Understanding the GST Amnesty Scheme: Insights from the Ministry of Finance

The Ministry of Finance has recently issued additional clarifications regarding Section 128A of the Central Goods and Services Tax (CGST) Act, 2017, which introduces a GST Amnesty Scheme aimed at waiving outstanding interest and penalties for eligible taxpayers. This initiative is particularly significant for those who have outstanding tax liabilities from the financial years 2017-18 to 2019-20. The clarifications, released via a circular dated October 15, 2024, aim to address common queries and ensure uniform implementation across various field formations.

What is Section 128A of the GST Amnesty Scheme?

The GST Amnesty Scheme, introduced in the Budget 2024, is designed to alleviate the financial burden on taxpayers by waiving interest and penalties for those who settle their tax liabilities in full by March 31, 2025. This scheme is applicable to demands arising from non-fraud cases during the period from July 2017 to March 2020. According to SR Patnaik, Partner (Head – Taxation) at Cyril Amarchand Mangaldas, the scheme specifically targets taxpayers who are willing to comply without any allegations of fraud or willful misrepresentation.

Key FAQs Regarding the GST Amnesty Scheme

The circular provides answers to several frequently asked questions (FAQs) to clarify the application of Section 128A:

Q1: Applicability of Section 128A for Pre-Implementation Payments

Answer: Taxpayers who have paid the tax component in full before the implementation of Section 128A can still benefit from the waiver. Any amounts paid towards the demand, regardless of when they were paid, will be considered as eligible for the waiver, provided they were intended for the specific demand.

Q2: Waiver for Already Paid Tax with Pending Interest/Penalty

Answer: If the tax due has already been paid, taxpayers can still avail themselves of the waiver for interest and penalties. However, this does not apply to cases where interest is demanded due to delayed filing of returns or reporting of supplies, as such interest is related to self-assessed liabilities.

Q3: Coverage of Other Penalties and Fees

Answer: The waiver under Section 128A includes penalties under various sections, such as Section 73, but does not extend to late fees or redemption fines. This distinction is crucial for taxpayers to understand the scope of the amnesty.

Q4: Payment Methods for Waiver Eligibility

Answer: Taxpayers can utilize Input Tax Credit (ITC) to make payments required for the waiver under Section 128A. However, certain conditions apply, such as payments related to the Reverse Charge Mechanism or erroneous refunds, which must be made through the electronic cash ledger.

Additional Clarifications on the GST Amnesty Scheme

The circular also outlines the procedures for taxpayers and tax officers to follow in order to avail the benefits of Section 128A. Here are some key points:

Filing Applications for the Amnesty Scheme

Section 128A applies to cases where notices or statements have been issued under Section 73 for the financial years 2017-18, 2018-19, and 2019-20. Taxpayers must file their applications for waivers in specific situations, including:

• Notices issued under Section 73 that have not yet been adjudicated.
• Orders issued under Section 73 where no appellate orders have been made.
• Cases where appellate orders exist but no further orders have been passed by the Appellate Tribunal.

Payment of Tax

Taxpayers must make payments towards the tax demanded in the notice through FORM GST DRC-03 before the deadline of March 31, 2025. This requirement ensures that taxpayers are compliant with the stipulated timelines to benefit from the amnesty.

Scope of Waiver

The waiver applies to both CGST and IGST liabilities, providing broader relief to businesses operating across multiple states or engaging in international transactions. However, it is essential to note that the waiver does not cover demands related to self-assessed liabilities or late fees.

Implications for Taxpayers

The clarifications provided by the Ministry of Finance are expected to facilitate a smoother implementation of the GST Amnesty Scheme. However, some concerns have been raised regarding the requirement for taxpayers to settle all demands, including those beyond the eligible periods, which may deter some from participating in the scheme.

Advocate Apoorv Phillips from Sirmacs Consultancy Services highlights that while the scheme offers significant relief, the all-or-nothing approach may restrict taxpayers from resolving genuine disputes while contesting others. Additionally, the time frame covered by the scheme raises questions, particularly when demands span periods beyond the specified eligibility window.

Tax Partner Saurabh Agarwal from EY India emphasizes the importance of these clarifications in addressing long-standing concerns regarding the availment of input tax credit (ITC) and the retrospective amendments to the CGST Act. The new provisions allow taxpayers to reclaim ITC previously denied due to procedural issues, promoting ease of compliance.

In summary, the GST Amnesty Scheme under Section 128A presents an opportunity for eligible taxpayers to alleviate their financial burdens by waiving interest and penalties, provided they meet the stipulated conditions. The recent clarifications from the Ministry of Finance aim to enhance understanding and facilitate smoother implementation, although some challenges remain for taxpayers navigating the complexities of the scheme.