New GST amnesty scheme notified:
Waiver of interest and penalty on GST tax demand for eligible taxpayers to be effective from November 1, 2024

Oct 10, 2024

Synopsis
Waiver of GST tax demand interest and penalty: The Ministry of Finance has notified the rules and conditions to follow if you need to use 128A for waiver of your GST tax demand notice's interest and penalty component. Do note that this new section 128A will only apply on section 73 non-fraud GST demand notices.

The Ministry of Finance notified has the rules and procedures to be followed if a GST-registered taxpayer wants to apply for the ‘conditional waiver of interest and penalty’ scheme announced in Budget 2024. This notification by the Ministry of Finance was released on October 8, 2024, effective November 1, 2024.

Who is eligible for this waiver and how does this work?

This conditional waiver scheme under section 128A aims to give a total waiver of interest and penalty for specified non-fraudulent GST demand notices under section 73 relating to FY 2017-19 to 2019-20. Do note that this scheme only waives off the interest and penalty amount; you still need to pay the tax demand amount.

Siddharth Surana, Chartered Accountant and PGDM – IIM Bangalore, speaking to ET Wealth Online, earlier said, "The Finance Bill introduces Section 128A, which provides a waiver of interest and penalties for non-fraudulent taxpayers being assessed only under Section 73 for the periods FY 2017-18, 2018-19, and 2019-20."

"The eligible assesees have to make the payments vide Form DRC 03 until March 31, 2025 and upload the stipulated Forms until June 30, 2025. It must be ensured that the Forms are vigilantly filled to avoid any possibility of further litigation. Albeit the procedure is compliance heavy, however, it will ensure effective conclusion of proceedings arising out of Section 128A of the CGST Act," says Vivek Baj, Partner, Economic Laws Practice (ELP).

“This is quite a welcome step as these were the initial period of GST and people had made mistakes in while filing their returns on account of which a plethora of demands had been raised. Coupled with the 18% interest and penalty, the demands for the defaults had become quite significant. Hence, this move provided a big relief to the taxpayers,” says Ankit Jain, Partner, Ved Jain & Associates.

According to the notification by the Ministry of Finance, here is the process of applying for this scheme:

Procedure and conditions for closure of proceedings under section 128A in respect of GST demands issued under section 73

(1) Any person who is eligible for waiver of interest, or penalty, or both in respect of a notice or a statement mentioned in clause (a) of sub-section (1) of section 128A, may file an application electronically in FORM GST SPL-01 on the common portal, providing the details of the said notice or the statement, as the case may be, along with the details of the payments made in FORM GST DRC-03 towards the tax demanded.

(2) Any person who is eligible for waiver of interest, or penalty, or both, in respect of orders mentioned in clauses (b) and (c) of sub-section (1) of section 128A, may file an application electronically in FORM GST SPL 02 on the common portal, providing the details of the said order, along with the details of the payments made towards the tax demanded:

● Provided that the payment towards such tax demands shall be made only by crediting the amount in the electronic liability register against the debit entry created by the said order.
● Provided further that if the payment towards such tax demanded has been made through FORM GST DRC-03, an application in FORM GST DRC-03A, as prescribed in sub-rule (2B) of rule 142, shall be filed by the said person for credit of the said amount in the Electronic Liability Register against the debit entry created for the said demand, before filing the application in FORM GST SPL 02.

(3) Where the notice or statement or order mentioned in sub-section (1) of section 128A includes demand of tax, partially on account of erroneous refund and partially for other reasons, an application under subrule (1) or sub-rule (2) may be filed only after payment of the full amount of tax demanded in the said notice or statement or order, on or before the date notified under the said sub-section.

(4) Where the notice or statement or order mentioned in sub-section (1) of section 128A includes demand of tax, partially for the period mentioned in the said sub-section and partially for the period other than that mentioned in the said sub-section, an application under sub-rule (1) or sub-rule (2) may be filed only after payment of the full amount of tax demanded in the said notice or statement or order, on or before the date notified under the said sub-section.

