GST Amnesty Scheme 2025 — Waiver of Interest and Penalty for Pending Demands

GST Amnesty Scheme 2025 — Waiver of Interest and Penalty for Pending Demands

Section 128A of the CGST Act, enacted by the Finance (No. 2) Act 2024 and brought into force by CBIC Notification No. 21/2024-Central Tax dated 8 October 2024, offers a defined exit from old GST disputes: pay only the principal tax on demands under Section 73 for FY 2017-18, FY 2018-19 and FY 2019-20, and the government waives interest under Section 50 and penalty in full. Payment flows through Form DRC-03; the amnesty application is filed in Form GST SPL-01 or SPL-02 depending on the stage of proceedings; any pending appeal must be withdrawn. The scheme does not touch Section 74 (fraud) demands — not even partially.

What Section 128A Actually Does

Section 128A was inserted into the Central Goods and Services Tax Act, 2017 by the Finance (No. 2) Act, 2024, which received Presidential assent on 16 August 2024. CBIC operationalised it through Notification No. 21/2024-Central Tax dated 8 October 2024 and issued comprehensive procedural guidance via Circular No. 238/32/2024-GST dated 15 October 2024, followed by additional clarifications in Circular No. 240/34/2024-GST.

The mechanics are straightforward: once the taxpayer pays the full tax principal arising from a Section 73 demand and meets the procedural conditions, the proper officer is statutorily required to waive the interest under Section 50 and the penalty imposed under Section 73(9). This is not a departmental concession — it is a legislative mandate. The waiver is permanent and cannot be reversed once the order is passed.

Two things deserve emphasis up front:

• You pay tax only. Interest and penalty are not reduced — they are zeroed out entirely.
• The closure is final. Once the waiver order is passed, neither you nor the department can re-agitate the same demand.

Who Is Eligible

Financial Years and Demand Type

The scheme is confined to three financial years — FY 2017-18, FY 2018-19 and FY 2019-20 — and only to demands raised under Section 73 of the CGST Act. Section 73 covers situations where tax has not been paid, has been short-paid, has been erroneously refunded, or where Input Tax Credit (ITC) has been wrongly availed or utilised, in circumstances not involving fraud, wilful misstatement or suppression of facts.

Demands for FY 2020-21 onwards are outside the scheme. If you have disputes for later years, those must follow the regular adjudication route under Sections 73 or 74.

Eligible Demand Categories

Most Section 73 demands from this era fall into one of these buckets, all of which are eligible:

• ITC mismatch: Excess ITC claimed due to GSTR-2A / GSTR-3B divergence because a supplier filed late or not at all
• Classification errors: Tax short-paid due to HSN or rate disputes where fraud is not alleged
• RCM non-discharge: Reverse Charge Mechanism (RCM) liability missed on GTA freight, legal fees, import of services
• Reconciliation gaps: Differences between GSTR-1 and GSTR-3B that generated demand notices
• Erroneous refunds: Refunds drawn that should not have been sanctioned, in non-fraud cases

Stages of Proceedings Covered

Section 128A is designed to meet taxpayers wherever they are in the dispute lifecycle:

1. Pre-SCN: You proactively pay before a Show Cause Notice (SCN) is even issued.
2. Post-SCN, pre-order: You received an SCN under Section 73 but the adjudication order has not been passed.
3. Post-order: You received a demand order (Form DRC-07) under Section 73(9) and have not paid in full.
4. Appeal pending: Your case is pending before the Appellate Authority (Section 107), the GST Appellate Tribunal, the High Court or the Supreme Court, with the underlying proceedings rooted in Section 73.

What the Scheme Waives — and What It Does Not

Before you spend time computing and paying, be precise about scope.

If a demand notice invokes both Section 73 and Section 74 — which can happen when an adjudicating authority re-frames the original SCN — the amnesty applies only to the Section 73 component. The Section 74 portion must be settled separately through normal proceedings. Attempting to use the amnesty to cover a Section 74 demand will result in the waiver being denied on that portion.

Worked Example: The Real Arithmetic of Waiting

Abstract waiver percentages are less motivating than actual rupee savings. Consider a realistic case.

Scenario: A manufacturing firm in Pune received a DRC-07 order for FY 2018-19 alleging excess ITC claim of Rs. 4,20,000 arising from GSTR-2A mismatches with three suppliers who filed GSTR-1 late. The case is not fraud-related. The order was passed in November 2021 and has been in appeal since March 2022.

What the total liability looks like without amnesty:

Under the amnesty:

Pay only the tax: Rs. 4,20,000

Saving on interest and penalty: Rs. 4,95,600 — which is more than the tax principal itself.

