FEBRUARY 17, 2025

By CA Saradha Hariharan

GST Amnesty Scheme is introduced vide Finance (No. 2) Act, 2024 based on 53rd GST Council Meeting recommendation on 22nd June 2024 to provide Conditional Waiver of Interest or Penalty or both for demands for FY 2017-18, 2018-19 & 2019-20 under Section 73, through Section 128A of the CGST Act. March 31, 2025 is the deadline to pay full tax demands and apply for scheme benefit.

Further, Rule 164 and Circular 238 were issued and Form SPL-02 was finally introduced in the portal effective January 2025.

While amnesty scheme was introduced to reduce litigation and offer relief, practical challenges and complexities remain, especially regarding eligibility and procedural requirements. This resembles separate set of proceedings in itself, adding to compliance burdens.

Here, we discuss such practical challenges and also PROVIDE OUR SUGGESTIONS to consider, with the best interest of settling tax disputes.

PRACTICAL CHALLENGES, LIMITATIONS & COMPLEXITIES

1. Procedural Complexities

Taxpayers must adhere to detailed review process involving forms, documentation, and response opportunities with layers of complexity to perceive this waiver application process as an additional, independent proceeding rather than an expedited relief measure.

While original intention is to settle the disputes, the procedural aspects could lead to new rounds of disputes.

Suggestion: Streamline verification process to reduce procedural burdens and ensure expedited dispute resolution.

2. No refund of already paid interest / penalty

No refund will be granted for interest and penalties already paid. This clause is restrictive to genuine taxpayers who have settled such amounts in good faith, as it denies the opportunity to reclaim these payments.

This would discourage proactiveness of taxpayers in future from ensuring regulatory compliances, when their proactive approach is not adequately acknowledged or rewarded.

Suggestion: Consider allowing partial refunds or credits for already paid interest/penalties to encourage taxpayer proactiveness and align the scheme's objectives with fairness and compliance incentives.

3. Self-assessed tax not covered

Waiver does not extend to delays in filing returns or reporting supplies, creating ambiguity for genuine taxpayers striving to comply with tax laws. Taxpayer who identifies an unpaid liability is expected to rectify it promptly upon discovery, paying tax even before receiving any notice or demand. However, this scheme excludes such proactive self-compliant taxpayers who already discharged their liabilities on self-assessment basis well before tax authorities identifies them, effectively rewarding those who pay demand upon assessment.

This inadvertently creates a situation where taxpayers might defer liabilities, anticipating periodic amnesty schemes that allow them to settle dues without interest or penalties, undermining efforts of bona fide taxpayers and risks encouraging non-compliance.

Taxpayers may perceive that Amnesty schemes are more lenient towards non-compliant entities, offering them periodic opportunities to regularize defaults without full financial consequences. This disparity challenges principles of fairness and erode trust of honest taxpayers.

Suggestion: To strike a balance between fostering compliance and ensuring genuine taxpayers are rewarded equally, by extending waiver for voluntarily settled liabilities, encouraging proactive compliance.

4. "All or Nothing" Condition

A key limitation is that taxpayers must pay entire outstanding tax to qualify for waiver, leaving no room for partial payments and dispute the rest. When law permits individual or multiple proceedings for the same FY for multiple subject matters, waiver should also be made available subject matter-wise. Taxpayers should have the choice of deciding, thereby creating more room for disputes settlement, instead of imposing a handicapped situation to litigate for entire bunch of matters.

Suggestion: Subject-matter-wise settlements must be allowed providing flexibility and promote partial dispute resolution.

5. Impact on Disputed and Unverified Demands

When demands include contested or unverified amounts (e.g., cases where the tax officer hasn't fully acknowledged taxpayer responses), taxpayers are left with choice of either accepting confirmed demand or forfeiting waiver. This creates dilemma: taxpayers may feel compelled to pay amounts not fully accurate, that would be otherwise disputed, just to obtain waiver. This undermines relief objective, as taxpayers may have to bear cost they might otherwise dispute.

Suggestion: Create option for partial relief and payment for verified demand, thus allowing to contest unverified amounts to ensure fairness.

6. Multi-Year Demand Notices and Ineligible Periods

For notices including years outside waiver eligibility (i.e., FY 2020-21 and beyond), scheme does not allow taxpayers to apply selectively. This means effectively paying dues for periods outside amnesty scheme, leaving taxpayers without recourse for periods may be wished to contest, resulting in dilemma: pay full demand across all years or forgo amnesty benefit.

Suggestion: Allow taxpayers to apply waiver selectively year-wise for multi-year demands.

7. Erroneous Refund Ineligibility

Scheme does not extend to erroneous refunds, though part of an order including other demands is eligible for waiver. Hence, erroneous refund-amount must be accepted as is along with interest & penalty. Taxpayer cannot contest it under waiver provisions, forcing to settle erroneous refund without opportunity to contest.

Suggestion: Expand scheme to include erroneous refunds. If not, to make scheme accessible issue-wise.

8. Exclusion of Section 74

Scheme excludes demands u/s 74, which requires establishing fraudulent intent that must be substantiated. However, several instances where notices u/s 74 were issued solely because of time limitation u/s 73 had expired.

Additionally, considering unified time limit for both fraud and non-fraud cases introduced vide Section 74A replacing 73 & 74 from FY 24-25, it may be prudent to extend amnesty scheme to cases u/s 74 as well.

Furthermore, Section 75(2) only cover order of Appellate Authority, Appellate Tribunal, or court. However, since there is no explicit provision empowering adjudicating officer to make assessment u/s 73 for notice issued u/s 74, even if convinced on facts and circumstances responded, officer is handicapped from carrying out adjudication process in legitimate manner.

