Section 128A : Immunity from Interest and Penalty under Non-Fraud Cases.
DATE: october 22, 2024
In the July 2024 Budget, the government introduced Section 128A under the CGST Act, acknowledging the genuine difficulties businesses faced during the early years of GST—from July 2017 to March 2020.
During this period, many taxpayers received demand orders under Section 73, often for mistakes made while adapting to the new system. Recognizing this, the government decided to offer relief by allowing a waiver of interest and penalty mentioned in these demand orders—as long as certain conditions and safeguards are met.
It’s essentially a one-time opportunity for businesses to clean up past issues without the burden of interest and penalties, provided they act within the prescribed timelines.
Exception for Waiver of Interest.
Key Exception under Circular CIR-238/32/2024-GST (dated 15/10/2024) – Waiver of Interest/Penalty:
The benefit under Section 128A will apply even if the tax has already been paid and the notice/order under Section 73 relates only to interest and/or penalty.
Exception:
Waiver not available where interest is due to delayed filing of returns or delayed reporting of supply in returns.
Such interest is on self-assessed tax and is recoverable under Section 75(12), not under a tax demand.
The CBIC Circular (CIR-238/32/2024-GST) unfairly excludes taxpayers from the Section 128A waiver if they paid tax late voluntarily (via GSTR-3B), stating interest is directly recoverable under Section 75(12).
But if someone didn’t pay tax for years and was caught later under Section 73, they get full waiver on interest/penalty.
This creates a double standard:
- Honest taxpayers face interest with no waiver.
- Defaulters get immunity.
Such interpretation contradicts the law, punishes self-compliance, and undermines fairness. Circulars can’t override the Act, and this needs to be challenged legally or through representations.