Section 128A: Your One-Time Opportunity to Wipe the GST Slate Clean
Businesses, particularly in their early years under GST, often found themselves entangled in disputes due to initial misunderstandings, systemic errors, or simple compliance oversights. Many older GST notices stem from this period, reflecting the growing pains. The amnesty scheme presents a golden opportunity to resolve these legacy issues amicably, allowing businesses to close the chapter on past discrepancies and focus squarely on future growth.
Understanding Section 128A Amnesty Scheme under GST
The GST Amnesty Scheme 2024, introduced under Section 128A of the CGST Act, provides relief to taxpayers facing demands under Section 73. This scheme waives interest and penalties if the taxpayer clears their pending tax dues within the prescribed timeframe. This article provides a clause-by-clause explanation of Section 128A, its applicability, benefits, and compliance requirements.
Clause-by-Clause Breakdown of Section 128A
(1) Scope and Eligibility for Amnesty
Clause (1) of Section 128A states that taxpayers can avail of the amnesty if they have outstanding tax dues under specific conditions:
(a) If a taxpayer has received a show cause notice (SCN) under Section 73(1) or a statement under Section 73(3) but no final adjudication order has been issued under Section 73(9).
(b) If an order has been issued under Section 73(9), but no subsequent order has been passed under Section 107(11) (First Appellate Authority) or Section 108(1) (Revisional Authority).
(c) If an order has been passed under Section 107(11) or Section 108(1), but no further order has been issued under Section 113(1) (Tribunal or High Court level).
Key takeaway: The scheme is applicable to tax demands raised between 1st July 2017 and 31st March 2020 that meet any of the above conditions.
(2) Waiver of Interest & Penalty
Under this amnesty, if the entire tax liability as per the notice/order is paid before the notified deadline, then:
• Interest under Section 50 is waived.
• Penalty under GST law is waived.
• All proceedings related to that notice or order are deemed concluded, meaning no further legal action will be taken.
Key takeaway: Taxpayers can resolve pending tax disputes with minimal financial burden, provided they pay the principal tax amount.
(3) Special Provisions for Orders Under Section 74
A taxpayer who has received a notice under Section 74(1) (fraudulent cases) and later received an order based on an appeal or tribunal/court direction under Section 75(2) can still avail of this amnesty.
Key takeaway: Even if the tax demand originated from fraud cases under Section 74, it can still be treated under Section 73, allowing them to benefit from the amnesty.
(4) Condition for Ongoing Appeals and Revisions
• If an appeal or revision is ongoing against the order under Section 107(3), 112(3), 117(1), or 118(1), the amnesty is conditional.
• The taxpayer must pay any additional tax liability that arises due to an adverse order from the appellate authority within three months of the order.
Key takeaway: If a case is under appeal, the amnesty applies only if any additional tax liability determined by the appellate body is paid within 3 months.
(5) No Refund of Interest/Penalty Already Paid
If the taxpayer has already paid interest and penalties before the introduction of this amnesty, they cannot claim a refund for the same.
Key takeaway: Amnesty benefits apply only to pending dues and do not offer refunds for previously paid amounts.
(6) Exclusions from the Amnesty Scheme
The following cases are not eligible for relief under Section 128A:
• Cases where the taxpayer received an erroneous refund (i.e., excess refund claimed) and must repay it.
• Cases where the taxpayer has filed an appeal or writ petition before the appellate authority, tribunal, or court and has not withdrawn it before the amnesty deadline.
Key takeaway: Taxpayers must withdraw any pending appeals or writ petitions before availing of the amnesty scheme.
(7) Finality of Proceedings & Appeal Restrictions
• Once the amnesty benefits are availed, no fresh appeal under Section 107(1) or Section 112(1) can be filed against the relevant tax order.
Key takeaway: Opting for the amnesty means forfeiting the right to challenge the demand further.
How to Avail the Section 128A Amnesty Scheme?
1.Check Your Eligibility: Verify if your case falls within the scope of Section 128A.
2.Calculate Pending Tax Liability: Review the SCN or order issued under Section 73 or related provisions.
3.Make the Payment Before the Deadline: Pay the entire tax amount as per the notice or order before the notified date.
4.Withdraw Any Pending Appeals or Writ Petitions: If applicable, withdraw cases before appellate bodies or courts.
Understanding Section 128A: Issues and Solutions in Availing Waiver of Interest and Penalty (Refer Circular No. 238/32/2024-GST for more detail) https://cbic-gst.gov.in/pdf/circular-238-32-2024-GST.pdf
Issue 1: Applicability of Waiver to Taxpayers Who Paid Tax Before Section 128A Came into Effect
• Any amount paid towards the demand before or after Section 128A came into effect is considered for waiver.
