GST Amnesty Scheme Expands: Big News

GST Amnesty Scheme Expands: Big News

If you are carrying a legacy GST demand from FY 2017-18 to FY 2019-20, have a cancelled GSTIN you need to revive, or are sitting on years of GSTR-9 late fees, FY 2026-27 is still your structured reset window. Section 128A of the CGST Act waives interest and penalty on bonafide tax demands if you pay the principal in full. Parallel schemes cover late fee caps and GSTIN revocation. This post tells you exactly what applies to your situation, which forms to file, how the numbers work, and which mistakes will cost you the benefit entirely.

What the FY 2026-27 GST Amnesty Architecture Actually Covers

The term "GST amnesty scheme 2026" is used loosely to describe at least four distinct legal mechanisms that operate simultaneously but independently. Conflating them leads to missed deadlines and wrong forms. Here is the map:

1. Section 128A of the CGST Act — waiver of interest and penalty on tax demands under Section 73 for FY 2017-18, FY 2018-19, and FY 2019-20, contingent on full payment of the principal tax demanded.
2. Late fee waiver and cap — periodic CBIC notifications that reduce the maximum late fee payable under Section 47 for non-filing or delayed filing of GSTR-1, GSTR-3B, GSTR-9, and GSTR-10 (final return), applicable when returns are filed within a notified window.
3. GSTIN revocation amnesty — an extended window under Section 30 of the CGST Act that allows taxpayers whose registration was cancelled (typically for return non-filing) to restore the GSTIN by filing all pending returns and paying dues within the notified period.
4. Compounding of offences — available under Section 138 of the CGST Act as an alternative to prosecution for certain categories of violation.

Each has its own eligibility conditions, prescribed forms, and hard cut-off dates. You may be eligible for all four simultaneously, or only one. The analysis must be done demand-by-demand and registration-by-registration.

Section 128A: The Centrepiece of the Amnesty Architecture

Section 128A was inserted into the CGST Act by the Finance Act 2024 and became operational through CBIC notifications. Its purpose is to draw a line under the enormous backlog of Section 73 demand orders from GST's first three financial years — a period when both taxpayers and tax officers were still navigating an imperfectly settled law.

What Section 128A Waives

The provision waives two things, and only two things:

• Interest under Section 50 of the CGST Act — 18% per annum for unpaid tax and 24% per annum for wrongly availed input tax credit (ITC)
• Penalty under Section 73(9) — 10% of the tax amount, subject to a minimum of Rs. 10,000, for non-fraudulent defaults

The waiver is unconditional on those two items but conditional overall: you must pay 100% of the principal tax demanded before the cut-off date. Partial payment does not unlock even partial relief.

Who Qualifies — and Who Does Not

Eligible:

• Demands relating to FY 2017-18, FY 2018-19, or FY 2019-20 only
• Demands raised under Section 73 — genuine error, ITC mismatch, return discrepancy, difference in interpretation
• Taxpayers who pay the full tax amount before the prescribed cut-off date

Not eligible:

• Demands under Section 74 — fraud, wilful misstatement, or suppression of facts
• Demands for periods after FY 2019-20 (Section 128A has no application to FY 2020-21 onwards)
• Cases where penalty and interest have already been fully paid (there is no refund mechanism under Section 128A)

The Section 73 versus Section 74 classification is not always obvious in the order. Some orders cite both sections in the show cause notice but confirm under Section 73 in the final order. Read the final order carefully — the section under which the demand was confirmed and quantified determines eligibility, not the section cited in the SCN.

The Four Demand Scenarios Covered

The CBIC has clarified through circulars that Section 128A applies across four stages of proceedings:

1. No SCN yet issued — audit, scrutiny, or inspection has identified a liability but no formal notice has been served. You can voluntarily pay and file Form GST SPL-01 to pre-empt a demand.
2. SCN issued, no final order yet passed — pay the tax and file Form GST SPL-01 to seek closure before confirmation of demand.
3. Order confirmed under Section 73(9), no appeal filed — pay the tax and file Form GST SPL-02.
4. Order confirmed and appeal pending — withdraw the appeal first, then pay and file Form GST SPL-02. The withdrawal must precede the SPL-02 filing, not follow it.

Step-by-Step: How to Claim Closure Under Section 128A Today

Follow this sequence without deviation. Each step must be completed before the next.

Step 1 — Locate and reconcile the demand Log into the GST portal (gst.gov.in). Navigate to Services → User Services → My Applications and locate the relevant demand order (typically in Form GST DRC-07). Cross-reference the tax amount against your GSTR-3B, GSTR-2A/2B, and GSTR-9 for the relevant year to confirm the quantum.

