GST interest and penalty: Centre eases out complexities
It has now introduced Section 128A of CGST Act, a relief scheme designed to help taxpayers clean the slate
Hyderabad: When the Goods and Services Tax (GST) was rolled out in July 2017, it was hailed as a historic tax reform, unifying India’s complex web of indirect taxes. However, the initial years of implementation were far from smooth. Businesses—especially Micro, Small and Medium Enterprises (MSMEs)—struggled to adapt to the new system amid changing rules, technological glitches, and unclear compliance requirements.
Many taxpayers received notices they couldn’t interpret, followed by demands they couldn’t reconcile. In several cases, they were unaware of the proceedings until bank accounts were frozen. Recognising these challenges, the central government has now introduced Section 128A of the CGST Act, a relief scheme designed to help taxpayers clean the slate.
What is Section 128A?
Section 128A offers a waiver of interest and penalties on pending GST demands, as long as they are not related to fraud or wilful suppression. The focus is on supporting honest taxpayers, who faced difficulties during the transition period.
Who Can Avail This?
The scheme applies in the following scenarios:
l Notices issued, but final orders not passed.
l Orders passed without subsequent appeals or revisions
l Appeals pending before tribunals
l Cases reassigned from Section 74 to Section 73 after court directions
l If the tax is paid in full, the interest and penalty are waived—no questions asked
Application Process and Deadlines:
To avail the benefits of the amnesty scheme under Section 128A, taxpayers must file the appropriate forms based on their case status. Form SPL-01 should be used where notices have been issued but no final orders have been passed, while Form SPL-02 is applicable for cases where orders have been passed, but appeals or revisions are still pending. The last date to pay the due tax is March 31, 2025, and the deadline for submitting the relevant forms is June 30, 2025.
If an appeal or writ is ongoing, it must be withdrawn before applying. The withdrawal order must be submitted within a month.
Payment Method
Use Form DRC-03 (select ‘Others’) or GSTR-3Bif paid before enactment of section 128A.
l Pay through Electronic Liability Register for passed orders.
l If tax is already paid, link it using Form DRC-03A.
l In cases reassigned under court order, payment must be made within six months.
Approval Timeline:
The Proper Officer (PO) reviews the application. If ineligible, a notice (Form SPL-03) is issued, and the taxpayer must reply using Form SPL-04. The final order—either SPL-05 (approval) or SPL-07 (rejection)—is then passed. If no order is issued in time, the application is deemed approved.
Who Benefits the Most?
India’s MSMEs, which faced the brunt of early GST confusion, stand to benefit significantly. The scheme offers:
The scheme offers taxpayers a valuable opportunity to exit from prolonged litigation, providing much-needed relief from the financial burden of accumulated penalties and interest. By clearing past dues without additional costs, businesses can better manage their working capital and redirect resources toward growth. Moreover, it allows them to maintain a clean compliance record going forward, setting a stable foundation for future operations.
Rare Opportunity: This is not just another policy update—it’s a second chance for taxpayers to move forward without the baggage of the past. For those willing to act before the March 2025 deadline, Section 128A offers much-needed relief and a fresh start.
Sandeep Prakash, Principal Chief Commissioner of Hyderabad GST & Customs Zone, said: “The GST Amnesty Scheme presents a crucial opportunity, particularly for MSMEs, to rectify past non-compliances through waiver of interest and penalties, subject to payment of due taxes by March 31, 2025. With the extended timeline for filing the requisite forms till June 30, 2025, the scheme offers meaningful relief and encourages businesses to regularize their compliance status, thereby reducing the burden of potential litigation. Taxpayers who are liable to pay tax along with interest and penalty are urged to take full advantage of this amnesty by ensuring payment of tax dues within the stipulated deadline of March 31, 2025, to avail the benefits of waiver.”
CMA Bhogavalli Mallikarjuna Gupta, adds: “The GST Amnesty Scheme introduced by the Government is a welcome relief, particularly for MSMEs, offering them a chance to settle past dues without the burden of interest and penalties—provided the tax is paid by March 31, 2025, and the necessary forms are filed by June 30, 2025. This initiative not only supports ease of doing business (EoDB), but also enables taxpayers to reduce litigation exposure, improve cash flow, and realign with compliant practices.”