(5) The amount payable under sub-rule (1) or sub-rule (2) shall be the amount that remains payable, after deducting the amount not payable in accordance with subsection (5) or sub-section (6) of section 16, from the amount payable in terms of the notice or statement or order under section 73, as the case may be

(6) Any person who wishes to file an application under sub-rule (1) or sub-rule (2), may do so within a period of three months from the date notified under sub-section (1) of section 128A: Provided that where an application in FORM GST SPL-02 is to be filed in cases referred to in the first proviso to sub-section (1) of section 128A, the time limit for filing the said application shall be six months from the date of communication of the order of the proper officer redetermining such tax under section 73

(7) The application under sub-rule (1) or sub-rule (2) shall be accompanied by documents evidencing withdrawal of appeal or writ petition, if any, filed before any Appellate Authority, or Tribunal or Court, as the case may be, to establish that the applicant is eligible for the waiver of interest or penalty or both, in terms of section 128A:

● Provided that where the applicant has filed an application for withdrawal of an appeal or writ petition filed before the Appellate Authority or Appellate Tribunal or a court, as the case may be, but the order for withdrawal has not been issued by the concerned authority till the date of filing of the application under sub-rule (1) or sub-rule (2), the applicant shall upload the copy of such application or document filed for withdrawal of the said appeal or writ petition along with the application under subrule (1) or sub-rule (2), and shall upload the copy of the order for withdrawal of the said appeal or writ petition on the common portal, within one month of the issuance of the said order for withdrawal by the concerned authority.

(8) Where the proper officer is of the view that the application made in FORM GST SPL-01 or FORM GST SPL-02 is liable to be rejected as not being eligible for waiver of interest, or penalty, or both, as per section 128A, he shall issue a notice on the common portal to the applicant in FORM GST SPL-03 within three months from the date of receipt of the said application and shall also give the applicant an opportunity of being heard.

(9) On receiving the notice under sub-rule (8), the applicant may file a reply to the said notice on the common portal in FORM GST SPL-04, within a period of one month from the date of receipt of the said notice.

(10) If the proper officer is satisfied that the applicant is eligible for waiver of interest and penalty as per section 128A, he shall issue an order in FORM GST SPL-05 on the common portal accepting the said application and concluding the proceedings under section 128A.

(11) In cases where the order in FORM GST SPL-05 is issued by the proper officer under sub-rule (10).–

● In respect of an application filed in FORM GST SPL-01 pertaining to a notice or statement referred to in clause (a) of sub-section (1) of section 128A, the summary of order in FORM GST DRC-07 as per sub-rule (5) of rule 142 shall not be required to be issued by the proper officer, in respect of the said notice or statement;
● In respect of an application filed in FORM GST SPL-02 pertaining to an order referred to in clause (b) or clause (c) of sub-section (1) of section 128A, the liability created in the part II of Electronic Liability Register, shall be modified accordingly.
(12) If the proper officer is not satisfied with the reply of the applicant, the proper officer shall issue an order in FORM GST SPL-07 rejecting the said application.

(13) (a) In cases where notice in FORM GST SPL-03 has not been issued, the proper officer shall issue the order under sub-rule (10) within a period of three months from the date of receipt of the application in FORM GST SPL-01 or FORM GST SPL-02, as the case may be.

(b) In cases where notice in FORM GST SPL-03 has been issued, the proper officer shall issue the order in sub-rule (10) or sub-rule (12) within a period of three months from the date of receipt of reply of the applicant in FORM GST SPL-04, or within a period of four months from the date of issuance of notice in FORM GST SPL-03 where no reply is received from the applicant.

(14) If no order is issued by the proper officer within the time limit specified in sub-rule (13), then the application in FORM GST SPL-01 or FORM GST SPL-02, as the case may be, shall be deemed to be approved and the proceedings shall be deemed to be concluded.

