Relief under Section 128A of CGST Act: Clarification on Departmental Appeals in Interest and Penalty Cases
The Government has taken another progressive step toward reducing GST litigation by extending clarity on Section 128A of the CGST Act, 2017. This provision, read with Rule 164 of the CGST Rules, allows for waiver of interest, penalty, or both in cases of demand under Section 73, specifically for the financial years 2017-18, 2018-19, and 2019-20, subject to certain conditions.
To address ambiguities, the CBIC had earlier issued Circular No. 238/32/2024-GST dated 15th October 2024, clarifying multiple aspects related to the implementation of Section 128A.
Key Issue Clarified:
Field formations raised a question:
Can a taxpayer who has already paid the tax amount but is facing a departmental appeal only on interest or penalty issues still avail the benefit under Section 128A?
Board’s Stand:
The CBIC has examined the issue and confirmed:
- As per S. No. 4 of the Table in Para 4 of the above circular, cases where the full tax amount is paid, and the remaining dispute only pertains to interest and/or penalty, are indeed eligible for relief under Section 128A.
- The mere fact that the department has filed or is in the process of filing an appeal should not disqualify an otherwise eligible taxpayer from availing the benefits under this section.
- The intent of Section 128A is to reduce unnecessary litigation. Hence, technicalities such as pending departmental appeals should not hinder the application of this beneficial provision.
What Has Been Decided?
Where the following conditions are met:
✅ The entire tax amount under Section 73 has been paid by the taxpayer
✅ The department is in appeal or reviewing the case only on issues related to interest and/or penalty
✅ The taxpayer satisfies all other conditions under Section 128A and Rule 164
Then:
👉 The Proper Officer may initiate steps to withdraw such appeals filed by the department
👉 In cases under review stage, the order under Section 73 may be accepted
Impact and Action Points:
- Taxpayers who have paid tax demands under Section 73 and are only facing issues related to interest or penalty may now confidently opt for Section 128A waiver.
- Field officers are advised to review such appeals in light of this clarification and consider withdrawal to reduce avoidable litigation.
- This clarification aligns with the government’s commitment to ease of doing business and ensures a more taxpayer-friendly GST regime.
Notification Reference: GST
Instruction No. 02/2025-GST
07/04/2025