The firm also avoids ongoing legal costs: two CA appearances per hearing, advocate retainer for the appellate proceedings, and the senior management time absorbed by every notice and hearing. Factor in a realistic three-to-four-year timeline to get a favourable order from the Appellate Tribunal, and the economic case for the amnesty becomes compelling unless the legal merits are very strong.

Decision test: Even if this firm has a 65% chance of winning on merits, the expected saving from litigation is Rs. 4,95,600 × 65% = Rs. 3,22,140 — against a certain saving of Rs. 4,95,600 under the amnesty. Unless litigation costs are negligible or the legal position is near-certain, the amnesty wins the math.

Step-by-Step: Availing the Scheme on the GST Portal

Follow this sequence precisely. An error at any step — wrong form, wrong payment head, missing attachment — can result in rejection.

Step 1 — Audit All Open Section 73 Demands

• Log in to www.gst.gov.in and navigate to Services > User Services > View Notices and Orders.
• Filter by document type: DRC-01 (SCN), DRC-07 (adjudication order) for FY 2017-18, 2018-19 and 2019-20.
• Cross-reference with your AIS/TIS on the Income Tax portal for any demand reflection there.
• Pull records from your appellate authority portal if any case is in appeal.
• Build a spreadsheet: demand number, financial year, section invoked, tax amount, interest accrued, penalty, and current stage of proceedings.

Step 2 — Compute the Net Tax Balance

• Use the tax figure from the DRC-07 or the SCN.
• Subtract any partial payments already made through earlier DRC-03 filings or ITC adjustments.
• Only the unpaid tax balance needs to be paid — prior payments are credited.
• Do not include interest or penalty in this figure; they are being waived.

Step 3 — Pay Through Form DRC-03

• On the GST portal: Services > User Services > My Applications > New Application.
• Select "Intimation of payment made voluntarily or made against SCN/Order (DRC-03)".
• Under "Reason for Payment," select the Section 128A amnesty option as listed in the portal dropdown (added post-October 2024 notification).
• Link the payment to the specific demand order number and financial year.
• Generate a challan and pay through net banking, NEFT or RTGS.
• Tax can be settled from your Electronic Credit Ledger (ITC balance) — only interest and penalty require cash, and since those are waived, you may not need any fresh cash outflow if sufficient ITC credit exists.

> Critical warning: Do not pay through a standalone challan (PMT-06) that is not linked to a DRC-03. Payment without the DRC-03 intimation does not trigger the waiver mechanism, regardless of the amount paid.

Step 4 — File the Amnesty Application

Under Rule 164 of the CGST Rules, 2017 (as introduced by the CGST Third Amendment Rules, 2024):

• Form GST SPL-01 — for cases where no order has been passed (SCN stage or proactive pre-SCN payment).
• Form GST SPL-02 — for cases where an adjudication order, appellate order or revision order under Section 73 already exists.

Access both forms at: Services > User Services > My Applications on the GST portal. Attach the DRC-03 payment reference number, the relevant SCN/order number, GSTIN, and financial year details.

Step 5 — Withdraw Any Pending Appeal

If your case is pending at the Appellate Authority (Section 107), the GST Appellate Tribunal, a High Court or the Supreme Court:

• Apply for withdrawal at the relevant forum.
• Obtain a written order of withdrawal or an endorsed application.
• Upload this proof with your SPL-02 application.

Without proof of withdrawal, the proper officer cannot pass the waiver order. This step is non-negotiable for post-appeal cases.

Step 6 — Track and Obtain the Waiver Order

After filing SPL-01 or SPL-02, follow up with your jurisdictional GST officer to ensure the waiver order is passed and uploaded to the portal. Do not assume silence means approval — retain the written waiver order. It is your permanent evidence of closed liability.

Critical Dates and CBIC Notifications to Bookmark

> The deadline has been extended beyond the original 31 March 2025 cut-off. However, every extension is gazette-notified for a specific window. As of the date of this article, the scheme remains accessible, but further extensions are not guaranteed. Do not bank on another extension and act with at least 30 days in hand.

Demand Types and Edge Cases Worth Knowing

ITC Mismatch (Most Volume)

The bulk of demands from FY 2017-18 to 2019-20 relate to GSTR-2A / GSTR-3B mismatches — suppliers who filed their GSTR-1 late or not at all. These are textbook Section 73 cases and fully eligible. The only exception is if the department has separately alleged that you knew the supplier was non-compliant and participated in the evasion — that converts the allegation to Section 74 territory.

Composition Taxpayers

Composition dealers who received demands for tax on supplies exceeding the composition threshold, or for making ineligible supplies while under the composition scheme, are covered under Section 73 in non-fraud cases.

Cases at High Court or Supreme Court

Circular 238/32/2024-GST clarifies that writ petitions and statutory appeals at constitutional courts are also eligible. You must obtain and submit the court's withdrawal order before or simultaneously with the SPL-02 filing. High Courts often have specific administrative steps for recording a "not pressed" or withdrawal endorsement — factor this into your timeline.

