The Central Board of Indirect Taxes and Customs (CBIC), through Circular No. 238/2024-GST dated 15th October 2024, provided crucial clarifications regarding the application of Section 128A of the CGST Act, focusing on the waiver of interest and penalty. This waiver pertains to demands under Section 73 for the Financial Years 2017-18, 2018-19, and 2019-20.
Background
Section 128A, introduced as per recommendations of the GST Council’s 53rd meeting, allows for the waiver of interest, penalty, or both, provided certain conditions are fulfilled. The provisions came into effect on 1st November 2024. To ensure uniform implementation, Rule 164 of the CGST Rules was also inserted, laying down the procedure for closure of proceedings under this section.
Key Clarifications in Circular 238/2024
1. Applicability and Scope
- Section 128A applies to taxpayers who have received demands under Section 73 of the CGST Act for non-payment of tax or short payment, specifically for the financial years 2017-18, 2018-19, and 2019-20.
- The waiver extends to interest and penalties, but the full tax amount must still be paid.
2. Important Deadlines
- The waiver is applicable if the taxpayer pays the demanded tax amount by 31st March 2025. For cases where redetermination of tax is required, taxpayers have six months from the date of the proper officer’s final order under Section 73 to make the full payment.
3. Eligibility for Waiver
- Taxpayers who have been served notices or statements under Section 73 but have not yet received a final order, can file for waiver using FORM GST SPL-01.
- Those with final orders issued under Section 73 but without further appeals or revisions can file FORM GST SPL-02 to avail of the waiver.
- If an appeal or revision is underway, the taxpayer may still apply for the waiver after withdrawing the appeal or writ petition.
4. Reduction of Payable Tax
- In cases where the tax demand includes amounts due to the contravention of Section 16(4), which pertains to the time limit for availing Input Tax Credit (ITC), taxpayers can deduct the amount of ITC that is no longer payable due to the retrospective amendments of Section 16(5) and 16(6).
- FORM GST SPL-01 or FORM GST SPL-02 must specify the amount being deducted, ensuring transparency for both the taxpayer and the tax officer.
5. Processing of Applications
- Upon receipt of FORM GST SPL-01 or SPL-02, the proper officer must examine the application within three months. If rejected, the officer will issue a notice to the taxpayer, who will then have one month to reply via FORM GST SPL-04.
Click here to read full circular
Implications of the Circular
This waiver is a significant relief for businesses facing large penalties for non-payment or underpayment of taxes during the initial years of GST implementation. By focusing on retrospective waivers for specific financial years, the CBIC aims to ease the burden on businesses while ensuring timely compliance with tax payment obligations.
The introduction of Section 128A and the accompanying Rule 164 provides a structured mechanism for businesses to settle their tax disputes from the initial years of GST implementation, thereby allowing them to clear pending liabilities with reduced penalties. As deadlines approach, businesses are encouraged to review their pending tax demands and take the necessary steps to benefit from this waiver before the March 2025 deadline.
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