Scheme for GST Amnesty for Non-Filers

Scheme for GST Amnesty for Non-Filers

A GST amnesty scheme is a time-bound CBIC notification that lets lapsed taxpayers file overdue returns, revoke cancelled registrations, or settle pending demands by paying the underlying tax — and sometimes interest — while late fees and penalties are either waived outright or capped at a fraction of the normal amount. The tax itself is never waived. Every amnesty window since 2017 has followed this pattern, and the 2024–2026 cycle is no different. If you have pending GSTR-1, GSTR-3B, GSTR-9 returns or a cancelled registration, the question is not whether to act, but how quickly and in what order.

The Legal Basis: What Actually Powers an Amnesty Scheme

Two provisions in the Central Goods and Services Tax (CGST) Act, 2017 underpin every amnesty notification. Understanding which one applies to your situation determines your strategy.

Section 128 empowers the Central Government, on the GST Council's recommendation, to waive wholly or in part the late fee payable under Section 47. This is the section invoked every time you read "capped late fee" or "nil late fee" for a specific return type and tax period. It has been used for GSTR-1, GSTR-3B, GSTR-4 and GSTR-9 windows repeatedly since 2019.

Section 128A, inserted by the Finance Act, 2024, is the more powerful and newer instrument. It provides a one-time waiver of interest under Section 50 and penalties under Section 73(9) on demand notices and adjudication orders issued under Section 73 only (i.e., non-fraud, non-suppression cases) for the financial years 2017-18, 2018-19 and 2019-20. The condition: pay the full tax demand by the notified deadline (originally March 31, 2025, subsequently extended by CBIC — check the current notification before acting). Payment must be made through Form DRC-03A on the GST portal.

These two instruments solve different problems. Section 128 saves you on return filing late fees. Section 128A saves you on demand-level interest and penalty. They are not interchangeable.

What the 2024–2026 Amnesty Windows Actually Cover

Following the 53rd GST Council meeting (June 2024) and subsequent CBIC notifications, here is what has been in scope during this cycle:

GSTR-3B and GSTR-1 Late Fees

For regular taxpayers with outstanding monthly or quarterly returns, late fees have been capped well below the statutory maximum. The standard late fee under CBIC-reduced rates is Rs. 50 per day (Rs. 25 CGST + Rs. 25 SGST) for returns with a tax liability, subject to a cap of Rs. 10,000 per return (Rs. 5,000 per Act). For nil-liability returns, the rate is lower. Under amnesty notifications, the per-return cap has historically been reduced to nominal amounts — verify the exact cap in the applicable notification number before filing.

GSTR-4 (Composition Dealers)

Composition taxpayers with pending annual GSTR-4 returns have been covered in multiple rounds, with late fees reduced to token amounts for filings made within the prescribed window.

GSTR-9 and GSTR-9C (Annual Returns)

Pending annual returns for FY 2017-18 through FY 2022-23 have attracted reduced late fees in this cycle. For GSTR-9, the statutory late fee is Rs. 200 per day (Rs. 100 CGST + Rs. 100 SGST), capped at 0.25% of turnover in the state. Amnesty schemes have cut this to a fraction — as notified — making it viable for taxpayers who skipped multiple years of annual returns.

Revocation of Cancelled Registrations

Where a GSTIN was cancelled under Section 29(2)(c) — typically for failure to file returns for six or more consecutive months — taxpayers have been given extended windows to apply for revocation through Form GST REG-21. The condition in every such window is that all pending GSTR-1 and GSTR-3B returns must be filed first, with full tax and reduced late fees paid.

Section 128A: Interest and Penalty Waiver on Section 73 Demands

This is the most consequential amnesty instrument in the current cycle. If your entity received a show cause notice (SCN) or adjudication order under Section 73 for FY 2017-18, 2018-19 or 2019-20, you can settle the demand by paying the tax component via Form DRC-03A and obtain a statutory waiver of the interest and the 10% penalty. Given that three-to-six years of interest at 18% per annum can double the effective demand, the saving is often larger than the tax itself.

