeals

• If the taxpayer has filed an appeal or writ petition, they must withdraw it before filing for amnesty.
• Proof of withdrawal must be attached to the application.

Step 4: Processing of Applications

• The tax officer must review and decide within three months.
• If rejected, a notice in FORM GST SPL-03 will be issued, and taxpayers must respond within one month using FORM GST SPL-04.
• If accepted, the officer will issue FORM GST SPL-05, concluding the case.
• If ineligible, an order in FORM GST SPL-07 will be issued.

3. Notification No. 21/2024 – Deadline for Tax Payment

Notification No. 21/2024-Central Tax, dated October 8, 2024, sets the deadlines:

• March 31, 2025 – Last date for payments in cases where notices/orders were issued under Section 73.
• Six months from redetermination – For cases where a Section 74 notice was later revised under Section 73.

4. Circular No. 238/32/2024-GST – Government Clarifications

The government issued Circular No. 238/32/2024-GST, providing extensive clarifications regarding:

Circular-No-238-2024

4.1 Scope of Amnesty

• Applies only to tax demands raised under Section 73.
• Erroneous refund demands are not covered.
• Demands solely for penalties or interest are covered, except for late return filings.
• Notices initially under Section 74 but later converted to Section 73 are eligible.

4.2 Tax Payment and Adjustments

• Tax payments must be made via FORM GST DRC-03.
• If tax has already been paid, FORM GST DRC-03A is required for adjustments.
• Tax amounts recovered by officers can be counted towards waiver eligibility, but interest/penalties recovered cannot be adjusted.

4.3 Impact of Retrospective ITC Amendments

• If Input Tax Credit (ITC) was earlier disallowed due to Section 16(4) but is now allowed due to retrospective amendments, taxpayers can deduct this ITC before paying tax.

4.4 Handling Departmental Appeals

• If the department has filed appeals against penalties and interest, taxpayers are still eligible for amnesty.
• Tax officers must withdraw such appeals to facilitate dispute resolution.

5. Instruction No. 02/2025-GST – Handling Department Appeals

Issued on February 7, 2025, Instruction No. 02/2025-GST provides guidelines for handling cases where the department has filed appeals against interest or penalty calculations:

• If tax is fully paid, but the department disputes interest/penalty, taxpayers can avail the waiver.
• Departmental appeals related only to interest and penalties must be withdrawn.

6. Frequently Asked Questions (FAQs)

The circular includes 16 FAQs, covering:

• Eligibility for taxpayers who paid tax before Section 128A was introduced.
• Whether tax recovered by officers qualifies for waiver.
• Adjustment of interest/penalty against tax dues – Not allowed.
• Partial waiver requests – Not permitted; full tax payment is required.
• Applicability to IGST and Compensation Cess – Covered.
• Impact of retrospective ITC amendments – Eligible taxpayers can deduct ITC.
• Applicability to irregular transitional credit claims – Covered if under Section 73.
• Utilization of ITC for tax payments – Allowed except for RCM and erroneous refunds.

Conclusion

The amnesty scheme under Section 128A offers a crucial opportunity for taxpayers to settle pending tax disputes without additional financial burdens. By waiving interest and penalties, this scheme encourages voluntary compliance and dispute resolution.

The procedural clarity provided through Rule 164, Notification No. 21/2024, Circular No. 238/32/2024-GST, and Instruction No. 02/2025-GST ensures smooth implementation.

Taxpayers should carefully assess their eligibility and submit applications before the March 31, 2025, deadline to maximize the benefits of this scheme.

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