GST Major Amnesty Scheme under Section 128A — No Interest, No Penalty

The GST Amnesty Scheme under Section 128A is one of the most consequential relief measures since GST’s introduction. Aimed at clearing legacy disputes and reducing litigation, the scheme allows eligible taxpayers to regularise past non-compliances by paying principal tax while obtaining waiver of interest, penalty and sometimes late fees. The policy seeks to reset compliance norms and enable authorities to focus on current enforcement.

Section 128A empowers the Government to waive or reduce interest and penalties for specified defaults. Introduced against a backdrop of initial GST rollout challenges and interpretational disputes, the provision seeks to incentivise settlement, reduce administrative load, and stabilise the GST ecosystem by improving compliance metrics.

The intent is threefold: encourage taxpayers to clear dues; reduce litigation; and improve the accuracy of GST data for policymaking.

Relief typically covers non-filing of returns, delayed tax payments, pending assessments, and demand notices where principal tax remains unpaid. The scheme requires payment of principal tax while interest and penalties are waived under specified conditions. Transitional disputes and certain assessment-related matters can also be covered in select scenarios.

Fraudulent cases, willful misrepresentation and conclusively established tax evasion are ordinarily excluded from the amnesty.

Eligible taxpayers often include non-filers of various returns (GSTR-1/3B/9), cases with demand orders under Sections 73/74 where liabilities remain unpaid, and instances where interest or penalties were levied for delayed compliance. Voluntary disclosure of omitted or under-reported liabilities may also qualify. Exclusions typically include fraud, wilful concealment and criminal liability cases.

Conditions usually include payment of the full principal tax, filing of pending returns within the amnesty window, withdrawal of appeals/objections related to the disputed tax, and a declaration of accuracy/completeness. These safeguards ensure the scheme benefits genuine cases and prevents misuse by habitual defaulters.

Covered liabilities include late return filing (late fees), delayed tax payments (interest waiver), assessment-related penalties, demand orders (penalty components), and in some instances transitional credit disputes. The scheme’s primary aim is to clear punitive charges while securing the principal tax amount.

The operational flow typically starts with identification of defaults, determination of principal tax, submission of pending returns and declarations, payment of principal tax through the GST portal, and automatic waiver of interest/penalty once conditions are met. The system generates acknowledgements to confirm relief.

The process is designed to be largely automated to ensure uniformity, transparency and minimal manual processing.

Benefits to taxpayers

Taxpayers save significant sums as interest and penalties often exceed principal dues. They get an opportunity to reset compliance, improve GST ratings and reduce litigation exposure. Improved cash flow and closure of disputes are major operational benefits.

Benefits to the Government & GST system

The government clears backlog of disputes, increases collection of principal tax, reduces litigation burden, and improves quality of GST data for policymaking. Resources can be reallocated toward current enforcement priorities.

Businesses should use the amnesty to reconcile mismatches (GSTR-1 vs GSTR-3B), correct ITC reversals, regularise non-filings and strengthen internal controls. Proactive participation reduces long-term tax risk and improves stakeholder confidence.

Maintain filing evidence, payment challans, reconciliations, voluntary disclosure statements and withdrawal letters for appeals. These records form the audit trail and are crucial in defending claims of good-faith compliance.

Amnesty applies only to interest/penalty (not principal), excludes fraud/willful evasion, and is time-bound. Misuse, false declarations or late participation can result in prosecution or reversal of relief.

Recommended steps: conduct GST health-check, reconcile liabilities, identify eligible periods, file pending returns, pay principal tax, confirm waiver reflects in portal, and archive proofs. This reduces future assessments and audit friction.

Section 128A’s amnesty is a strategic opportunity to close legacy GST issues, pay principal dues and obtain waiver of punitive components. For taxpayers with outstanding defaults, it presents a pragmatic path to clean compliance and reduced litigation risk — but requires timely action, accurate documentation and honest disclosure.

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