GST Amnesty Scheme: What’s in store for taxpayers?

[Sakshi Jhajharia]

The Government, through Section 128A of the Central Goods and Services Tax Act, 2017 (CGST Act), has introduced a one-time opportunity for taxpayers to regularize past tax dues without the burden of interest and penalties. Effective from 1st November 2024, this provision aims to reduce litigation and clear pending tax demands for specific financial years.

As the GST Appellate Tribunal (GSTAT) is yet to be formed, this step is significant and was the need of the hour. The Amnesty Scheme is expected to reduce the number of pending litigations thereby easing the burden on the GSTAT. With a plethora of cases piled up, waiting for the formation of the GSTAT, it is this Scheme which could possibly pave way for its faster set up.

While Amnesty Schemes under any Law appear to be beneficial and attractive, however, it is crucial to also look into those aspects which have blocked the benefit in certain cases.

Timeline of Key Events:

• 16 August 2024 – Section 128A introduced via Finance (No. 2) Act, 2024
• 08 October 2024 – Notification No. 21/2024-Central Tax specifies procedural deadlines
• 15 October 2024 – Circular No. 238/32/2024-GST clarifies doubts related to Section 128A
• 01 November 2024 – Section 128A comes into force

Extract of Section 128A of the CGST Act:

(1) Notwithstanding anything to the contrary contained in this Act, where any amount of tax is payable by a person chargeable with tax in accordance with,––

(a) a notice issued under sub-section (1) of section 73 or a statement issued under sub-section (3) of section 73, and where no order under sub-section (9) of section 73 has been issued; or

(b) an order passed under sub-section (9) of section 73, and where no order under sub-section (11) of section 107 or sub-section (1) of section 108 has been passed; or

(c) an order passed under sub-section (11) of section 107 or sub-section (1) of section 108, and where no order under sub-section (1) of section 113 has been passed,

pertaining to the period from 1st July, 2017 to 31st March, 2020, or a part thereof, and the said person pays the full amount of tax payable as per the notice or statement or the order referred to in clause (a), clause (b) or clause (c), as the case may be, on or before the date, as may be notified by the Government on the recommendations of the Council, no interest under section 50 and penalty under this Act, shall be payable and all the proceedings in respect of the said notice or order or statement, as the case may be, shall be deemed to be concluded, subject to such conditions as may be prescribed:

From the above Section, the key highlights of the Amnesty Scheme can be summarised as follows:

1. Applicability: The Amnesty Scheme is applicable in the following cases:

1. 1. Cases where a notice has been issued under Section 73(1) / a statement under Section 73(3), but no final orders.
   2. Orders under Section 73(9) without appellate or revisional decisions.
   3. Orders under Section 107/108 where tribunal proceedings haven’t commenced.

2. Where notices have been issued under Section 74: Where notice has been issued under sub-section (1) of section 74, and an order is passed or required to be passed by the proper officer in pursuance of the direction of the Appellate Authority or Appellate Tribunal or a court in accordance with the provisions of sub-section (2) of section 75, the said notice or order shall be considered to be a notice or order, as the case may be, referred to in clause (a) or clause (b) of this sub-section i.e., a notice / order under section 73.

3. Additional tax payable arising out of the order of the Appellate Authority or the Appellate Tribunal or the court or the Revisional Authority, as the case may be, must be paid within three months from the date of the said order in order to avail the benefit of the amnesty scheme.

4. In case where interest and penalty has already been paid, no refund of the same shall be available.

5. Amnesty scheme is not applicable to cases of erroneous refund.

6. The benefit of waiver can be availed where an appeal or writ petition filed by the said person which is pending before Appellate Authority or Appellate Tribunal or a court, as the case may be, has been withdrawn.

7. Where any amount specified under sub-section (1) has been paid and the proceedings are deemed to be concluded, no appeal can be filed under sub-section (1) of section 107 or sub-section (1) of section 112.

8. Date up to which payment for the tax payable can be made for waiver of interest, or penalty, or both: Notification No. 21/2024–Central Tax dt. 08-10-2024 has clarified that the date up to which payment is to be made for availing the benefit of amnesty scheme is as under:

1. Registered persons to whom a notice or statement or order, referred to in clause (a) or clause (b) or clause (c) of section 128A of the said Act, has been issued: 31^st March 2025

2. Registered persons to whom a notice has been issued under sub-section (1) of section 74, but later Order received u/s 75(2): Date ending on completion of six months from the date of issuance of the order by the proper officer re-determining tax under section 73 of the said Act.