• Payments made before the demand notice/order or afterward qualify for waiver as long as the payment was intended towards the demand.
Issue 2: Treatment of Amount Recovered from Another Person on Behalf of the Taxpayer
• If tax officers recover tax from another entity on behalf of the taxpayer, it is considered tax paid.
• Such recovery qualifies under Section 128A, provided it occurred before the notified date.
Issue 3: Adjustment of Interest/Penalty Paid for FY 2017-18, 2018-19, and 2019-20 Against Tax Demand
• Interest/penalty paid or recovered cannot be adjusted against tax dues.
• No refund of such payments is available under the third proviso to Section 128A(1).
Issue 4: Applicability of Waiver When Demand Order Only Includes Interest/Penalty
• If tax dues are already paid, the waiver applies to interest/penalty.
• However, waiver does not apply if interest arises from delayed return filing or delayed supply reporting.
Issue 5: Partial Waiver for Certain Issues While Opting to Litigate Others
• Section 128A(1) mandates full payment of tax to avail waiver.
• Partial payment of tax will not allow for waiver of interest/penalty.
Issue 6: Demand Orders Covering Multiple Periods (Some Eligible, Some Ineligible for Waiver)
• Waiver applies only to periods specified in Section 128A.
• Taxpayer must pay the full tax demand, but the officer will reduce interest/penalty only for eligible periods.
• Unwaived interest/penalty must be paid within three months to retain the waiver benefit.
Issue 7: Demand Includes Erroneous Refund Component
• Full tax payment, including erroneous refund demand, is required.
• Waiver applies only to tax demands not related to erroneous refunds.
• Taxpayer must clear the remaining liability for erroneous refund within three months.
Issue 8: Additional Tax Liability Due to Departmental Appeal
• If an appellate order increases tax liability, the taxpayer must pay the additional amount within three months.
• Failure to do so voids the waiver granted under Section 128A.
Issue 9: Waiver for Cases with Pending Special Leave Petition (SLP) in Supreme Court
• Taxpayer must withdraw the SLP and submit proof of withdrawal.
• Application for waiver must include the withdrawal document.
Issue 10: Applicability of Waiver for IGST and Compensation Cess Matters
• Waiver under Section 128A extends to IGST and Compensation Cess.
• Full tax payment must include CGST, SGST, IGST, and Compensation Cess.
Issue 11: Demand of Wrongly Availed Transitional Credit
• If transitional credit availed falls within the period covered under Section 128A, it is eligible for waiver.
• Demand issued under Section 73 for transitional credit qualifies under Section 128A.
Issue 12: Waiver Coverage for Late Fees, Redemption Fine, and Other Penalties
• Waiver applies to penalties under Sections 73, 122, 125, etc.
• Late fees and redemption fines are not covered under the waiver.
Issue 13: Payment Method for Availing Waiver
• Tax demand can be paid using cash, Input Tax Credit (ITC), or both.
• However, payments for Reverse Charge Mechanism (RCM) tax and erroneous refund must be made in cash.
Issue 14: Waiver on IGST Payable on Imports Under the Customs Act
• Section 128A does not cover IGST demand issued under the Customs Act.
• Waiver of interest/penalty does not apply to such cases.
Issue 15: Reduction of Tax Demand Due to Retrospective Amendments in ITC Provisions
• Taxpayer must pay the adjusted amount, deducting tax no longer payable due to new provisions.
• Application must include a breakup of such reductions for verification.
• No need for rectification filing under Section 148 if the demand is reduced as per notification No. 22/2024.
Issue 16: Adjusting Payments Made via FORM GST DRC-03 in FORM GST SPL-02
• Taxpayer must adjust payments made via FORM GST DRC-03 before applying for waiver in FORM GST SPL-02.
• Compliance with the second proviso to Rule 164(2) is mandatory.
• By addressing these issues systematically, businesses can maximize the benefits available under Section 128A while ensuring compliance with GST regulations.
The Section 128A Amnesty Scheme is a golden opportunity for taxpayers to clear outstanding tax dues without additional interest and penalties. By making timely payments and meeting the prescribed conditions, businesses can resolve past tax disputes efficiently and ensure compliance. Don't miss this one-time chance to settle your tax liabilities and move forward with a clean slate!
Disclaimer: This material and the information contained herein is intended for clients and other Chartered Accountants to provide updates and is not an exhaustive treatment of such subject. We are not, by means of this material, rendering any professional advice or services. It should not be relied upon as the sole basis for any decision which may affect you or your business.
