1.      100% waiver from interest and penalty In respect of demand notices issued u/s 73 for the initial three years of GST implementation i.e., FY 2017-18, FY 2018-19 and FY 2019-20.

2.      Recommendation has been made on account of difficulties faced by the taxpayers during the initial years of GST implementation.

3.      In GST, a taxpayer can be adjudicated, audited, investigated, etc.

4.      Adjudication primarily takes place u/s 61 which starts with issuance of GST ASMT-10, DRC-01A, DRC-01, and end up in issuance of demand order in GST DRC-07.

5.      Audit u/s 65 is followed up by the adjudicating authority by way of issuance of GST DRC-01 and finally it culminates into demand order in GST DRC-07 and likewise with Investigation.

6.      On being aggrieved by the demand order, taxpayer files an appeal in Form GST APL-01.

7.      The most common issues faced by most of the taxpayers is in relation to section 16(2)(c) wherein ITC was denied on the grounds that ITC is not appearing in GSTR 2A, or supplier has not filed his returns in GSTR 3B, or suppliers registration has been cancelled retrospectively, etc. and under section 16(4) for delay in availing ITC beyond specified timeline.

8.      It is worthwhile to note that the recommendation from the GST Council of waiver from interest and penalty is not restricted to common issues, or any specific issue but is a blanket waiver irrespective of issues involved in the said demand.

9.      Undoubtedly, the time limit to issue SCN for all the three FYs has been over and there are tonnes of notices issued u/s 73 which signifies that taxpayer is demanded with the tax, interest and penalty which is without an element of fraud. Hence, considering it as an important criteria, Government has thoughtfully granted waiver from interest and penalty with the condition of full payment of tax demanded in the notice upto 31-3-2025.

10.  The question that arises is what is the meaning of tax demanded in the ‘notice’? The time limit to issue ‘notice’ in GST DRC-01 has already been over for all the said three FYs. In fact, the time limit to issue demand orders has already been over for FY 2017-18 and FY 2018-19 (for FY 2019-20, there is still time for issuance of demand order in GST DRC-07), therefore, there could be certain possibilities, either:

·         The taxpayer would have paid the entire tax, interest and penalty against such SCN or

·         The Proper Officer would have issued Demand Order in GST DRC-07, or

·         The Proper Officer would have issued SCN in DRC-01 and demand order in GST DRC-07 is yet to be issued.

Hence, the relaxation does not seem to offer ‘refund’ of interest and penalty to the taxpayers who have already paid such amount but is applicable only to the taxpayers whose demands are yet active whether at adjudication level or appellate level.

11.  Once the demand order is issued, there are certain possibilities, either:

·         the taxpayer would have filed an appeal within the time limit and the issue would be pending before the appellate authority, or

·         the taxpayer would have filed an appeal beyond the time limit and the issue would be pending before the appellate authority, or

·         the recovery would have been made by the department and taxpayer would have filed the appeal, or

·         the recovery would have been made by the department and taxpayer has not filed the appeal.

It appears that where the appeals filed within the timeline are lying before the appellate authority irrespective of fact whether the recovery has been made by the department or not, the waiver from interest and penalty can be availed subject to the condition of full payment of tax. It seems that the authority to grant waiver would be given in the hands of both the adjudicating officer and the appellate authority because the appellate authority cannot remand the matter back to the adjudicating authority.

12.  Further, the question that arises is whether the said waiver can be claimed only when the entire tax demanded in the SCN/Demand Order has been paid or can be waiver be claimed on issues independent of each other in one SCN/Demand Order.

13.  Furthermore, the question that arises is whether the SCN/Demand Order issued only in respect of interest and/or penalty be suo-moto dropped/waiver can be applied as the waiver scheme is conditional upon payment of tax. So, will the scheme treat the tax paid prior to its introduction as the condition of tax paid till 31-3-2025 has been satisfied.