Who Qualifies — and Who Does Not

Eligible:

• Regular taxpayers with pending GSTR-1 and GSTR-3B for any period covered by the notification
• Composition dealers with pending GSTR-4 returns
• Taxpayers whose GSTIN was cancelled under Section 29(2)(c) for non-filing
• Taxpayers with Section 73 SCNs or orders for FY 2017-18, 2018-19, FY 2019-20 (for Section 128A)
• Entities with a pending GSTR-10 (final return) where registration was voluntarily surrendered but the final return was not filed

Not eligible (standard exclusions):

• Taxpayers with demands under Section 74 (fraud, suppression, wilful misstatement) are expressly excluded from Section 128A
• Demands for FY 2020-21 onwards fall outside Section 128A's scope
• If an appellate authority or court has already passed an order on a demand, specific conditions apply — the benefit is not automatic; consult the relevant notification
• Returns filed after the amnesty window closes attract normal late fees — there is no retroactive extension

Step-by-Step: How to Use an Amnesty Window

Treat this as a structured six-week project, not a last-minute filing rush. Compressed timelines produce incorrect filings, which create fresh mismatches and notices that can erode every rupee of benefit.

Week 1 — Map Your Complete Exposure

1. Log into the GST portal (www.gst.gov.in) and navigate to Returns → Return Dashboard for each GSTIN.
2. List every pending return: form type, period, current filing status.
3. For each pending return, calculate: (a) approximate tax payable, (b) interest at 18% p.a. from original due date to today, (c) normal late fee under cap, (d) amnesty late fee under the applicable notification.
4. For each active Section 73 demand, pull the SCN or order and note the tax, interest and penalty components separately.
5. If any GSTIN has been cancelled, note the exact cancellation date and list all returns due from last-filed period to cancellation date.

Week 2 — Reconcile Before You File

1. Reconcile your outward supplies register with GSTR-1 data on the portal, period by period.
2. Reconcile ITC claimed in GSTR-3B with GSTR-2B for each month. Identify any excess ITC that needs reversal before filing.
3. Do not file approximate numbers to beat the deadline. An incorrect return filed under amnesty is still incorrect — it will trigger an ASMT-10 scrutiny notice, negating the benefit.

Week 3 — Arrange Funds and Plan Payment Sequence

1. Compute total cash outflow: tax + interest (amnesty may not waive interest fully in return-filing scenarios) + capped late fee across all pending periods.
2. Ensure sufficient balance in your Electronic Cash Ledger before beginning to file.
3. For Section 128A cases, set aside the exact tax amount and confirm payment will be made via DRC-03A — this is a separate payment mechanism from the regular PMT-06 challan.

Week 4 — File Returns Chronologically

1. File GSTR-1 before GSTR-3B for each period. The portal enforces this dependency.
2. File the oldest pending period first. The portal blocks filing of later periods if earlier ones remain open.
3. After each GSTR-3B is filed, verify the late fee charged on the portal matches the amnesty cap. If the system computes a higher fee (common when notifications are freshly effective), raise a portal grievance and retain the screenshot.

Week 5 — Complete Revocation or Demand Closure

1. For revocation: After filing all pending returns and paying dues, navigate to Registration → Application for Revocation of Cancellation and submit Form GST REG-21. Attach proof of return filings.
2. For Section 128A demands: After paying tax via DRC-03A, file the undertaking or application as prescribed in the relevant CBIC circular. Retain the acknowledgement number.
3. Note that withdrawal of a pending appeal may be a condition in some Section 128A cases. Sequence the payment first, then the withdrawal — not the other way around.

Week 6 — Verify Closure and Preserve Records

1. Monitor the portal for revocation approval (typically 7–30 working days from application).
2. Confirm demand orders show as closed or resolved in your GST login.
3. Preserve all ARNs, DRC-03A payment acknowledgements, and GSTR filing acknowledgements in a permanent compliance file — digital and physical. Future scrutiny notices for these periods can arrive years later.

Worked Example 1 — Late Fee Savings for a GSTR-3B Non-Filer

Situation: A sole proprietor operating a trading business with annual turnover of Rs. 80 lakhs did not file GSTR-3B for 18 consecutive months (April 2023 to September 2024) due to a dispute with his bookkeeper. Each of the 18 returns carried a tax liability.