RCM on Import of Services

Businesses that missed paying IGST under RCM on import of services (management consulting, IT services, royalties) and received Section 73 demands can avail the amnesty for the tax due on those transactions.

Partial Eligibility Within a Single Order

When a single DRC-07 order combines Section 73 and Section 74 allegations (for instance, where the adjudicating officer reclassified part of an ITC claim as fraudulent), you must segregate. Apply the amnesty only to the Section 73 component; the Section 74 component must be dealt with through appeal or payment of full dues.

Strategic Analysis: When Amnesty Wins and When to Fight

This scheme is valuable — but it is not automatically the right decision for every open demand. Use this framework before committing.

Use the amnesty when:

• The demand is technical in nature (rate classification, ITC mismatch, procedural lapse) and the legal position is not overwhelmingly strong.
• Accrued interest and penalty together approach or exceed the tax principal — the savings are too large to ignore.
• The business is approaching a fundraise, acquisition or audit, and cannot carry contingent tax liabilities on the balance sheet.
• Litigation is consuming management bandwidth disproportionate to the amount at stake.
• The demand is for FY 2017-18 (GST's first year) where industry-wide compliance was imperfect and courts have not uniformly ruled in taxpayers' favour.

Consider continuing to fight when:

• The demand rests purely on a legal interpretation — place of supply, HSN classification, composite vs. mixed supply — where multiple High Court or Tribunal decisions favour the taxpayer on identical facts.
• The tax amount is large enough that even the legal costs are a fraction of the potential saving from winning.
• You have solid documentary evidence (supplier's own tax payment records, e-way bills, lorry receipts) that directly demolishes the factual basis of the demand.
• You have multiple demands across different years on the same issue — a single favourable ruling may extinguish them all.

The cut-off changes the calculus: you cannot litigate indefinitely and elect amnesty at the end as a fallback. Once the window closes, the choice is made for you.

Common Pitfalls to Avoid

These are the errors that recur in every amnesty cycle. Each one has derailed otherwise valid applications.

1. Paying via PMT-06 without DRC-03. A direct challan payment to your Electronic Cash Ledger without routing through DRC-03 does not constitute payment under the scheme. The DRC-03 intimation is what triggers the Section 128A mechanism — the challan alone is insufficient.

1. Filing SPL-02 for a pre-order case (or SPL-01 for a post-order case). The form choice depends entirely on whether an order exists. Check the status of each demand individually — some SCNs may have matured into orders that you have not tracked.

1. Treating a Section 74 demand as Section 73. Scrutinise every demand notice for the section invoked. "Fraud," "wilful misstatement" and "suppression of facts" are the red-flag words. If present, the amnesty does not apply and payment will not extinguish the penalty.

1. Failing to withdraw the pending appeal before or with the SPL-02 application. Proper officers routinely return SPL-02 applications because the appeal withdrawal proof is missing. Confirm withdrawal status at the appellate forum before you log in to file.

1. Overlooking earlier partial payments. If you paid part of the demand when the SCN was served (common in cases where taxpayers paid under protest), that amount must be netted off the balance. Recheck your DRC-03 history and the ECL/ECrL transaction logs.

1. Filing in the last 10–15 days before the cut-off. GST portal congestion at the tail end of every amnesty is predictable and well-documented. Server errors and failed submissions on the last two or three days are not grounds for extension. File at least 30 days before the cut-off.

1. Not following up for the waiver order. Paying and filing is not the end. The proper officer must pass and upload the waiver order. Chase this proactively — the order is your definitive evidence that the demand is closed.

Key Takeaways

• Section 128A covers only Section 73 (non-fraud) demands for FY 2017-18, FY 2018-19 and FY 2019-20 — Section 74 fraud demands are excluded without exception.
• Pay only the tax principal through Form DRC-03 with the correct amnesty reference; interest under Section 50 and penalty under Section 73(9) are fully waived on compliance.
• File Form GST SPL-01 where no order yet exists and Form GST SPL-02 where an adjudication or appellate order has been passed — attaching proof of appeal withdrawal where applicable.
• The interest saving for a six-year-old demand regularly exceeds the tax principal; calculate the actual rupee saving before deciding whether to settle or fight.
• The DRC-03 pathway is mandatory — direct challan payment without DRC-03 linkage does not trigger the waiver, regardless of the amount paid.
• Verify the current cut-off date on www.cbic.gov.in; the original 31 March 2025 deadline has been extended, but further extensions are not guaranteed — act at least 30 days ahead of the operative deadline.
• Demands with strong legal merit and large tax at stake may justify continued litigation; ITC mismatch demands with accrued interest approaching the tax amount are almost always better settled under the scheme.