The Government of India has issued Circular No. 248/05/2025-GST, dated 27th March 2025, to address concerns regarding the implementation of Section 128A of the CGST Act, 2017. This new provision, introduced based on recommendations from the 53rd and 54th GST Council meetings, allows for the waiver of interest, penalty, or both on demands raised under Section 73 for the period from 1st July 2017 to 31st March 2020.
What is Section 128A of the CGST Act?
Section 128A of the Central Goods and Services Tax (CGST) Act, 2017 was introduced to provide relief to taxpayers facing demands raised under Section 73 for the period 1st July 2017 to 31st March 2020. This provision enables the waiver of interest, penalties, or both, subject to certain conditions. To avail of this benefit, taxpayers must adhere to the payment and procedural requirements outlined in the CGST Rules, particularly Rule 164.
This section was inserted to facilitate the settlement of disputes and reduce litigation by allowing eligible taxpayers to clear their dues without additional financial burden.
Key Clarifications Issued in the Circular
1. Eligibility for Benefit Under Section 128A When Tax is Paid via GSTR-3B
Many taxpayers were unsure whether payments made via FORM GSTR-3B (instead of FORM GST DRC-03) before 1st November 2024 would qualify for relief under Section 128A.
- The circular confirms that any payment made before the notification date (1st November 2024) through GSTR-3B will be considered eligible, as long as it was intended for settling the demand.
- However, payments made on or after 1st November 2024 must be done only through FORM GST DRC-03, following Rule 164 of the CGST Rules, 2017.
- The eligibility of such payments will be verified by the proper officer before allowing the benefit under Section 128A.
2. Treatment of Appeals in Cases Covering Periods Beyond Section 128A Scope
Another major issue addressed in the circular is regarding taxpayers who have received notices or orders covering periods both within and beyond the scope of Section 128A (FY 2017-18 to 2019-20).
- Taxpayers can file an application in FORM SPL-01 or FORM SPL-02 after clearing their tax liability for the period covered under Section 128A.
- They must inform the Appellate Authority or Tribunal that they are availing the benefit under Section 128A and will not pursue appeals for the covered period.
- The Appellate Authority will then pass an order only for the period outside Section 128A’s scope, ensuring clarity in adjudication.
- The previous clarification provided in Circular No. 238/32/2024-GST (dated 15th October 2024) regarding this matter is now withdrawn.
Implications for Taxpayers
- Opportunity to Settle Disputes: Taxpayers facing demand notices for the specified period (FY 2017-18 to 2019-20) can now benefit from waiver of interest and penalties.
- Flexibility in Payments: Payments made earlier through GSTR-3B are eligible for relief, avoiding the need for additional compliance burdens.
- Clearer Appeal Procedures: Taxpayers with consolidated orders can now separate their disputes and settle relevant periods under Section 128A while continuing appeals for other periods.
- Compliance with Rule 164: Future payments must strictly follow the prescribed forms and procedures, ensuring transparency in the system.
Final Thoughts
This circular is a significant step in addressing industry concerns regarding Section 128A of the CGST Act. By allowing payments made via GSTR-3B and providing clarity on appeal procedures, the government has eased compliance and encouraged dispute resolution. Taxpayers should carefully evaluate their past tax payments and appeal status to maximize the benefits offered under this provision.
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