The CBIC has issued clarifications vide Circular No. 238/32/2024-GST dated 15.10.2024, regarding Waiver of Interest or Penalty or both, related to demands under Section 73 of the CGST Act for the Financial Years 2017-18, 2018-19, and 2019-20. For this purpose, Section 128A of the CGST Act, inserted by the Finance Act (No.2), 2024, based on the GST Council's recommendations.
As notified vide Notification No. 21/2024-Central Tax dated 08.10.2024, the benefit of waiver is only available if the taxpayer fulfills the conditions and pays the full tax demanded in the notices, statements, or orders by 31.03.2025, or within six months from the re-determination of the tax by the proper officer.
A. Clarification on Procedures under Section 128A of CGST Act for Waiver of Interest or Penalty
1. Filing Applications for Waiver:
a. Filing in cases with notice/statement under Section 73, no order passed yet: Application using FORM GST SPL-01 electronically via the GST portal.
b. Filing for cases with an order under Section 73, no order under Section 107/108: Application using FORM GST SPL-02.
2. Time Limit of filing application:
a. Applications in FORM GST SPL-01 or FORM GST SPL-02: Within 3 months from the notified date, i.e., three months from 31.03.2025
b. If a notice under Section 74 was re-assessed under Section 73 following an appellate order: Within six months from the proper officer's re-determination.
3. Withdrawal of Appeals or Writ Petitions:
a. If a taxpayer has filed an appeal under Section 107/112 or a writ petition, they must withdraw it before filing the waiver application and upload the order of withdrawal along with their application.
b. If the order for withdrawal is still pending, a copy of the application for withdrawal must be uploaded, and the final withdrawal order must be submitted within one month of its issuance
B. Clarifications with respect to availing the benefit regarding the waiver of interest and penalty
a. Tax Payment before Section 128A's Effectiveness: Any amount paid toward a demand, whether before or after Section 128A came into effect, will be considered as paid towards the demand as long as the payment was made by the date notified under Section 128A.
b. Tax recovered by tax officers from Others on Behalf of Taxpayer: Amounts recovered from others on behalf of the taxpayer by tax officers will be considered as tax paid towards the demand if collected before the notified date under Section 128A
c. Adjustment of Recovered Interest/Penalty: Any interest or penalty recovered for demands under Section 73 for FYs 2017-18, 2018-19, and 2019-20 cannot be adjusted against the tax amount payable for those years
d. Tax Already Paid, Notice Pertaining to Interest/Penalty Only: If a demand notice only pertains to interest or penalties and the tax has already been paid, the taxpayer can still avail of the waiver under Section 128A. However, waiver of interest for delayed filing of returns or late reporting is not applicable
e. Partial Payment & Waiver of Interest or penalty : The benefit under Section 128A is only available when the full amount of tax demanded is paid. Partial waiver or selective waiver by contesting part of the demand is not allowed
f. Demand relating to Multiple Tax Periods: For demands covering periods eligible and ineligible under Section 128A, the waiver applies only to the eligible periods. Full payment of tax for the entire period in the demand is required for eligibility.
g. Notice/ statement/order involves multiple issues and one of them is regarding Erroneous Refund Demand: The waiver applies only to tax demand excluding erroneous refund claims. Full payment of the total demand is required to claim the waiver.
h. Appeals Against Enhanced Tax Liability: If additional tax liability is imposed by an appellate or revisional authority after an appeal by the department, the conclusion of proceedings under Section 128A is conditional on payment of this additional tax within three months. Failure to pay within the specified time will void the waiver of interest or penalties.
i. Section 128A refers to only appeal or writ petition, Special Leave Petition Pending Before the Supreme Court: If an SLP is pending, the taxpayer must withdraw the SLP and submit an application in FORM GST SPL-01 or FORM GST SPL-02 with proof of the withdrawal or proof of the application for withdrawal. This procedure applies to avail the waiver under Section 128A.
j. Matters involving IGST and Compensation Cess: The benefit of Section 128A extends to demands involving IGST and compensation cess, as these are covered by the CGST Act on joint reading with Section 20 of the IGST and section 11 of GST (Compensation to States) Act, 2017. Full payment of CGST, SGST, IGST, and compensation cess is required for the waiver.
k. Waiver for demand relating to irregular Transitional Credit Demands: Transitional credit availed during periods covered by Section 128A is eligible for the waiver if a demand is raised under Section 73. The transitional credit is treated as availed from the date it was credited to the Electronic Credit Ledger.
l. Waiver of penalties under other provisions, late fee, redemption fine etc: Section 128A covers penalties under various sections like section 73, section 122, section 125 etc. However, late fees, redemption fines, and similar charges are not eligible for the waiver.
m. Payment to avail waiver via Input Tax Credit : The taxpayer can use ITC to pay the tax demand for waiver eligibility, except for certain cases such as reverse charge mechanism payments and demands on erroneous refunds, which must be paid using the Electronic Cash Ledger.
n. Import IGST Under Customs Act: Section 128A does not cover IGST demands issued under the Customs Act, so such cases are excluded from the waiver
o. Reduced Tax Demand Due to Amendments in Section 16: The amount payable to avail of the Section 128A waiver should be calculated after deducting any reductions due to subsections (5) and (6) of Section 16, introduced retrospectively. The taxpayer must pay only the remaining tax after these deductions and provide a clear breakdown of deductions in the application.
p. Adjustment of Payments Made via FORM GST DRC-03:
If the taxpayer has made payments through FORM GST DRC-03, they must file FORM GST DRC-03A to adjust these payments against the demand in the Electronic Liability Register before submitting the waiver application in FORM GST SPL-02.
The Complete Circular can be accessed at https://taxo.online/wp-content/uploads/2024/10/Circular-No-238-2024.pdf
