Key GST Provisions: Section 128A and Section 16(5) of the CGST Act

[Tushar Malik]

Tax Relief Unveiled: Understanding Section 128A of the CGST Act

What is Section 128A?

Section 128A of the Central Goods and Services Tax (CGST) Act, 2017, was introduced through the Finance Act No. 2 of 2024. It provides relief to taxpayers by waiving interest and penalties for certain tax demands raised under Section 73. This relief is specifically for tax periods between July 1, 2017, and March 31, 2020, if the full tax amount is paid by March 31, 2025.

Key Provisions and Related Sections

1. Eligible Cases for Waiver:

• Section 73(1) & Section 73(3): If a taxpayer has received a notice or statement under these sections (for tax shortfall or wrong refund claims) and no final order is issued under Section 73(9), they can apply for the waiver.
• Section 73(9): If an order demanding tax is already issued but no further order has been passed by:
  • Appellate Authority under Section 107(11).
  • Revisional Authority under Section 108(1).
• Section 107(11) & Section 108(1): If an appeal or revision order exists, but no final order is passed under Section 113(1) (relating to Appellate Tribunal), the waiver can still be claimed.

2. Exclusions:

• Erroneous Refunds: If the demand is due to an incorrect refund, this waiver is not applicable.
• Pending Appeals/Writs: If a legal appeal or writ petition is pending and not withdrawn before the specified date, the waiver does not apply.

3. Conditions to Avail Waiver:

• Full Tax Payment: Pay the complete tax demand by March 31, 2025.
• File Application for Waiver:
  • Use Form GST SPL-01 if a notice is issued under Section 73(1) or 73(3), and no final order is given under Section 73(9).
  • Use Form GST SPL-02 if a final order is issued under Section 73(9), 107(11), or 108(1), but no order exists under Section 113(1).
• Documentation: Submit proof of tax payment and withdrawal of any appeals or writs.

4. Payment Method:

• Tax can be paid using:
  • Electronic Cash Ledger or
  • Input Tax Credit (ITC) from the Electronic Credit Ledger.
• For reverse charge mechanism (RCM) demands or erroneous refunds, payments must be made in cash only.

5. When Does the Proceeding End?

• Once the full tax is paid and the application is submitted, related interest and penalties are waived.
• The case is considered closed, and no new appeal can be filed against the relevant orders.
• However, any interest or penalties already paid will not be refunded.

Maximizing ITC Benefits: A Look at Section 16(5) of the CGST Act

What is Section 16(5)?

Section 16(5) of the Central Goods and Services Tax (CGST) Act, 2017, was introduced through the Finance Act No. 2 of 2024, with retrospective effect from July 1, 2017. This section provides an extended timeframe for availing Input Tax Credit (ITC) for specific financial years. The provision allows taxpayers to claim ITC for invoices or debit notes related to supplies made during the financial years 2017-18, 2018-19, 2019-20, and 2020-21, provided the claim was made in returns filed up to November 30, 2021.

Key Provisions of Section 16(5)

1. Extended Timeframe for ITC Claims:

• Normally, Section 16(4) sets a time limit for claiming ITC, but Section 16(5) provides an exception for specified financial years.
• Taxpayers who missed the original ITC claim window can still claim ITC in returns filed up to November 30, 2021 for eligible invoices and debit notes.

2. Conditions to Avail ITC:

• Possession of Valid Documents: Must have a valid tax invoice or debit note from a registered supplier.
• Receipt of Goods or Services: Ensure the goods/services have been received.
• Tax Payment by Supplier: Verify that the supplier has paid tax to the government.
• Returns Filed: The taxpayer must have furnished returns under Section 39.

3. Procedure for Availing ITC under Section 16(5):

1. Identify Eligible Invoices/Debit Notes: Review invoices and debit notes from the financial years 2017-18 to 2020-21.
2. Verify Compliance with ITC Conditions: Ensure compliance with the eligibility conditions mentioned above.
3. Check Previous ITC Claims: Determine whether the ITC on eligible invoices was claimed in returns filed up to November 30, 2021.
4. Rectification of Orders (if applicable):
   • If ITC was not claimed on time, resulting in demands under Sections 73 or 74, taxpayers can apply for rectification.
5. File Rectification Application: Submit the application along with supporting documents through the GST portal.
6. Processing by Tax Authorities: The proper officer will review the application and, if accepted, issue an order for rectification.

4. Important Considerations:

• No Refund for Past Payments:
  • As per Section 150 of the Finance Act (No. 2) of 2024, there will be no refund of tax paid or ITC reversed due to the retrospective effect of Section 16(5).
• Timely Compliance:
  • Taxpayers must adhere to the six-month window from the notification date to file rectification applications.