Dear All,

The Central Board of Indirect taxes and Customs (‘the CBIC’) has issued Circular 238/32/2024-GST dated 15 October 2024 to provide clarifications on certain aspects related to applicability of Section 128A (which provide for waiver of interest or penalty or both, relating to demands raised under section 73 of the CGST Act pertaining to FY 2017- 18, 2018-19 and 2019-20). The key aspects of the clarifications are summarized hereinbelow:

• Any tax amount paid whether before or after effective date of Section 128A (i.e., 1 November 2024), irrespective whether such tax payments are made before issuance of show cause notice (‘SCN’)/demand order or after that, shall be considered for the waiver of interest/ penalty provided it was intended to be paid for the demand and paid before the notified date (i.e., 31 March 2025)

• Tax recovered by the tax officers from any third party on behalf of the taxpayer would also be considered as tax paid towards the demand, if recovered on or before the notified date (i.e., 31 March 2025). However, interest and penalty recovered cannot be adjusted against the amount payable under Section 128A

• If tax has already been paid and the SCN/ demand order only pertain to interest and penalty amounts, then same can be considered for waiver Section 128A. However, the waiver shall not be applicable in the following cases

• • Interest and penalty due to delayed filing of returns or
  • Interest and penalty due to delayed reporting of any supply
• The waiver is only available in case of full payment of tax demand as per the SCN/ demand order and not available against partial payment of tax (i.e., payment of tax issue wise is not allowed for waiver)

• Transitional credit wrongly availed during FY 2017-18 to FY 2019-20 is covered under Section 128A for waiver of interest and penalty

• Tax payable under Section 128A can be paid using input tax credit, except in cases of liabilities under reverse charge mechanism or erroneous refunds, which require payment in cash

• Section 128A does not apply in cases of IGST payable on imports as in such cases demand is issued under the provisions of Customs Act.