Comprehensive Guidelines on Waiver of Interest and Penalty under Section 128A
The Government of India, through the Central Board of Indirect Taxes and Customs (CBIC), issued Circular No. 238/32/2024-GST on 15th October 2024. This circular provides clarifications regarding Section 128A of the Central Goods and Services Tax (CGST) Act, 2017, effective from 1st November 2024. These clarifications aim to guide taxpayers on the waiver of interest and penalty, or both, under specific circumstances for tax demands related to financial years 2017-18, 2018-19, and 2019-20.
1. Overview of Section 128A of the CGST Act
Section 128A allows for a waiver of interest or penalty in connection with tax demands raised under Section 73, covering tax periods from FY 2017-18 to 2019-20. The waiver is conditional upon full tax payment and adherence to deadlines.
2. Objective of the Circular
Circular No. 238/32/2024 aims to clarify procedures and conditions under Section 128A, ensuring uniform application across tax authorities. It provides a comprehensive guide on the applicable forms, timelines, and provisions.
3. Scope and Applicability
- Applicable to tax notices or orders issued under Section 73.
- Cases involving appellate authority decisions where no appellate tribunal order has been issued.
- Specific cases originally under Section 74, now under Section 73.
4. Filing Process and Timelines
Taxpayers can apply for the waiver using FORM GST SPL-01 or SPL-02, depending on whether adjudication has occurred. Applications must be submitted within three months from 31st March 2025, or six months from the date of the proper officer’s order for re-determined cases.
5. Payment of Tax Demanded
The full tax must be paid using FORM GST DRC-03 or the Electronic Liability Register (ELR), depending on the status of the case. Prior tax payments aligned with the demand will be valid, but interest or penalty payments made before the circular will not be adjusted.
6. Clarifications on Common Issues
The circular addresses multiple common issues, including the requirement for full payment of tax demands, non-eligibility of partial waivers, and conditions related to erroneous refunds and SLP withdrawals.
7. Retrospective Provisions in Section 16
The inclusion of sub-sections (5) and (6) in Section 16 affects input tax credit (ITC) provisions, clarifying tax liabilities in light of retrospective ITC allowances.
Frequently Asked Questions (FAQs)
What is the deadline for filing the waiver application?
The deadline is three months from 31st March 2025, or six months from the date of the officer’s order for re-determined cases.
Is partial waiver allowed under Section 128A?
No, the waiver applies only when the full tax demand is paid. Partial waivers are not permitted.
Can taxpayers withdraw ongoing litigation and apply for a waiver?
Yes, but only if they withdraw any Special Leave Petitions (SLP) or appeals pending in court. Once withdrawn, the taxpayer can file the waiver application.
Is the waiver applicable for cases under the Customs Act?
No, the waiver provisions under Section 128A do not apply to IGST payments under the Customs Act.
Can Input Tax Credit (ITC) be used to pay the tax demand?
Yes, ITC can be used to pay the tax demand, except in cases involving reverse charge mechanisms or erroneous refunds, which must be paid via cash.
Are late fees or redemption fines covered under the waiver?
No, the waiver applies only to interest and penalties under Sections 73, 122, and 125 of the CGST Act. Late fees and redemption fines are not covered under the waiver.
Issue and Clarification on Waiver of Interest and Penalty under Section 128A
In light of the recent issuance of Circular No. 238/32/2024-GST dated 15th October 2024, taxpayers and stakeholders have raised certain issues regarding the implementation and interpretation of the provisions outlined under Section 128A of the CGST Act. To ensure a uniform understanding and implementation of the waiver provisions, the following clarifications are provided.
Issue 1: Applicability of Waiver for Pre-existing Tax Payments
Issue: Taxpayers have questioned whether the waiver benefits under Section 128A are applicable to those who have already made payments towards the tax component before the section came into effect.
Clarification: Any payments made towards tax demands prior to the introduction of Section 128A, whether before or after the issuance of the notice or demand order, will be considered valid, provided that the payments align with the amount demanded. These payments will be deemed applicable for availing the waiver benefit as long as they are made before 31st March 2025.
Issue 2: Multiple Tax Periods in Notices
Issue: Taxpayers have sought clarification on whether they can avail of the waiver for demands covering multiple tax periods, only some of which fall under the scope of Section 128A.
Clarification: In cases where a demand notice or order includes tax periods both covered and not covered by Section 128A, the taxpayer is required to pay the full tax demand. The waiver will be applicable only for the portion relating to the periods covered under Section 128A (i.e., FY 2017-18, 2018-19, and 2019-20). The waiver of interest or penalty will be granted for the eligible periods, while any interest or penalty for ineligible periods remains payable.
Issue 3: Adjustment of Interest or Penalty Paid Against Tax Dues
Issue: Taxpayers are unsure whether amounts recovered as interest or penalty for tax periods under Section 73 can be adjusted against the tax amount payable to avail of the waiver.
Clarification: No adjustment of interest or penalty amounts towards the tax dues is allowed. As per Section 128A, any interest or penalty that has already been paid or recovered cannot be refunded or adjusted against the tax demand.
Issue 4: Treatment of Erroneous Refund Demands
Issue: Clarification is sought regarding the applicability of the waiver in cases where the demand includes an erroneous refund.
Clarification: For notices involving multiple issues, including erroneous refunds, the waiver under Section 128A applies only to the portion of the tax demand unrelated to the erroneous refund. Taxpayers must pay the full demand, but the waiver will be provided only for interest or penalty related to the valid tax demand, not the erroneous refund.
Issue 5: Utilization of Input Tax Credit (ITC)
Issue: Taxpayers have questioned whether the tax payable under Section 128A can be paid using Input Tax Credit (ITC).
Clarification: Yes, the tax required to be paid for availing the waiver under Section 128A can be paid either from the electronic cash ledger or by utilizing ITC, except in cases where the tax liability is due to the Reverse Charge Mechanism (RCM) or erroneous refunds, which must be paid via the cash ledger.
Issue 6: IGST Demand Under Customs Act
Issue: Taxpayers have asked whether the waiver under Section 128A applies to IGST liabilities under the Customs Act, 1962.
Clarification: The waiver under Section 128A does not apply to IGST demands raised under the Customs Act, 1962. Section 128A pertains only to demands issued under Section 73 of the CGST Act, and therefore, any tax demand under the Customs Act is not covered by the waiver.
Issue 7: Application Process and Deadlines
Issue: Many taxpayers are unclear about the deadlines and the process for filing applications under Section 128A.
Clarification: Taxpayers must file the application for the waiver in FORM GST SPL-01 or FORM GST SPL-02 electronically on the GST portal within three months from 31st March 2025. For cases where tax demands have been re-determined under Section 73 following a direction from an appellate or court authority, taxpayers have six months from the date of the order to submit their applications.
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