(15) (a) In cases where no appeal is filed against the order in FORM GST SPL-07 within the time period specified in sub-section (1) of section 107, the original appeal, if any, filed by the applicant against the order mentioned in clause (b) or clause (c) of sub-section (1) of section 128A, and withdrawn for filing the application in FORM GST SPL-02 in accordance with sub-section (3) of section 128A, shall be restored.

(b) In cases where an appeal is filed against the order in FORM GST SPL-07 for rejection of application for waiver of interest, or penalty, or both, if—

● The appellate authority has held that the proper officer has wrongly rejected the application for waiver of interest, or penalty, or both, in FORM GST SPL-07, the said appellate authority shall pass an order in FORM GST SPL-06 on the common portal accepting the said application and concluding the proceedings under section 128A; or
● The appellate authority has held that the proper officer has rightly rejected the application for waiver of interest, or penalty, or both, in FORM GST SPL-07, the original appeal, if any, filed by the applicant against the order mentioned in clause (b) or clause (c) of subsection (1) of section 128A, and withdrawn for filing the application in FORM GST SPL-02 in accordance with sub-section (3) of section 128A, shall be restored, subject to condition that the applicant files an undertaking electronically on the portal in FORM GST SPL-08, within a period of three months from the date of issuance of the order by the appellate authority in FORM GST APL-04, that he has neither filed nor intends to file any appeal against the said order of the Appellate Authority.

(16) In cases where the taxpayer is required to pay an additional amount of tax liability as per the second proviso to sub-section (1) of section 128A, and such additional payment is not made within the time limit specified in the said proviso, the waiver of interest, or penalty, or both, under the said section as per the order issued in FORM GST SPL-05 or FORM GST SPL-06, if any, shall become void.

(17) In cases where the taxpayer is required to pay any amount of interest, or penalty, or both, in respect of any demand pertaining to erroneous refund or on account of demand pertaining to the period other than the period mentioned in sub-section (1) of section 128A, and the details of such amount have been mentioned in FORM GST SPL-05 or FORM GST SPL-06, the applicant shall pay the said amount of interest, or penalty, or both, within a period of three months from the date of issuance of the order in FORM GST SPL-05 or FORM GST SPL-06, as the case may be, and where the said amount is not paid within the said time period, the waiver of interest, or penalty, or both, under section 128A as per the order issued in FORM GST SPL-05 or FORM GST SPL-06, shall become void.

"The Government has introduced Form GST SPL-01 and SPL-02 for allowing asssesees to apply for availing the benefit of Amnesty Scheme along with Forms SPL – 03 to SPL – 07 for regulating such application through issuance of Show Cause Notices and Orders either confirming or rejecting the request for availing such benefit. Albeit the procedure is compliance heavy, however, it will ensure effective conclusion of proceedings arising out of Section 128A of the CGST Act. However, it must be noted that the Amnesty Scheme does not extend its benefit to cases arising out of demand of erroneous refund along with interest and penalty," says Baj from Economic Law Practice (ELP).

“The Government notified the rules and the forms applicable for waiver of the above relief on 8th October. To claim the relief, the taxpayer has to submit Form GST SPL - 01 providing the details of the notice, the tax demands and the years to which they pertain, payment details and a declaration that no writ or appeal has been filed against the said notice. If any appeal has already been filed and an order has been issued under the appeal, the taxpayer is required to submit Form GST SPL-02. It is important to note that the full tax as demanded (other than interest and penalty) should have been paid before filing the forms for the waiver of interest and penalty. Once the forms are filed, the concerned officer will review and approve the form after which the interest and penalty would stand waived. The Government has structured the process significantly for this waiver. In my opinion, the waiver should have been straight forward such as in the case of waiver of penalty if the tax is paid before issue of final demand order. The current process is quite cumbersome requiring proper details to be compiled and submitted which have the risk of being rejected by the officer if the information is not correct,” says Jain.

[The Economic Times]