Waiver of Interest and Penalty under Section 128A: A Complete Guide

Overview of Waiver of Interest and Penalty Under Section 128A and Rule 164

The Section 128A waiver scheme, in conjunction with Rule 164, offers relief from interest and penalty demands under GST notices issued as per Section 73 for the period from 01-07-2017 to 31-03-2020. Taxpayers are required to fully settle their tax liabilities and submit waiver applications within stipulated timelines to benefit from this scheme. The waiver does not apply to:

• Cases of erroneous refunds.
• Appeals that have not been withdrawn.
• Interest on delayed return filings.
• Recoveries made under Section 75(12) as referenced in Circular 238/32/2024-GST.

Multiple notices require separate waiver applications, while a single application may be submitted for a multi-year order. Withdrawal proof of any appeals is mandatory, and partial withdrawals are not permitted. Failure to comply with these conditions and timelines could render the waiver invalid.

Key Provisions of the Waiver Scheme

Eligibility and Application Process

1. Application Types:

   • SPL-01: For notice stage applications.
   • SPL-02: For decisions made or cases in appeal/writ stage.
   • SPL-03: Used for defect memos if the application requires clarifications.
   • SPL-05 & SPL-07: Order of acceptance or rejection respectively.

2. Filing Responsibilities:

   • Tax demands must be paid by the due dates, generally by 31-03-2025, with waiver applications filed within 3 months of this date.
   • If a decision is only partially included in the waiver, full payment related to items not covered must be made within 3 months post-rejection.

3. Appeals:

   • Appeals against acceptance orders (SPL-05) are not permitted.
   • For rejection orders (SPL-07), appeals can be filed provided they comply with the timelines established in Section 107(1).

Detailed Compliance Steps

Notice Stage (Section 128A(1)(a))

• Ensure tax demand is settled by 31-03-2025.
• Submit the waiver application (SPL-01) after paying DRC-03.

Order or Appeal Stage (Section 128A(1)(b) or (c))

• Complete tax payment via ELR or DRC-03A if applicable and file SPL-02.

Conditions for Redetermination

• If an appeal results in a redetermination under Section 73, the demand must be paid within 6 months.

For Erroneous Refunds or Partial Amnesty Periods

• Full tax payment is required before filing applications (SPL-01 or SPL-02).
• Address any interest or penalty not covered by Section 128A within prescribed timeframes.

Appeals Process for Rejected Waivers (SPL-07)

1. Restoration of Appeals:
   • If an original appeal was withdrawn for filing SPL-02, it will be restored upon appeal against SPL-07.
2. Future Steps:
   • If rejection is appealed, either the acceptance or further modifications will be addressed through SPL-06.

Conclusion

The waiver scheme under Section 128A combined with Rule 164 provides a structured approach for taxpayers seeking relief from interest and penalty demands. Compliance with procedural requirements and deadlines is critical for successful applications.