SBC Guide for GST Amnesty Scheme (Section 128A)

CGST ACT, 2017

1. INTRODUCTION

Section 128A has been introduced in the Central Goods and Services Tax Act, 2017, vide the Finance Act, 2024, effective from November 1, 2024, based on recommendations from the GST Council’s 53rd meeting held on June 22, 2024. It provides for the waiver of interest, penalties, or both, related to tax demands under Section 73 for the financial years 2017-18, 2018-19, and 2019-20, subject to specific conditions. This amendment aims to offer relief to taxpayers while ensuring compliance with past GST obligations.

2. WHAT IS COVERED UNDER THIS AMNESTY SCHEME?

2.1. Scope: Applies specifically to demands under Section 73, which generally deals with non-fraudulent tax discrepancies and refunds.

2.2. Time-Frame: Relief applicable for tax periods from FY 2017-18 to FY 2019-20.

2.3. Due Date for Payment: All taxes must be paid on or before March 31, 2025, as per the 53rd GST Council meeting. However, currently, the law remains silent and an official notification from the government is yet to be issued.

2.4. Relief: Complete waiver of interest and penalty.

3. WHAT IS NOT COVERED IN THE SCHEME?

While the proposed GST Amnesty Scheme under Section 128A offers significant relief to taxpayers, it is important to understand that certain cases are not eligible for this scheme. This exclusion aims to maintain the integrity of the tax system and ensure that the scheme benefits those who comply with the law in good faith. The following are the

a. Demand raised under Section 74, i.e., cases involving fraud, willful misstatement, or suppression of facts to evade tax.

b. c. Erroneous refunds received by the assesses.

No refund will be issued for interest and penalties already paid by the taxpayers.

4. ADVANTAGES OF THE SCHEME

4.1. Reduction in Litigation: By offering a waiver of interest and penalties, the scheme incentivizes taxpayers to settle disputes without further legal proceedings, reducing the burden on tax tribunals and courts.

4.2. Revenue Generation: The scheme encourages the payment of outstanding taxes, leading to immediate revenue generation for the government.

4.3. Relief for Taxpayers: Provides significant relief to taxpayers who faced difficulties during the initial years of GST implementation, offering a chance to settle their dues with a reduced financial burden.

5. IS THE SCHEME APPLICABLE AT ALL STAGES OF LITIGATION?

The applicability extends to:

5.1. Notice issued under section 73 of the CGST Act:

The scheme covers cases where a notice has been issued under Section 73 for recovery of tax not paid, or short paid or erroneously refunded, or input tax credit wrongly availed or utilized.

5.2. Notice issued under section 74, deemed as issued under section 73 due to the absence of elements of fraud/suppression/ willful misstatement:

If a notice initially issued under Section 74 is later deemed to be issued under Section 73 because it lacks elements of fraud, suppression, or willful misstatement, it falls under the purview of this amnesty scheme.

5.3. Order issued under section 73 of the CGST Act, where no order under sub-section (11) of section 107 [Appellate Authority] or sub-section (1) of section 108 [Revisional Authority] has been issued:

If an order has been issued under Section 73, and there is no subsequent order from the Appellate Authority (Section 107) or the Revisional Authority (Section 108), this situation is also covered by the amnesty scheme.

5.4. Appeal Order or Revisional Authority Order:

The scheme also includes cases where orders have been issued by the Appellate Authority or the Revisional Authority.

Section 128A targets non-compliant taxpayers who haven’t filed returns on time. The scheme aims to bring them back into compliance and reduce the number of non-compliant GST accounts.

AMENSTY RULES

Vide Notification no.20/2024-Central Tax dated 8th October 2024 Rule 164 of CGST Rules, 2017 Government of India introduces a detailed procedure for the closure of proceedings related to tax demands issued under Section 73 of the Goods and Services Tax (GST) Act. This rule outlines the process and conditions under which a taxpayer can seek a waiver of interest or penalties, or both, in connection with notices, statements, or orders issued under Section 128A. It sets forth the application methods, timelines, required documentation, and necessary payments for eligibility, ensuring an organised framework for taxpayers and GST officers to resolve disputes.

