Big GST relief in budget 2024: No need to pay interest and penalty for these GST notices
July 24, 2024
Synopsis
Budget 2024: Relief for GST registered individuals and companies. "The waiver of interest and penalties for tax disputes faced by genuine taxpayers will reduce the financial burden on taxpayers, particularly benefiting small businesses and individual taxpayers who may face cash flow constraints and cannot really afford to litigate," says Siddharth Surana, Director, RSM India.
Budget 2024 has provided some relief to individuals and companies registered under (Goods and Services Tax) GST. This relief comes in the form of a conditional scheme that allows for the waiver of interest and penalty for specified non-fraudulent GST demand notices for the financial years 2017-18 to 2019-20.
"This is one of the most anticipated and welcomed step taken by the Central Government for bringing in waiver of interest and penalty for every taxpayer, be it an individual, a company, or otherwise," says Apoorv Phillips, Senior Associate, Sirmacs Consultancy Services (Law Firm).
Which GST notices are eligible for waiver penalty and interest
Experts say that the benefit of this conditional waiver scheme applies only if you have received a section 73 GST notice, i.e., non-fraud notice.
According to Siddharth Surana, Director, RSM India, "The Finance Bill introduces Section 128A, which provides a waiver of interest and penalties for non-fraudulent taxpayers being assessed only under Section 73 for the periods FY 2017-18, 2018-19, and 2019-20. The taxpayer must not be assessed on grounds of alleged fraud, willful misrepresentation, or suppression of facts," says Surana.
Vivek Baj, Partner, Economic Laws Practice (ELP) says that the type of GST notice-fraud and non-fraud depends on the circumstances of the case.
"If the assessee primarily intends to evade tax/suppressed information/provides statements which are not factually correct, then the GST Authorities issue notices deciding to be qualified as 'fraud cases'. In cases of inadvertent errors whereby intention is not to evade taxes/the issue pertains to be of legal interpretational issue or in cases where there is no loss to the exchequer, such matters are decided as 'non-fraud' notices," Baj says.
What are the conditions for getting waiver of GST penalty and interest in GST demand notices
GST demand notices issued under section 73 issued for FYs 2017-18 to 2019-20 and where the GST demand amount has been paid are eligible for this conditional waiver.
According to Surana, "The waiver of interest and penalty is conditional and is subject to payment of tax amount under dispute by 31 March 2025. Further, this waiver excludes cases of erroneously sanctioned refunds and applies only to open cases, which are still in appeal or under dispute, and do not appear to extend to cases where the taxpayer has already paid interest and penalty."
According to EY India, the Budget has waived off interest and penalty granted in 'non-fraud' GST cases for FY 2018-19 to 2019-20. The following scenarios will be covered under this waiver scheme:
Notice issued but order has not been passed, or
Order passed by GST Proper Officer, but Appellate Authority or Revisional Authority has not passed the order, or
Order passed by Appellate Authority or Revisional Authority, but Tribunal has not passed the order
Waiver will not be available in case of erroneous refunds.
How will this conditional waiver scheme impact you
"I believe the proposed amendment under Section 128A of the CGST Act will offer significant benefits to GST-registered persons, including individuals," says Surana.
Surana explains the rationale behind why he says individuals will benefit from this conditional waiver scheme. "Firstly, the waiver of interest and penalties for tax disputes faced by genuine taxpayers will reduce the financial burden on taxpayers, particularly benefiting small businesses and individual taxpayers who may face cash flow constraints and cannot really afford to litigate. This provision specifically addresses legacy issues from the initial years of GST implementation (FY 2017-18 to FY 2019-20), providing a much-needed resolution to lingering disputes without imposing additional financial strain," he says.
Experts say that this amendment encourages voluntary compliance by incentivizing taxpayers to come forward and settle their outstanding tax dues for past periods.
"The clear conditions set forth for availing the benefits under Section 128A provide certainty and transparency, allowing taxpayers to effectively plan their finances. Also, by focusing relief on genuine cases and excluding those involving fraud, willful misrepresentation, or suppression of facts, the amendment recognises genuine issues arising from GST implementation and is extending support to compliant taxpayers. Additionally, the provision encourages voluntary compliance by allowing the waiver of penalty and interest even if the tax is paid after the issuance of notice but before the specified date," says Surana.
Philips says that some of his clients who were issued a GST show cause notice (SCN) under section 73 were waiting in anticipation for the waiver, as the GST Council had recommended to the government about this in last month's meeting.
"Though this amendment would be like a blessing in disguise for many taxpayers, however, those who had already paid their taxes and whose demand had been finalized under Section 73 are at a great loss. As no refund of the amount paid would be allowed by the Government," says Philips.
[The Economic Times]
