The Indian GST law continues to evolve, bringing forth provisions to ease the compliance burden on taxpayers. One such provision is Section 128A of the CGST Act, 2017, introduced through the Finance (No. 2) Act, 2024.
In this article, we will discuss Section 128A, its significance, eligibility criteria, and how to apply for a waiver of interest and penalties. Additionally, we will provide a draft format for taxpayers who wish to apply for this waiver.
Section 128A provides taxpayers the opportunity to waive interest and penalties for outstanding tax dues for specific financial years. This section applies to outstanding tax dues from financial years 2017-18, 2018-19, and 2019-20, subject to the payment of tax dues by March 31, 2025.
This provision was introduced to address concerns regarding excessive interest and penalty burdens on taxpayers who faced difficulties during the early years of GST implementation.
Essential Training for Tax Professionals: Know Your Sections!
Like any new system, the implementation of GST encountered several transitional hurdles. Even after seven years, the GST framework continues to undergo frequent legislative and procedural changes, with the GST Council regularly addressing emerging challenges. The early phase of GST implementation was marked by significant ambiguity, resulting in numerous notices being issued to taxpayers, often due to procedural errors or differing interpretations of the law.
To address these issues, the GST Council, in its 53rd Meeting, recommended an amnesty scheme. This scheme offers a waiver of interest and penalties for demand notices issued under Section 73 of the CGST Act (excluding cases of fraud, suppression, or willful misstatement) for the fiscal years 2017-18, 2018-19, and 2019-20, provided the full tax dues are paid by March 31, 2025. This amnesty provision was later introduced under Section 128A in the Union Budget 2024.
Read More: GST Amnesty Scheme: A Necessary Reprieve or a Controversial Shortcut?
To avail of the waiver under Section 128A, taxpayers must meet the following conditions:
1. Outstanding Tax Dues: The provision is applicable for tax periods covering the financial years 2017-18, 2018-19, and 2019-20.
2. Timely Payment: The waiver is granted if the taxpayer makes the payment of the outstanding tax dues on or before March 31, 2025.
3. Compliance with Circulars: Taxpayers must adhere to the Forms and procedural guidelines that are expected to be issued by the GST Council.
– No Penalty for Previous Years: Waiver of penalties applies to tax periods from 2017 to 2020, provided the tax is paid within the stipulated timeline.
– Interest Relief: Taxpayers can also benefit from the waiver of interest for these periods.
– Upcoming Circulars: The GST Council is expected to issue clarifications and procedures for applying for the waiver, which will include specific forms and deadlines.
Essential Training for Tax Professionals: Know Your Sections!
With the introduction of Section 128A, taxpayers now have a way to address outstanding tax liabilities without facing heavy penalties and interest. This will benefit businesses that struggled during the initial years of GST implementation.
Keep an eye out for GST Council circulars that will clarify the specific steps for applying for this waiver. If you’re eligible, ensure that you submit your application before the deadline of March 31, 2025.
You can access the Draft Format of the Goods and Services Tax Act Section 128A Letter Draft to keep recovery proceedings pending by clicking the blue button below.
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