1. Application for Waiver:

Persons eligible for the waiver of interest, penalty, or both may apply electronically on the common GST portal using-

a) FORM GST SPL 01- applies to SCNs under Section 128A(1)(a) (i.e., Section 73(1), or a statement is issued under Section 73(3) (for unpaid or short-paid tax)

b) FORM GST SPL 02- applies to orders under Section 128A(1)(b) (i.e., determining the amount of tax) and Section 128A(1)(c) (i.e., Section 73(9) or through appeals under Sections 107 or 108)

2. Payment Conditions for orders under Section 128A(1)(b) and (c):

a) Tax payments must be made by crediting the amount to the Electronic Liability Register against the debit entry created.

b) Additionally, if any payment has already been made using GST DRC 03, an application in FORM GST DRC 03A must be filed for the transfer of such amounts to the Electronic Liability Register against the debit entry created.

3. Partial Demands:

If the demand partially involves erroneous refunds or periods not covered by Section 128A, the applicant must ensure the full tax amount is paid before filing the application.

4. Deadline for Applications:

a) Applications must be submitted within three months from the notified date under Section 128A(1).

b) An extended deadline of six months applies if the application in Form GST SPL 02 refers to the first proviso (for cases involving fraud or willful misrepresentations) of Section 128A(1)

5. Withdrawal of Appeals:

a) To qualify for the waiver of interest or penalty, applicants must show evidence of having withdrawn appeals or writ petitions filed with appellate authorities, tribunals, or courts.

b) If the order for withdrawal isn’t issued by the time of application, a copy of the filed withdrawal request should be uploaded. The final order of withdrawal must be uploaded within one month after it is issued.

6. Rejection of Applications:

If the officer deems that the application made in FORM GST SPL 01 or FORM GST SPL 02 is ineligible for the waiver, a notice in FORM GST SPL 03 will be issued within three months. The applicant can then respond via FORM GST SPL 04 within one month.

7. Approval and Finalization:

a) Upon successful review, the officer issues an approval order in FORM GST SPL 05, which concludes the proceedings.

b) If the application is rejected, an order in FORM GST SPL 07 will be issued.

8. Issuance of Orders and Modification of Liability under FORM GST SPL-05:

a) If an application is filed in FORM GST SPL-01 for a notice under Section 128A(1)(a), the proper officer does not need to issue FORM GST DRC-07

b) If an application is filed in FORM GST SPL-02 for orders under Section 128A(1)(b) or 128A(1)(c), the Electronic Liability Register will be modified accordingly to reflect any changes in liability after the waiver or order.

9. Time limit for issuance of order:

a) If notice in FORM GST SPL 03 has not been issued, then the proper officer shall issue the order within three months from the date of receipt of the application in FORM GST SPL 01 or FORM GST SPL 02.

b) If the above notice is issued, then the proper officer shall issue the order within three months from the date of receipt of the reply of the applicant or within four months if no reply is received.

10. Deemed Approval:

If no order is passed by the proper officer within the prescribed time, the application in FORM GST SPL 01 or FORM GST SPL 02 as the case may be, is deemed to be approved and the proceedings concluded.

11. Appeal and Restoration of Appeals:

a) If the application for waiver is rejected (FORM GST SPL 07), the applicant can appeal. If the appeal is successful, the order shall be passed in FORM GST SPL 06 and the waiver will be granted.

b) Otherwise, any previously withdrawn appeal related to the original demand will be restored in FORM GST SPL 08.

12. Voidance of Waiver:

If any additional tax amount is not paid within the specified time, the waiver of interest or penalty will become void.

13. Conditions under which a taxpayer is required to pay interest, penalties, or both:

a) Interest or Penalty Payment Requirement: If a taxpayer receives a demand for an erroneous refund or for a tax period not covered under section 128A, and the details of the interest or penalty are mentioned in FORM GST SPL-05 or FORM GST SPL-06, the taxpayer is obligated to pay the specified amount.

b) Three-Month Time Frame: The taxpayer must pay the interest, penalty, or both within three months from the date of the order issued in FORM GST SPL-05 or FORM GST SPL-06.

c) Consequences of Non-Payment: Failure to pay within the specified three-month period voids any waiver of interest or penalty previously granted under section 128A, removing eligibility for that waiver.

GSTN Advisory for Taxpayers: Waiver Scheme Under Section 128A

Forms availability:

• FORM GST SPL-01 and SPL-02 will be available on the common portal starting January 2025.

Immediate Action for Taxpayers:

• Payments can be made now under “Payment towards demand” for demand orders.

FORM GST DRC-03:

• If payments have already been made, taxpayers should link FORM GST DRC-03 to the demand order using FORM GST DRC-03A, now available on the common portal.

