The Central Board of Indirect Taxes and Customs (CBIC) has issued Instruction No. 02/2025-GST on February 7, 2025, addressing the procedure to be followed in departmental appeals related to interest and/or penalty under Section 128A of the Central Goods and Services Tax (CGST) Act, 2017. This directive aims to clarify the applicability of Section 128A in cases where tax dues have been settled but disputes persist regarding interest calculations or penalty impositions.
Legal Framework
Section 128A of the CGST Act, 2017, read with Rule 164 of the CGST Rules, 2017, provides for the waiver of interest and/or penalty concerning demands raised under Section 73 of the CGST Act for Financial Years 2017-18, 2018-19, and 2019-20, subject to specific conditions. Additionally, Circular No. 238/32/2024-GST, dated October 15, 2024, clarified various aspects of Section 128A.
Clarifications on Applicability
Numerous field formations sought clarification regarding whether taxpayers can avail of the benefits of Section 128A in cases where:
- The tax amount has been fully paid, but the department has appealed due to an arithmetic miscalculation of interest.
- The penalty was either not imposed or imposed at a rate lower than the prescribed threshold.
Upon examination, the Board observed that as per Serial No. 4 of the Table under Paragraph 4 of the aforementioned circular, where tax dues are fully settled and the demand or notice under Section 73 pertains only to interest and/or penalty, taxpayers are eligible for the benefit of Section 128A.
Board’s Decision and Implementation
Based on the above clarifications, the Board has decided as follows:
- Eligibility for Benefit Under Section 128A:
- If a taxpayer has fully paid the tax amount under a demand made pursuant to Section 73 of the CGST Act, but disputes remain only concerning interest and/or penalty, they are eligible for the benefit of Section 128A.
- The mere fact that the department has filed or is in the process of filing an appeal should not disqualify the taxpayer from availing of this benefit.
- Objective of Section 128A:
- The provision is intended to reduce litigation and should not be denied based on technicalities.
- Withdrawal of Appeals in Relevant Cases:
- In cases where the department has already filed an appeal or is in the process of filing an appeal solely on account of interest miscalculation or incorrect penalty imposition under the CGST Act or IGST Act, and the taxpayer meets all other conditions under Section 128A, the proper officer may proceed to withdraw such appeals.
- If an order under Section 73 is under review and pertains only to these limited concerns, it should be accepted rather than contested further.
Implementation and Compliance
Field officers are directed to ensure compliance with these instructions and to take necessary steps to withdraw pending appeals or accept orders under Section 73 wherever applicable. Any difficulties in implementing these instructions should be reported to the Board.
Conclusion
This clarification under Instruction No. 02/2025-GST provides much-needed relief to taxpayers by ensuring that appeals related solely to interest or penalty do not result in unnecessary litigation. By aligning with the intent of Section 128A, the directive fosters a more streamlined and taxpayer-friendly compliance environment.
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