Clarifications issued by CBIC vide Circular No. 238/32/2024-GST dated 15-10-2024

1. Taxpayers who have paid the tax component in full before the enactment of Section 128A can avail of the waiver benefits, as long as the payment was intended for the said demand and made by the notified date under Section 128A(1).

2. Amounts recovered by tax officers from third parties on behalf of the taxpayer by the notified date under Section 128A(1) will be considered as tax paid towards the demand for the purpose of Section 128A.

3. Any amount paid by the taxpayer or recovered by tax officers as interest or penalty cannot be adjusted against the tax amount payable; no refund of such interest or penalty is available.

4. If the tax due has been paid and the notice or demand orders under Section 73 only pertain to interest and/or penalty, it will be considered for availing the benefit of Section 128A. However, interest demanded on account of delayed filing of returns or delayed reporting of supply is not covered.

5. The waiver under Section 128A is only applicable when the full amount of tax demanded in the notice/statement/order is paid; partial waivers by making part payments are not permitted.

6. Taxpayers can apply for a waiver only for the periods covered under Section 128A even if the demand notice/order spans tax periods not covered under the said section. However, the full amount demanded for all periods must be paid to avail the waiver, along with interest and penalty for the period not covered by the Section.

7. Applications for a waiver can be filed even if the notice/statement/order includes a demand for an erroneous refund, but the full amount demanded, including the erroneous refund, must be paid along with interest and penalty on such erroneous refund.

8. If the department has filed an appeal and the appellate authority enhances the tax liability, the taxpayer must pay the additional tax amount within three months; otherwise, the waiver under Section 128A becomes void.

1. Taxpayers with pending Special Leave Petitions (SLPs) before the Supreme Court must withdraw the SLP and file an application for a waiver along with proof of withdrawal or the application/document filed for withdrawal.

10. The benefits provided under Section 128A of the CGST Act are available for matters involving IGST and Compensation Cess as well.

11. Section 128A covers demands related to transitional credit wrongly availed during the period specified in Section 128A and issued under Section 73.
12. Section 128A covers penalties under various sections such as 73, 122, 125, etc., demanded in the notice/statement/order, but it does not cover late fees, redemption fines, or IGST due under the Customs Act.
13. The payment of tax required to be made for eligibility for waiver under Section 128A may be made through ITC also. However, where the demand is in respect of any amount of tax to be paid by the recipient under Reverse Charge Mechanism or by the Electronic Commerce Operator under section 9(5), then the said amount shall be required to be paid by debiting the electronic cash ledger only and not through the electronic credit ledger. Further, where the amount has to be paid for demand of erroneous refund, the demand in respect of erroneous refund paid in cash is required to be paid only by debiting the electronic cash ledger only and not through the electronic credit ledger.

14. In cases where order in FORM GST DRC-07, FORM GST DRC-08 or FORM GST APL-04, as the case may be, has been issued and such taxpayer has paid required amount through FORM GST DRC-03, such applicant is required to adjust the said amount towards the demand created in the Electronic Liability Register, as per the second proviso to sub-rule (2) of rule 164, before filing the application in FORM GST SPL-02.
15. If the tax demanded in a notice, statement, or order is reduced due to the retrospective insertion of sub-sections (5) and (6) to Section 16 of the CGST Act, the taxpayer is required to pay only the recalculated amount that is actually payable. This recalculated amount should exclude the portion that is no longer payable in accordance with the new sub-sections (5) and (6) of Section 16. When submitting the application for the benefit under Section 128A, the taxpayer should only pay the amount due after this deduction and provide a breakdown of the non-payable amount to facilitate verification by the tax officer. Additionally, taxpayers are not required to file an application for rectification regarding the input tax credit (ITC) that was previously denied due to contravention of Section 16(4) but is now available under the new provisions.

A practical case scenario:

SCN was issued for FY 2019-20 within the prescribed timeline, however, no Order has been issued till date: In such cases, since the due date for issuance of Order has already lapsed, the case may be deemed as closed on the grounds of being barred by limitation. In such cases, a position may be taken to not opt for the amnesty scheme.

While Section 128A provides a pathway for taxpayers to settle their dues without additional financial burdens, it is essential to be aware of the specific conditions and deadlines associated with the waiver. Taxpayers should review their outstanding demands and consider taking advantage of this scheme to regularize their tax affairs. It is advisable to consult with tax professionals to ensure compliance with the provisions and to make the most of this one-time opportunity.