GST Amnesty Scheme under Section 128A (Eligibility and Procedure)

The GST Amnesty Scheme under Section 128A represents one of the most significant relief initiatives for taxpayers facing pending GST demands arising from notices issued under Section 73 and Section 74, late fees, penalties, and other compliance lapses. Introduced with the aim of reducing litigation and encouraging voluntary tax compliance, the scheme provides substantial waiver of interest, penalty, and late fees for eligible taxpayers who clear outstanding tax dues within prescribed timelines. Section 128A is part of the government’s larger objective to unclog the adjudication machinery, bring non-compliant taxpayers back into the system, and improve tax recovery without resorting to coercive measures.

Since the introduction of GST, taxpayers have faced multiple challenges such as technical glitches, transitional issues, mismatch errors, and procedural delays. These led to a large volume of pending assessments, show cause notices, and demands related to earlier periods. Many taxpayers, especially small and medium businesses, accumulated significant interest and penalties, making it economically difficult to settle liabilities.

The amnesty under Section 128A addresses this situation by:

• Providing relief from penal consequences
• Allowing closure of long-pending disputes
• Offering a clean slate to defaulting businesses
• Improving revenue collection with reduced administrative effort

The scheme encourages taxpayers to pay the principal tax while the government forgives punitive components.

The amnesty scheme covers a wide range of non-compliances, making it one of the broadest relief frameworks under GST. Some key areas include:

• a. Non-payment or short-payment of tax
  Cases covered under Section 73 (non-fraud) and Section 74 (fraud) are eligible subject to conditions.
• b. Incorrect availing or utilization of Input Tax Credit (ITC)
  Demands raised for wrongful ITC claims may be settled by paying the principal amount.
• c. Delayed filing of returns
  Late fees and penalties may be waived for taxpayers filing pending returns under the scheme.
• d. Pending adjudication, appeals, and recovery proceedings
  Relief applies even if cases are under departmental review or awaiting final adjudication.
• e. Transitional and mismatch-related disputes
  Earlier-year disputes involving ITC mismatches also fall within the relief scope.

The wide coverage ensures that almost every taxpayer with legacy GST disputes can benefit.

Eligibility is defined by clear statutory parameters. A taxpayer can avail the GST Amnesty Scheme if:

• a. Tax Liability Exists and is Outstanding
  The taxpayer must have an existing demand, self-admitted or adjudicated.
• b. Demand Falls Within the Specified Time Period
  Only demands pertaining to specific financial years or notices qualify as detailed in the scheme.
• c. Payment of Principal Tax is Mandatory
  The scheme waives penalty and interest only if the taxpayer pays the full principal tax amount.
• d. Proceedings Have Not Reached Finality Due to Fraud or Suppression
  For Section 74 cases, eligibility may be conditional or limited depending on the nature of fraud or misrepresentation.
• e. Returns for the Relevant Period Are Filed
  Taxpayers must file missing returns to compute and pay correct tax dues.

Taxpayers undergoing prosecution in special cases may not be eligible depending on the severity of offences.

Section 128A provides substantial relief to taxpayers, including:

• a. Waiver of Interest
  Interest on delayed payment may be fully or substantially waived.
• b. Waiver of Penalty
  Penalties under Section 73, Section 74, and late fees for delayed return filing may be waived.
• c. Closure of Pending Cases
  Upon payment of eligible dues, the case is closed without further litigation.
• d. Halt on Recovery Actions
  Demand recovery measures may be suspended during the period of amnesty compliance.
• e. Reduction in Litigation Costs
  Taxpayers avoid lengthy appeals and legal expenses.

The relief package significantly reduces the financial burden for businesses.

The amnesty scheme follows a structured, transparent, and time-bound process:

1. Step 1: Identify Eligible Liabilities
   Taxpayers must review GST portal notices, past demands, and pending returns.
2. Step 2: Filing of Pending Returns
   All missing GSTR-3B, GSTR-1, or annual returns for eligible periods must be filed.
3. Step 3: Payment of Principal Tax
   The taxpayer is required to pay only the principal amount of tax for the relevant period.
4. Step 4: Submission of Declaration
   A declaration or undertaking must be submitted online stating the taxpayer’s intent to settle dues under the amnesty.
5. Step 5: Departmental Verification
   GST authorities verify the accuracy of tax paid and completeness of return filings.
6. Step 6: Issuance of Relief Order
   Upon successful verification, the officer issues an order confirming waiver of interest and penalty.
7. Step 7: Closure of Proceedings
   All pending proceedings for the eligible period are deemed concluded.

The entire process is digitally monitored through the GST portal to ensure transparency.

The scheme differentiates between non-fraud and fraud cases:

• Section 73 – Non-Fraud Cases
  Full waiver of penalty; Partial or full waiver of interest; Payment of principal tax only.
• Section 74 – Fraud Cases
  Relief may be limited; Only part of penalty may be waived; Interest relief depends on nature of suppression.

The objective is to provide maximum benefit to genuine taxpayers while maintaining strictness toward intentional defaulters.

The amnesty scheme may have implications on ITC claims:

• Wrongly availed ITC must be reversed to settle demand.
• If ITC disputes relate to mismatches, taxpayers may need to correct earlier returns.
• ITC for the same period cannot be reclaimed in the future once settled under amnesty.

This ensures that ITC claims remain accurate and aligned with statutory requirements.

Taxpayers involved in appeals or departmental litigation may:

• Withdraw appeals to avail amnesty
• Submit application for settlement
• Obtain relief after completing payment of principal tax

On acceptance of the scheme, ongoing proceedings are terminated for the relevant period.

If a taxpayer fails to complete amnesty requirements, the following consequences apply:

• Demand revives with full interest and penalty
• Recovery proceedings may restart
• Late fees reapply for returns not filed
• Relief claimed may be withdrawn

Compliance within the deadline is therefore essential.

For Taxpayers:

• Reduced financial burden
• Simplification of compliance
• Closure of long-standing disputes
• Restoration of GST compliance rating
• Peace of mind and fewer departmental interventions

For Government:

• Immediate revenue mobilization
• Decongestion of litigation pipeline
• Timely closure of legacy cases
• Improved taxpayer trust and voluntary compliance

The scheme provides a win–win environment for both parties.

Despite its broad benefits, certain limitations exist:

• Cases involving serious fraud may not get full relief
• High principal tax amounts may burden small businesses
• Short deadlines may challenge taxpayers with multiple pending years
• Reconciliation of old records may be time-consuming

Nevertheless, the relief offered usually outweighs the procedural challenges.

The introduction of Section 128A Amnesty Scheme demonstrates the government’s willingness to adopt a pragmatic and taxpayer-friendly approach. It acknowledges historical complexities and technical errors faced by taxpayers during the early years of GST implementation. By incentivizing settlement rather than penalizing inconsistencies, the scheme encourages better compliance culture and supports a healthier tax environment.

The GST Amnesty Scheme under Section 128A is a vital legislative intervention that aims to resolve legacy disputes, clear outstanding liabilities, and enhance the efficiency of the GST administration. It provides taxpayers with an opportunity to regularize past non-compliances by paying only the principal tax and receiving waiver of interest and penalties. The scheme benefits the business community by reducing financial stress and helps the government improve revenue without coercive measures. As GST continues to evolve, initiatives like Section 128A play a critical role in strengthening trust, enhancing transparency, and building a stable compliance ecosystem.