Suggestion: Amnesty scheme can be extended to Section 74 cases, which are most likely issued due to time limitation u/s 73. Additionally, issue clear guidelines empowering adjudicating officers to reassess cases u/s 73 based on evidence, at least for notice issued u/s 74 within time limitation u/s 73. Thus, taxpayer could possibly avail relief at adjudication level rather than appeal and get it redetermined u/s 73 by applying for the scheme.

9. Declaration overriding proviso

When submitting applications Form SPL, taxpayers are required to furnish declaration mandating that, in the event the department files an appeal against the said order or initiates proceedings under Section 108 for revision of the order and the appellate tribunal or revisional authority subsequently enhances the tax liability, the taxpayer is obliged to undertake that he shall pay the enhanced liability within 3 months of the issuance of such an order.

Whereas as per the second proviso to Section 128A and Rule 164(16), sanction order SPL05 / SPL06 become void if enhanced tax liability is not paid within the time limit. Thus, nowhere in the law is it mandated that taxpayer should pay the additional enhanced tax liability. It only imposes a condition to pay additional tax to continue to avail waiver benefit, whereas declaration explicitly forces taxpayer to undertake that such additional tax shall be paid upon such enhanced liability. Thus, the declaration clause acts as a warning and acts as a deterrence for taxpayers to apply for scheme.

Suggestion: Form declaration be revised aligning with legal provisions.

10. No finality even upon obtaining waiver

Scheme does not prevent department from filing appeal or rectification against order sanctioning waiver benefit. Thus, despite settlement to conclude dispute to buy peace of mind, taxpayer still runs the risk of department appealing against such waiver sanction order. Thus, real objective of dispute settlement is not achieved.

Suggestion: To include legal provision preventing department from appealing against an order sanctioning waiver benefit, to avoid further litigation, as proceedings are concluded u/s 128A. Even recent Instruction No. 02/2025 dt 7th Feb covers department appeal against interest and/or penalty only and hence inadequate.

11. No injunction from Appeal / Rectification by Department

For orders pertaining to FY 19-20, there could be scenario of taxpayers applying for amnesty benefit whereas department also has option to file appeal against the said order, since the time limit to file appeal for FY 19-20 by department lapses by end of February, 2025 based on the actual date of order. Thus, even after opting for amnesty and paying full tax liability, taxpayer runs the risk of department appeal. Thus, amnesty does not provide finality assurance. Taxpayers to assess risk of appeal before proceeding with payment under the scheme.

Suggestion:

CBIC to issue internal instruction to avoid appeals in cases where amnesty is applied.

12. No Waiver Option for Future Uncertainty

Circumstances where taxpayer doesn't have demand as of now, though there is no certainty that such proceedings are concluded, since department may appeal against such dropped order and the tax liability could be confirmed in the appellate forum in future. Thus, taxpayer loses opportunity to settle dispute under amnesty in future, since there is neither a demand at present to apply for scheme, nor an explicit provision in the law extending an option in future to apply for amnesty where a dropped order was originally prevalent. Similar to second proviso to Section 128A(1), an approach to be taken for cases where order has been dropped now but demand gets confirmed in future in the appellate forum.

Suggestion: Provisions of Section 128A be amended to make enhancement of NIL orders inclusive in amnesty scheme in future.

13. Refund of Tax paid

If department appeals against waiver order, or if withdrawn original appeal gets reinstated in the event of amnesty being rejected, tax dispute continues. In such scenario, where requirement is only to pay 10% or 20% of tax amount as pre-deposit, taxpayer has instead paid full tax amount expecting amnesty waiver. This results in unwarranted cash flow impact and hence there must be clarity to refund differential tax of 80% - 90% paid in excess.

Suggestion: Explicit circular be issued clarifying sanction of refund of excess tax paid beyond pre-deposit requirement, if amnesty application is rejected or if the appeal process is reinstated.

14. Lengthy Appeal Process Post-Rejection

Process for waiver applications is an independent proceeding with its multiple stages of application, examination, possible rejection, and eventual appeal, creating an extended timeline that can delay relief.

Because rejection essentially forces taxpayer to "double back" into an appeal process, again it must be revisited, recompile responses, and face another round of document verification and hearings. Additionally, when there is a rejection of waiver, taxpayer has to take a crucial decision of either restoring original appeal or to initiate a new appeal against the waiver order. By choosing one, taxpayers effectively stand to lose the benefit of the other. This circular process not only extends the timeline significantly but also introduces repetitive administrative burdens. The entire process may take several months or years from initial application to a final conclusion, involving substantial costs, including legal fees, administrative expenses, and the opportunity cost of delayed resolution.

Suggestion: Government should consider simplifying procedure, with objective of settling tax disputes. Taxpayers should carefully assess their options and timelines, to streamline decisions and minimize the risk of losing both waiver and appeal benefits.

Conclusion

Waiver u/s 128A is undoubtedly a major relief mechanism, but imposes burdensome procedural compliance, limitations and stringent timeline, resulting in a longer path of compliance and litigations in circular manner. GST Council should consider widening the scope and simplifying procedure to settle disputes, minimizing litigation and expediting revenue collections.

Although the scheme was announced in June 2024, forms were finally made available in the portal only in January 2025, whereas, time limit to apply is March 31, 2025. However, a taxpayer requires mindful time to analyze risk and benefits of availing this scheme. Therefore, CBIC should consider extending the time limit to apply for this scheme.

Multiple decision making at multiple stages results in choosing one over the other, thereby foregoing opportunity benefit of the other. Taxpayers should exercise abundant care & caution and take informed decisions to assess cost benefit of scheme or to litigate any issues.

[The author is Co-Founder of GGSH & Co. LLP, Chartered Accountants, Chennai and the views expressed are strictly personal.]