CGST Section 128A — Waiver of interest or penalty or both relating to demands raised under section 73, for

Section 128A of the CGST Act offers a waiver of interest and penalties for taxpayers facing demands raised under Section 73, which deals with cases of tax not paid or short paid, or erroneously refunded, due to reasons other than fraud or willful misstatement. This provision provides relief to taxpayers for specific tax periods if they pay the full amount of tax demanded within a specified timeframe.

This section applies to persons chargeable with tax who have received a notice or statement under Section 73(1) or 73(3), or an order passed under Section 73(9), Section 107(11), or Section 108(1). Importantly, this applies only to demands pertaining to the period from 1st July 2017 to 31st March 2020. The core requirement is that the taxpayer must pay the full amount of tax payable as per the notice, statement, or order on or before a date to be notified by the government based on the GST Council's recommendations. If the taxpayer meets this condition, no interest under Section 50 and no penalty under the CGST Act will be levied, and all proceedings related to the notice, order, or statement will be considered closed.

Here are the key conditions and exceptions:

• Full Tax Payment: The primary condition is paying the entire tax amount demanded. Partial payments do not qualify for the waiver of interest and penalty.
• Time Limit: The payment must be made on or before the date notified by the government. This date is crucial, as missing it will disqualify the taxpayer.
• No Erroneous Refund Relief: The waiver does not apply to amounts payable due to erroneous refunds. If the demand arises from a wrongly claimed refund, this section offers no relief.
• Pending Appeals: If the taxpayer has a pending appeal or writ petition before an Appellate Authority, Appellate Tribunal, or a court, this section will NOT apply unless the appeal or writ petition is withdrawn before the notified date.
• Orders Consequent to Appeal/Tribunal/Court Directions: If a notice under Section 74 (relating to fraud, willful misstatement, or suppression of facts) has been issued, and an order is subsequently passed or required to be passed based on the direction of an Appellate Authority, Appellate Tribunal, or a court, the notice or order will be treated as if it were under Section 73 for the purposes of this waiver. However, if an appeal or revision is ongoing, the proceedings are considered closed only after the additional tax (if any) as determined by the appellate/revisional authority is paid within 3 months of that order.
• No Refund of Already Paid Interest/Penalty: If the taxpayer has already paid the interest and penalty related to the demand, no refund will be granted under this section.

Practical Examples:

1. A small business received a notice under Section 73(1) for ₹50,000 related to a discrepancy in their GSTR-3B and GSTR-1 filings for August 2018. If the government notifies a date, say, 30th September 2024, and the business pays the full ₹50,000 before that date, they will not have to pay any interest or penalty, and the matter will be closed.
2. A manufacturer received an order under Section 73(9) demanding ₹1 lakh in tax, along with interest and penalty, for wrongly availed input tax credit (ITC) in February 2019. They filed an appeal, which is still pending. To avail the benefits of Section 128A, they must withdraw the appeal before the notified date and pay the ₹1 lakh.
3. A company erroneously claimed a refund of ₹20,000. Later, the GST department raised a demand under Section 73 read with Section 54 for recovery of the erroneous refund along with interest and penalty. Even if the company pays the tax demanded by the due date specified in Section 128A, it will still be required to pay the interest and penalty, since this section specifically excludes demands related to erroneous refunds.

Amendment History:

Section 128A was inserted by Section 146 of The Finance Act (No. 2) Act, 2024 (No. 15 of 2024) dated 16.08.2024. This is a relatively new provision designed to provide relief to taxpayers regarding past tax demands, particularly in the early years of GST implementation. It's important to stay updated on any further notifications or clarifications issued by the government related to the operational aspects of this section, especially concerning the notified date for making payments.

In conclusion, Section 128A offers a valuable opportunity for taxpayers to resolve outstanding GST demands for the specified period (July 2017 to March 2020) without incurring interest and penalties. However, it’s crucial to understand the conditions, exceptions, and the notified timelines to avail of this benefit. Taxpayers should carefully evaluate their cases and take timely action to ensure compliance and avoid any potential disputes.