Normal late fee computation (without amnesty):

• Rate (as reduced by CBIC): Rs. 50 per day per return (Rs. 25 CGST + Rs. 25 SGST)
• Cap per return: Rs. 10,000 (Rs. 5,000 per Act)
• Each return was more than 200 days overdue, so every return hit the maximum cap
• 18 returns × Rs. 10,000 = Rs. 1,80,000 in late fees alone

Under amnesty (based on historical CBIC notification pattern, verify exact cap for the applicable window):

• Late fee capped at approximately Rs. 500 per return for returns with tax liability
• 18 returns × Rs. 500 = Rs. 9,000

Late fee saving alone: Rs. 1,71,000

The taxpayer still owed tax of approximately Rs. 4,80,000 and interest of Rs. 62,000 (18% p.a. on each period's outstanding tax). Total outflow under amnesty: Rs. 4,80,000 + Rs. 62,000 + Rs. 9,000 = Rs. 5,51,000. Without the amnesty, the same compliance exercise would have cost Rs. 7,22,000 — purely from the late fee difference of Rs. 1,71,000.

Worked Example 2 — Section 128A Demand Waiver

Situation: A private limited company in the manufacturing sector received an adjudication order under Section 73 for FY 2018-19. The order read:

Without Section 128A: The company must pay Rs. 10,88,000 to close the demand. If it chose to appeal, it would pre-deposit 10% of disputed tax (Rs. 85,000) before the appellate authority.

With Section 128A: The company pays Rs. 8,50,000 via Form DRC-03A by the notified deadline. The interest of Rs. 1,53,000 and the penalty of Rs. 85,000 — totalling Rs. 2,38,000 — are waived by statute.

Net saving: Rs. 2,38,000, achieved by simply paying what was always owed before the deadline.

Critical condition: The case must be under Section 73. If the adjudicating officer had invoked Section 74 (alleging fraud or suppression), Section 128A does not apply and the full demand — tax, interest, and penalty — remains payable.

Registration Revocation Under Amnesty — Sequence Is Everything

Revocation is not automatic on filing returns. Follow this exact sequence or the GST portal will reject your REG-21 application:

1. Confirm the cancellation order is under Section 29(2)(c) — non-filing. If cancelled on the business's own application (Section 29(1)), the revocation route does not apply.
2. File all pending GSTR-1 and GSTR-3B returns from the last-filed period to the date of cancellation, in chronological order, with full tax, interest, and amnesty-rate late fee.
3. Do not file GSTR-10. GSTR-10 is the final return on surrender/cancellation — filing it signals acceptance of cancellation and permanently forecloses revocation.
4. Apply through Form GST REG-21 on the portal. Attach the return filing acknowledgements.
5. The assessing officer must process the application within 30 working days. If rejected, file Form GST REG-24 (appeal against rejection) within 30 days of the rejection order.

The single most common and most costly mistake in revocation cases is inadvertently filing GSTR-10. Once filed, revocation becomes legally impossible and the GSTIN is permanently closed.

Common Mistakes and Pitfalls to Avoid

Filing rushed, inaccurate returns to beat the deadline Incorrect numbers in outward supplies or ITC in a return filed under amnesty will create mismatches between GSTR-1, GSTR-3B and GSTR-2B. The portal generates ASMT-10 notices automatically. The penalty exposure from those notices can easily exceed the late fee saving from the amnesty. Accuracy is not optional even under amnesty.

Treating the late fee waiver as an interest waiver Amnesty caps late fees; interest at 18% per annum under Section 50 continues to accrue on unpaid tax every day, including during the amnesty window. A taxpayer who delays filing by two months within the amnesty window incurs additional interest that is not retroactively waived. File as early as possible once you have reconciled your numbers.

Assuming all old demands qualify for Section 128A Section 128A covers FY 2017-18, 2018-19 and 2019-20 only, and Section 73 cases only. Demands for FY 2020-21 onwards, or any case where Section 74 has been invoked, are outside scope. Acting on a wrong assumption and paying tax without eligibility does not entitle you to a refund of the paid amount simply because Section 128A did not apply.

Withdrawing an appeal before paying the tax Where Section 128A requires withdrawal of a pending appeal as a condition, withdraw the appeal only after confirming that the tax payment via DRC-03A has been accepted and acknowledged. An accepted withdrawal combined with a failed payment leaves you with no demand in appeal and no amnesty benefit — the worst possible outcome.

