How to Avail Waiver of Interest and Penalty Under Section 128A of CGST Act

GST Litigation and Issues

On October 15, 2024, the Government of India released Circular No. 238/32/2024-GST, providing comprehensive clarifications on the recently introduced Section 128A of the CGST Act, 2017. This new provision, based on recommendations from the 53rd and 54th GST Council meetings, offers a waiver of interest or penalty or both for specific demands raised under Section 73 of the CGST Act, subject to certain conditions. Here’s an in-depth breakdown of the circular and its implications.

1. Scope of Section 128A

Section 128A is applicable to demands related to the financial years 2017-18, 2018-19, and 2019-20 under the following conditions:

  1. Unadjudicated Notices/Statements: Where a notice under Section 73(1) or statement under Section 73(3) has been issued, but no final order under Section 73(9) has been passed.
  2. Adjudicated Cases Without Appeal Orders: Where an order has been passed under Section 73(9) but remains unaffected by appellate or revisional orders under Section 107(11) or Section 108(1).
  3. Appellate Orders Without Tribunal Decisions: Where appellate or revisional orders exist, but the Appellate Tribunal under Section 113(1) has not issued any final order.

Additionally, cases where notices under Section 74 are redirected to be adjudicated under Section 73, as per Section 75(2), are also covered.

2. Procedure for Availing Waiver

Filing Applications

Taxpayers must file applications electronically in the prescribed forms:

  • FORM GST SPL-01: For cases without adjudicated orders.
  • FORM GST SPL-02: For cases with adjudicated orders or appellate decisions.

Key deadlines:

  • March 31, 2025: For most cases.
  • Within six months of order communication: For cases requiring redetermination under Section 73.

Tax Payment

  1. Payments must cover the full tax demanded, using FORM GST DRC-03 or adjustments via FORM GST DRC-03A, as applicable.
  2. The payment deadline aligns with the filing deadline of the waiver application.

3. Key Clarifications from the Circular

Eligibility Criteria

  • Prior Payments: Payments made before the enactment of Section 128A are considered valid for waiver eligibility.
  • Partial Waiver: Not permitted. Full payment of the tax demand is mandatory.
  • Multiple Periods/Demands: If demands span periods outside 2017-20, the waiver applies only to eligible periods. Full payment is still required, but liability for ineligible periods remains.

Special Cases

  • Erroneous Refunds: Waiver excludes penalties for refunds wrongly availed.
  • ITC Adjustments: Taxpayers can deduct amounts deemed not payable due to retrospective amendments in Section 16(5) and 16(6).
  • Pending Appeals or Writs: Applicants must withdraw such cases to claim the waiver. Proof of withdrawal is mandatory.

Payments Using ITC

Payments can be made using the electronic credit ledger, except for reverse charge mechanisms, erroneous refunds, or IGST on imports, where cash payments are mandatory.

4. Appeal and Rectification

  1. Rejected Waiver Applications: Orders rejecting waivers are appealable under Section 107, subject to pre-deposit rules.
  2. Deemed Approval: If officers fail to process applications within prescribed timelines, the waiver is deemed approved.

5. Practical Implications

The waiver under Section 128A provides significant relief to businesses dealing with historic tax disputes. By ensuring clarity and uniformity in its implementation, the government aims to reduce litigation and encourage compliance.

Conclusion

The introduction of Section 128A under the CGST Act, coupled with this detailed circular, represents a proactive step toward resolving legacy tax disputes efficiently. Taxpayers should act promptly to meet deadlines, ensure compliance, and leverage the waiver benefits.

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