GST Amnesty Scheme for interest and penalty raised under section 73

Amnesty Scheme by way of waiver of interest and penalty for demands raised under Section 73

The proposal of the GST Council is to insert Section 128A to provide a waiver of interest and penalties for demand orders issued under Section 73of the Central Goods and Services Tax Act, 2017 ('CGST Act'). This waiver applies to cases where taxpayers pay full tax demand by 31-03-2025. This is recommended for the financial years 2017-18, 2018-19, and 2019-20.  However, the waiver is not to be extended in the cases of erroneous refunds.

This recommendation provides significant relief to taxpayers where the tax remained unpaid in non-fraud, genuine cases of non-payment or short payment, etc.

Since the inception of GST, many show-cause notices and demand orders have been issued for the starting years. The accumulated amount of interest for such initial years has grown equivalent to the tax amount or even more due to the extension of the time limit for issuing orders under Section 73 for FYs 2017-18 to 2019-20. 

The GST Council has recommended to insert a new Section 128A in the CGST Act to provide waiver of interest and penalty on demand notices issued under Section 73 of the CGST Act. This would apply only to the orders for financial years 2017-18, 2018-19, and 2019-20. The waiver would be subject to the condition that the tax demanded should be paid in full on or before 31-03-2025. It may be noted that the waiver would not be granted in case of demand due to erroneous refunds.

However, there are cases where taxpayers have already paid interest and penalties along with the demands. The Council's recommendations do not clarify whether those who have already paid interest and penalties can seek a refund. Also, there may be scenarios, where a taxpayer intends to clear some issues raised in the show cause notice by depositing tax demand on those and contest the tax demand on remaining issues. Whether a taxpayer can avail the benefit of part interest and penalty to the extent of tax demand on issues which he intends to close.

Also, it would be interesting to examine the fine print of the amendment to check whether it cover cases where a notice was previously issued under Section 74 (on the ground of fraud or suppression of facts, etc.) which was later converted to Section 73 notice by the adjudication process.