From December 2023 to August 2024, the GST Department had issued a large set of Demand Orders for the initial three Financial Years viz. FY 2017-18, FY 2018-19 and FY 2019-20. Based on the inputs from field formations and the industry, government found that the demand orders are issued on various discrepancies which happened due to new law of GST which was brought into force w.e.f. 01/07/2017. Hence, the Government of India, in its full budget, being presented in July 2024, brought a provision to provide immunity from Interest and Penalty levied in such Demand Orders subject to various conditions, restrictions and safeguards.
Lets discuss about the same.
Through the Budget of July 2024, a Section 128A has been brought into law of CGST Act 2017 with title Waiver of interest or penalty or both relating to demands raised under section 73, for certain tax periods
As per the said provision, if the GST department has issued a Demand Order under Section 73 of CGST Act 2017 for any period lying between 01 July 2017 to 31 March 2020, he is eligible for waiver of interest or penalty demanded under said order.
Exception for Waiver of Interest
The CGST Department has issued a circular (CIR-238/32/2024-GST dated 15/10/2024) to provide clarifications over various issues in respect of waiver of interest/penalty.
Among others, the circular provides following exception which is the most important exception for such waiver
Whether the benefit provided under Section 128A will be applicable in cases, where the tax due has already been paid and the notice or demand orders under Section 73 only pertains to interest and/or penalty involved?
The circular provides that where the tax due has already been paid and the notice or demand orders under Section 73 only pertains to interest and/or penalty involved, the same shall be considered for availing the benefit of section 128A.
However, the benefit of waiver of interest and penalty shall not be applicable in the cases where the interest has been demanded on account of delayed filing of returns, or delayed reporting of any supply in the return, as such interest is related to demand of interest on self-assessed liability and does not pertain to any demand of tax dues and is directly recoverable under sub-section (12) of section 75.
This exception has various limbs and repercussions. The Section 128A brought under CGST Act 2017 does not provide such exception. Section simply says that if you are issued a demand order under section 73 and you are paying the due tax if any by the notified date, you are eligible for waiver of interest.
However, this exception issued through a Circular by the CBIC denigrate the principal provision.
In simple words, the exception is providing that if a taxpayer has paid their tax for July 2017 in GSTR-3B of Sep 2018, he would not be eligible for waiver of interest.
However, if he has paid the tax for July 2017 in December 2023 owing to demand order of GST department, he would be eligible for the waiver of interest.
It is unfair and unethical for the government to provide immunity only to those who were caught by them for more bigger defaults than the persons with penny mistakes.
It is difficult to understand the approach of our so called bureaucrats, leaders, trade associations, tax associations, representative institutes…..
If department have to apply Section 75(12), then what was the need of Section 128A. Why a law is not the same for all.
They are claiming that Section 75(12) provides for direct recovery of Interest on Self Assessed liability. If the provision is good to apply, why the department asking for payment of tax to the buyers of goods/services whose suppliers’ GSTIN cancelled with retrospective effect for any reason. If a supplier has filed GSTR-1, the self assessed liability arises itself from said supplier only.
It simply means that a person who has paid the tax on his own oblivion, he can be easily blackmailed for demand of interest and penalty. However, a person with/without malafide intent, who has not paid tax for five years, has been offered to pay tax only. Earlier, this position persist in Banks where NPAs are settled in any manner. Now, it comes to Tax Administration too.
This is not the first time the government came up with such situations. In past too, such instances were happened..
About the Immunity