Losing proof of amnesty filings Amnesty windows close. After closure, the portal returns to normal late fee computation. If a future audit or scrutiny notice for a past period arrives (which can happen years later), and you cannot produce the ARN, DRC-03A acknowledgement or GSTR filing receipts, you may be required to prove compliance from scratch under adverse conditions. Maintain a permanent, organised digital folder for every amnesty action taken.

Coordinating Amnesty Action With Your Books and Audit

Every return filed under an amnesty scheme ripples into three other compliance documents that must tell a consistent story:

Statutory accounts: Late tax, interest and fees paid for prior periods must be recognised correctly — either in the year of the original obligation (requiring a restatement or prior-period adjustment) or as an expense in the current year with appropriate disclosure. Your auditor needs to know before the books are finalised.

Tax audit (Form 3CD): Clause 44 of the 3CD requires disclosure of GST-related information, and the auditor will note defaults and their resolution. If GSTR-1 turnover for a past year has been revised upward through amnesty filing, the income-tax return for that assessment year must be examined for consistency.

Income-Tax Return (ITR): Turnover declared in GSTR-1 must reconcile with turnover in the ITR. AIS/TIS (Annual Information Statement / Taxpayer Information Summary) on the income-tax portal now aggregates GST turnover automatically. A large, late GSTR-1 filing will appear in your AIS and may trigger an income-tax notice if the ITR for the relevant AY does not reflect it. Review the ITR for the impacted assessment year and, if necessary, file a revised or updated return under Section 139(8A) before the relevant ITR deadline.

Co-ordinate with your auditor and tax advisor at the planning stage — not after the amnesty filings are done.

Process Re-Engineering: Making This the Last Amnesty You Need

Every business that has had to use an amnesty window should treat the experience as a process audit. The root cause of GST non-compliance in small and mid-size businesses is almost always one of three things: no named internal owner for GST, manual reconciliation that takes too long to be done monthly, or cash-flow gaps that cause returns to be held back.

Practical fixes you can implement immediately:

• Assign a named person (internal or external) with explicit accountability for GSTR-1 and GSTR-3B by their due dates — not by a date that is convenient.
• Set GSTR-1 and GSTR-3B filing as recurring calendar events with a three-day buffer before the statutory due date.
• Run a GSTR-2B versus Purchase Register reconciliation every month, before GSTR-3B is filed. This prevents ITC mismatches from accumulating into a quarterly or annual crisis.
• If you use the QRMP (Quarterly Return Monthly Payment) scheme, file the IFF (Invoice Furnishing Facility) monthly so your buyers can claim ITC on time and your supplier relationships are protected.
• Score your key vendors on their GSTR-1 filing consistency. A vendor who repeatedly fails to file GSTR-1 makes your ITC claims vulnerable; it is reasonable to make timely filing a contractual condition for vendors above a certain annual spend threshold.

The businesses that appear at every amnesty window — FY 2017-18, then FY 2020-21, then FY 2023-24 — are almost uniformly the ones that treated each prior window as a one-off rescue rather than a trigger for systemic change.

Key Takeaways

• Tax is never waived. Amnesty schemes reduce or eliminate late fees and, under Section 128A, interest and penalties on pre-2020 Section 73 demands. The tax itself must always be paid in full.
• Section 128A is the most valuable tool in the current cycle. It can eliminate 15–30% of total demand exposure for FY 2017-18, 2018-19 and FY 2019-20 cases. Pay the tax via Form DRC-03A by the notified deadline to qualify.
• File chronologically, file accurately. Incorrect numbers filed under amnesty generate ASMT-10 notices that can exceed the late fee saving. Reconcile before you file, not after.
• Do not file GSTR-10 if your goal is revocation. GSTR-10 finalises the cancellation. Filing it forecloses any possibility of reverting the GSTIN.
• Interest accrues throughout the amnesty window. File as early as possible within the window to minimise interest — every day of delay adds to a bill that cannot later be waived.
• Coordinate with your auditor before amnesty filings, not after. Revised GSTR-1 turnover affects AIS data, Form 3CD disclosures and possibly the ITR for the impacted assessment year. A piecemeal approach creates fresh notices.
• Use every amnesty window as a diagnostic trigger. Identify the process gap that caused the default, fix it, and make it structural. The goal is to make each amnesty scheme the last one you personally need — not the next one you are waiting for.