GST relief: No need to pay interest and penalty on GST tax demand; conditional waiver from November 1, 2024

The Ministry of Finance has notified various sections including 128A of the Goods and Services (GST) Act with effect from November 1, 2024.

Announced in Budget 2024, section 128A is a new section that provides some relief to individuals and companies registered under GST. This relief which is a conditional waiver scheme, allows total waiver of interest and penalty for specified non-fraudulent GST demand notices related to FY 2017-18 to 2019-20. Do note that this scheme only waives off the interest and penalty amount, you still need to pay the tax demand amount.

According to a Notification no. 17/2024 – Central Tax dated 27.09.2024 by the Ministry of Finance “In exercise of the powers conferred by clause (b) of sub-section (2) of section 1 of the Finance (No. 2) Act, 2024 (15 of 2024), the Central Government hereby appoints. —

• (a) the date of publication of this notification in the Official Gazette, as the date on which the provisions of sections 118, 142, 148 and 150 of the said Act shall come into force; and
• (b) the 1st day of November 2024, as the date on which the provisions of sections 114 to 117, 119 to 141, 143 to 147, 149 and 151 to 157 of the said Act shall come into force.”

Who is eligible for GST conditional waiver scheme?

According to the explanatory memorandum to Budget 2024, the newly inserted section 128A provides for “waiver of interest or penalty or both relating to demands raised under section 73 for certain tax periods.” Section 73 relates to non-fraud GST demand notices.

Siddharth Surana, Director, RSM India earlier said, “The Finance Bill introduces Section 128A, which provides a waiver of interest and penalties for non-fraudulent taxpayers being assessed only under Section 73 for the periods FY 2017-18, 2018-19, and 2019-20. The taxpayer must not be assessed on grounds of alleged fraud, willful misrepresentation, or suppression of facts.”

How does this GST conditional waiver work?

Experts say that if you need to benefit from this GST conditional waiver scheme then you need to agree with the tax demand pay it and stop all pending litigation. Once your case is accepted under this scheme and you paid the tax demand amount, the tax notice will be extinguished.

Surana said, “The waiver of interest and penalty is conditional and is subject to payment of tax amount under dispute by 31 March 2025.”

According to Surana this waiver of interest and penalty excludes cases of erroneously sanctioned refunds and applies only to ‘open cases’ which are still in appeal or under dispute and do not appear to extend to cases where the taxpayer has already paid the interest and penalty amount.

Echoing the same, Apoorv Phillips, Senior Associate, Sirmacs Consultancy Services (Law Firm) said, “Those GST registered taxpayers who have already paid the interest and penalty amount will not get a refund under this scheme.”

According to EY India, the Budget 2024 has waived off interest and penalty granted in ‘non-fraud’ GST cases for FY 2018-19 to 2019-20. The following scenarios will be covered under this waiver scheme:

• Notice issued but the order has not been passed, or
• Order passed by GST Proper Officer, but Appellate Authority or Revisional Authority has not passed the order, or
• The order passed by Appellate Authority or Revisional Authority, but Tribunal has not passed the order
• The waiver will not be available in case of erroneous refunds.

“Since the launch of GST various amnesty schemes have been introduced, and in all scheme the similarity is the neglect of the honest tax payers and the appeasement of the lethargic ones. If a lethargic and stubborn tax payer was to pay tax, it would had been paid already, but the Government is bent on appeasing them, while the honest ones who have already paid tax with interest and penalty are pondering on the moot question, what was our fault.? Needless to point out, the scheme itself is defective,” says CA Hardik Kakadiya President, Chartered Accountants Association Surat (CAAS).

Source: The Economic Times