Rule 164 of CGST Rules is comprehensive almost covers all the aspects while filing the GST Amnesty scheme application. However, a delay in the availability of forms on the GST portal are not expected

GST Amnesty Scheme

CLARIFICATIONS AND FAQS

CBIC Vide Circular No.238/32/2024-GST dated 15th October 2024 CBIC clarified various issues in relation to the implementation of the scheme. The clarifications and FAQs are as follows:

Clarification on Section 16(5) or (6):

a. Deduction of Non-Payable Amounts:

Tax amounts related to the contravention of Section 16(4) that are no longer payable due to the retrospective addition of Sections 16(5) and 16(6) should be deducted when calculating the total tax payable under Section 128A.

b. No Rectification Required for Reinstated ITC:

If input tax credit (ITC) previously denied under Section 16(4) is now available due to the new provisions, no rectification application is needed.

c. Deductions Limited to Section 16(4) Violations:

Deductions of non-payable amounts must be solely due to Section 16(4) violations, and the tax officer will verify this during scrutiny.

FAQs:

1. Will the benefit under Section 128A apply to taxpayers who paid the tax component in full before the section came into effect?

Yes, Any amount paid toward the demand up to the date notified under Section 128A will be considered, regardless of whether it was paid before or after the section’s effect or demand notice.

2. Will the amount recovered by tax officers from another person on behalf of the taxpayer be considered as paid for the demand under Section 128A?

Yes, Such amounts recovered by tax officers from any other person will be considered as paid towards the demand if recovered before the date notified under Section 128A.

3. Can the interest or penalty amount recovered for demands under Section 73 (Financial Years 2017-18, 2018-19, and 2019-20) be adjusted against the tax payable for the same demand?

No, There is no refund or adjustment of interest or penalty towards the tax demand. Amounts paid or recovered as interest or penalty cannot be adjusted toward tax payable

4. If the tax due is already paid and the notice under Section 73 pertains only to interest/penalty, is Section 128A applicable?

Yes, Section 128A benefits are available for such cases, except when interest is demanded for delayed filing or reporting of returns.

5. Can partial waiver of interest or penalty be availed by making part payment and litigating the remaining amount?

No, Section 128A benefits are only available when the full amount of tax demanded in the notice/order is paid.

6. If a demand notice/order includes multiple periods and some other tax periods for which such waiver is not applicable, can the benefit of waiver under Section 128A be claimed for the applicable period?

Yes, You can apply for a waiver for the period covered by Section 128A. However, the full tax amount in the notice must be paid to avail of the waiver.

7. Can a taxpayer apply for a waiver of interest/penalty under Section 128A if the demand includes erroneous refunds?

Yes, The taxpayer must pay the full amount, including erroneous refunds. However, the waiver under Section 128A applies only to tax demands not related to erroneous refunds.

8. If the department has filed an appeal and the tax liability is increased, will the waiver under Section 128A still apply?

Yes, but the taxpayer must pay the additional tax liability within three months of the appellate order. Failure to do so will void the waiver of interest or penalty.

9. If the taxpayer has already paid some tax through FORM GST DRC-03, do they need to file FORM GST DRC-03A for adjustments?

Yes, If an order has been issued and the taxpayer has paid through FORM GST DRC-03, the amount must be adjusted before filing FORM GST SPL-02.

10. Does Section 128A cover cases involving IGST and Compensation Cess?

Yes, The benefit of Section 128A also applies to IGST and Compensation cess demands, and full payment of the tax (CGST, SGST, IGST, and Compensation cess) is required.

11. Does Section 128A cover demands related to irregularly availed transitional credit?

Yes, provided the transitional credit was availed during the period covered under Section 128A, and the demand was raised under Section 73.

12. Does Section 128A cover penalties under other provisions, such as late fees or redemption fines?

Section 128A covers penalties under sections 73, 122, and 125, but not late fees or redemption fines

13. Can payment for the waiver under Section 128A be made using Input Tax Credit (ITC)?

Yes, The tax payment required to avail of the waiver can be made using ITC or electronic cash ledger, except in cases of Reverse Charge Mechanism (RCM) or erroneous refunds, where cash payment is mandatory.

14. Is the waiver under Section 128A applicable to IGST payable under the Customs Act, 1962?

No, Such cases fall under the Customs Act and are not covered under Section 128A.

15. If a demand reduces due to the retrospective insertion of Section 16(5) and (6), does the entire tax demand have to be paid to avail the waiver?

No, The amount payable to avail the waiver will be calculated after deducting the reduced amount based on Section 16(5) or (6).

Clarifications & Applicability of Amnesty Scheme:-