Section 75(2) of the Act specifies that if any Appellate Authority, Appellate Tribunal, or Court determines that a notice issued under section 74(1) is unsustainable due to the failure to establish fraud, wilful misstatement, or suppression of facts to evade tax, the proper officer must assess the tax payable as if the notice had been issued under section 73(1), providing taxpayers an opportunity to avail the waiver u/s.128A.
Waiver u/s.128A: In the early phase of GST implementation, taxpayers made several errors during self-assessments for various reasons. During the scrutiny of returns under Section 61 of the GST Act, some taxpayers acknowledged certain discrepancies and paid the corresponding taxes for undisputed issues. However, other taxpayers disputed certain discrepancies, challenging the tax liability, and filed appeals against orders issued under Section 73.
In some instances, taxpayers failed to file appeals within the prescribed time, resulting in the appeals being barred by limitation, leaving them with limited legal recourse. These cases predominantly revolve around disputes concerning the disallowance of input tax credits due to various reasons. To address this, a new scheme has been introduced, providing a conditional waiver of interest and penalties for demand notices issued under Section 73 for the financial years 2017-18, 2018-19, and 2019-20. This scheme has been incorporated by adding Section 128A to the GST Act 2017.
Types of demand eligible to waiver of interest and penalty:
1. Demand as per notice u/s 73(1) of the Act where no order under sub-section (9) of section 73 has been issued
Section 73 of the GST Act addresses the determination of tax liability when a taxable person has not paid tax, paid less tax, received an erroneous refund, or wrongfully availed input tax credit for reasons other than fraud. In such cases, the proper officer issues a demand notice for the tax liability, along with interest under Section 50 and penalties under the Act. Such Demands where no order under Section 73(9) has been issued are eligible for a waiver. In these cases, before the issuance of an order under Section 73(9), the taxable person must pay the full amount of tax as per the notice to avail the waiver of consequential interest, penalty, or both.
If the taxpayer disputes the tax amount and makes a partial payment, the benefit of waiver can still be claimed after the order under Section 73(9), provided the remaining tax is paid. However, the order and payment must be completed within the date notified under Section 128A (1) of the Act.
2. Demand as per order in original u/s 73(9) of the Act
As per Section 128A(1)(b) of the GST Act, demands raised through an order under Section 73(9) are eligible for a waiver of interest or penalty if no order has been passed under Section 107(11) or Section 108(1). To qualify, the taxpayer must withdraw any pending appeals under the Act. The waiver can also be availed after the Appellate Authority passes an appeal order, provided the taxpayer considers any relief granted in the order and pays the modified tax amount. Both the appeal order and the full payment of tax must be completed before the deadline notified under Section 128A(1) of the Act to benefit from the waiver.
3. Demand as per first appeal order u/s 107(11) of the Act
Under Section 128A(1)(c) of the GST Act, demands raised through an appeal order under Section 107(11) or a review order under Section 108(1), where no order has been passed under Section 113(1), are eligible for a waiver of interest or penalty.
To qualify, the taxpayer must withdraw any pending appeal with the Appellate Tribunal. The taxpayer can still claim the waiver after the appeal order has been passed by the Appellate Authority, considering any relief provided in the order and by paying the modified tax amount. Both the appeal order and full tax payment must be completed before the deadline specified under Section 128A(1) of the Act to be eligible for the waiver.
4. Demand as per review order u/s 108(1) of the Act
Under Section 128A(1)(c) of the GST Act, demands raised through an appeal order under Section 107(11) or a review order under Section 108(1), where no order has been passed under Section 113(1), are eligible for a waiver of interest or penalty. To avail this, the taxpayer must withdraw any pending appeal with the Appellate Tribunal and pay the tax as determined in the revision order. Both the withdrawal of the appeal and payment must be completed on or before the deadline specified under Section 128A(1) of the Act.
Types of Demand not eligible to waiver of Interest or Penalty:
1. Demand as per order of Appellate Tribunal is not eligible to waiver of interest or penalty
Section 112 of the Act allows a taxpayer to file an appeal with the Appellate Tribunal against an order passed by the Appellate Authority under section 107(11) or the Revisional Authority under section 108. If the taxpayer wishes to avail a waiver of interest or penalty under section 128A, they must withdraw the appeal before the date specified under section 128A (1). The waiver can be claimed only for orders under section 107(11) or 108(1), provided that no order has been issued under section 113(1).
This means that if the Appellate Tribunal has passed an order under section 113(1), the taxpayer is not eligible for the waiver of interest or penalty. Therefore, demands resulting from a Tribunal order under section 113(1) are excluded from the waiver provisions.
2. Demands raised u/s 74 are not eligible to waiver except contingencies specified in first proviso to section 128A (1)
Section 75(2) of the Act specifies that if any Appellate Authority, Appellate Tribunal, or Court determines that a notice issued under section 74(1) is unsustainable due to the failure to establish fraud, wilful misstatement, or suppression of facts to evade tax, the proper officer must assess the tax payable as if the notice had been issued under section 73(1). This ensures a fair reassessment without charges of fraud or suppression.
In relation to the waiver of interest or penalty, the first proviso added to section 128A clarifies the conditions under which such benefits can be granted. It states that when a notice is issued under section 74(1), and an order is passed or required to be passed by the proper officer in compliance with directions from an Appellate Authority, Tribunal, or Court under section 75(2), the notice or order shall be treated as one referred to in clause (a) or clause (b) of section 128A(1).
Consequently, these notices or orders, although originally issued under section 74, are eligible for the benefits of waiver of interest or penalty under section 128A, providing taxpayers an opportunity to avail the waiver even in cases where the notice is reclassified.
To Access the Press Release relating GST Council’s Recommendation of Waiver u/s. 128A Click Here
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