Tax officers told to give relief to businesses on GST interest, penalty
New Delhi, Feb 11, 2025
The Central Board of Indirect Taxes and Customs (CBIC) has told field officers that businesses which have paid tax dues in time are eligible for relief on interest and even penalty where the department has gone on appeal.
In an instruction to officials, CBIC said it has received requests from officers for clarification whether relief on interest and penalty is applicable to taxpayers where goods and service tax (GST) dues have been paid within the specified time, no fraud is involved and the department has gone on appeal on certain counts such as wrong calculation of interest amount.
CBIC said that in cases where the tax demand notice only pertains to interest or penalty, the taxpayer is eligible for relief under 128A of the Central GST Act.
This section offers relief from interest and penalty for taxpayers with pending tax demands for the tax period between 1 July 2017 to end of March 2020 provided they pay the full amount of tax due within the specified date.
In cases where the department is in appeal or is under the process of filing an appeal only on account of wrong interest calculation or wrong imposition or non-imposition of penalty amount and the taxpayer fulfils other conditions of section 128A, the officer may withdraw such appeal, the tax authority said in the instruction issued on 7 February.
Section 128A intends to reduce litigation and a taxpayer should not be denied its benefit on mere technicalities, CBIC said.
Rajat Mohan, senior partner at AMRG & Associates, a chartered accountancy firm, said CBIC's instruction aims to bring procedural relief in disputes related to interest and penalty and the directive rightly acknowledges that taxpayers who have already discharged their tax liabilities should not be subjected to undue litigation merely due to miscalculation of interest or penalties.
"A key aspect of this instruction is the emphasis on reducing unnecessary litigation by allowing taxpayers to avail of waivers under Section 128A, even if the department has already filed an appeal. This aligns with the intent of tax compliance facilitation, ensuring that businesses are not burdened with prolonged disputes where the principal tax liability has already been discharged," explained Mohan.
Reducing tax litigation and improving ease of doing business has been a priority for the government.
In the Union budget for fiscal year 2026 (FY26) presented on 1 February, finance minister Nirmala Sitharaman pledged to ensure a "light-touch regulatory framework based on principles and trust," which she said will unleash productivity.
The minister also promised a "modern, flexible, people-friendly, and trust-based regulatory framework appropriate for the twenty-first century."
Since the GST rollout, the indirect tax system has become heavily dependent on technology with extensive amount of data getting captured at different points in the value chain. Along with this, reporting requirements have also gone up. Policy makers are increasingly sensitizing field officers about the importance of ease of doing business.
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