14.  The recommendation categorically states that such waiver scheme will not cover demand of errorneous refunds, meaning thereby that interest and penalty will be levied.

15.  Currently, the GST law has the powers to collect the tax and give waiver from late fees but does not have the power to provide waiver from interest or penalty or both. Therefore, in order to give an effect to this recommendation, it has been recommended that a new section 128A will be inserted in the law which can be expected in the upcoming Budget.

16.  This will certainly ease the burden of litigation from the taxpayers in case of genuine mistakes. In certain cases, it has been observed that the interest amount was exceeding the tax amount merely on account of the fact that taxpayers were been adjudicated for the initial three years during the end of 6th year of GST implementation. In recent years, it has been observed that the taxpayers are given the notice of discrepancy either during the same FY or immediately after the end, so in such cases, on account of genuine mistakes, taxpayers end up paying tax within a bare nominal interest amount unlike in cases of adjudication/audit/investigation in respect of initial 3 years of GST implementation. On the other side, it will also trigger as a self-compliance mechanism, wherein taxpayers will actively participate in getting rid of litigations which are devoid of any merit. Further, it will also ease the burden of the adjudicating as well as appellate authority and will be able to focus better on the current years adjudication with proper allocation of time to each new cases.

17.  Notably, waiver is offered only in respect of those FYs in respect of which CBIC has extended the period of limitation to issue demand orders by evoking powers under section 168A of the CGST Act, 2017. Extension under section 168A was taken on the grounds of force majure but the subsequent extension taken subsequent to original one were challenged before the various Hon’ble High Courts. Many SCNs and Demand Orders were challenged on such basis considering it as time barred and beyond the powers of section 168A, and reference to such cases were taken even while filing replies to SCN and as ground before the appellate authority. Now that waiver has been given, taxpayers need to take a call, whether to continue litigating the matter on this ground or to avail the benefits of this scheme by paying tax in case the original issue covered in the SCN/Demand Order is devoid of any merit.

18.  It is important that the taxpayers should stock take the litigations pending at the appellate stage (including SCN stage for FY 2019-20) for the initial 3 years of GST implementation and ascertain the strength of the cases (in fact, issue-wise in respect of each demand orders) in respect of its chances of being sailing through the higher judicial forums. The issues that does not have sound grounds could be considered for such an amnesty scheme by paying tax till 31-3-2025 else the interest may further tailor the margins of the business.

19.  Further, the decision by the taxpayer should be taken keeping in mind certain other recommendations made during the said GST Council Meeting like:

·         ITC allowed which has been taken beyond the time limit specified in section 16(4) in respect of FY 2017-18, FY 2018-19, FY 2019-20 and FY 2020-21 but availed in any of the GSTR 3Bs filled up to 30-11-2021 shall be allowed by making retrospective amendment in section 16(4) of the CGST Act, 2017. It is worthwhile to note that since the retrospective amendment is recommended to be made in section 16(4) itself, the demand in itself won’t sustain and therefore, there is no question of any conditional waiver as no ITC is reversible. It is further to be noted that unlike this amnesty scheme, possibility of refund of ITC reversed along-with interest and penalty arises, as the relaxation is not governed under amnesty scheme but is a retrospective amendment in the law.

·         Insertion of a new section 11A in CGST Act, 2017 to give powers to the Government, on the recommendations of the Council, to allow regularization of non-levy or short levy of GST, where tax was being short paid or not paid due to common trade practices. Though the said section is expected to be passed in the upcoming budget and based on recommendations of the GST Council (the next or subsequent GST Council meetings), certain common trade practices may be recommended by the GST Council to be regularised, therefore, taxpayers need to be cautious of the fact if the same needs to be considered for amnesty or not, though the fact remains that such powers under this section would be exercised with utmost due consideration of the specific issue.

Hope the aforesaid adheres to your professional/business needs. In case of any clarification, please feel free to reach us at info@singhaniasgstconsultancy.com

Disclaimer: The views are strictly personal.