Step 2 — Determine the correct form If no order has been passed (SCN stage or pre-SCN), use SPL-01. If an order has been confirmed, use SPL-02. Filing the wrong form is not a curable defect — it requires restarting the application.

Step 3 — Withdraw pending appeals (SPL-02 cases only) File the appeal withdrawal application before the relevant authority — First Appellate Authority, GST Appellate Tribunal (GSTAT), or High Court, as applicable. Obtain a written withdrawal acknowledgment or order. This document is mandatory for SPL-02 and must be uploaded at the time of filing.

Step 4 — Pay via Form GST DRC-03 Generate a challan in Form GST DRC-03 on the portal. Select the correct demand reference and tax head (CGST, SGST, IGST — match the demand order exactly). Pay from the Electronic Cash Ledger. The Application Reference Number (ARN) of the DRC-03 is the key linking identifier — note it immediately.

Step 5 — File SPL-01 or SPL-02 On the GST portal, access the Section 128A application module. Enter the demand details, input the DRC-03 ARN, upload the appeal withdrawal order if applicable, and submit. Track the status under Services → User Services.

Step 6 — Obtain and archive the closure order Once the proper officer is satisfied, a closure order is issued. Download it immediately — the portal session may not retain it indefinitely. This order is your permanent defence against re-opening of the demand.

Late Fee Waiver: GSTR-1, GSTR-3B, GSTR-9, and GSTR-10

The Statutory Baseline Under Section 47

Before understanding the amnesty, know what the standard fee is:

• GSTR-1 and GSTR-3B: Rs. 50 per day for returns with liability; Rs. 20 per day for nil-turnover returns. The maximum late fee per return varies by turnover slab — small taxpayers face a lower cap; larger taxpayers can face up to Rs. 10,000 per return under the statutory schedule.
• GSTR-9 (Annual Return): Rs. 200 per day (Rs. 100 CGST + Rs. 100 SGST), capped at 0.25% of total State turnover for the CGST component — so a Rs. 10 crore turnover taxpayer in a single State faces a CGST late fee cap of Rs. 25,000 per year of non-filing, plus a matching SGST cap.
• GSTR-10 (Final Return): Rs. 200 per day, no turnover-based cap, which makes it particularly punishing for businesses that close without filing promptly.

How Amnesty Windows Change the Calculation

Under late fee amnesty notifications, the government does two things:

1. Fixes a reduced maximum late fee for past-period returns — for instance, capping fees at a flat amount per return for nil filers or small taxpayers as notified for the relevant period.
2. Sets a hard filing cut-off date — returns filed by that date attract the reduced fee; returns filed even one day after attract the full statutory fee for the same past period.

The reduction is not automatic. You must file the return during the window. Discovering the amnesty after the cut-off and filing then means paying full late fees as if the amnesty never existed.

GSTR-9 Amnesty: The Numbers That Matter

GSTR-9 amnesty notifications have historically reduced late fees significantly for periods where the compliance rate was poor. If you have GSTR-9 for FY 2021-22, FY 2022-23, or FY 2023-24 unfiled, check the CBIC notification board immediately for any live late fee cap. For a business with Rs. 5 crore turnover in a State, two years of unfiled GSTR-9 at the uncapped rate accumulates quickly. The amnesty typically reduces this to a fraction — but only if you file before the cut-off date specified.

GSTIN Revocation After Cancellation: The Amnesty Window

How Cancellations Happen

A GSTIN is cancelled under Section 29(2) of the CGST Act when a taxpayer fails to file six or more consecutive monthly GSTR-3B returns, or two or more consecutive quarterly returns under QRMP. Once cancelled, the taxpayer cannot issue valid tax invoices, cannot claim ITC, and faces supply disruption — but the liability for past periods remains alive.

What the Revocation Amnesty Allows

Extended revocation windows allow a taxpayer to restore a cancelled registration by:

1. Filing all pending GSTR-1 and GSTR-3B returns for every period up to the effective date of cancellation
2. Paying all outstanding tax, interest, and applicable late fees
3. Filing Form GST REG-21 (Application for Revocation of Cancellation of Registration) within the extended window

The application is filed on the GST portal under Services → Registration → Application for Revocation of Cancelled Registration. The proper officer must be satisfied that all returns have been filed and all dues settled before restoring the registration.

Critical Limitation

If the GSTIN was cancelled on grounds of fraud or misrepresentation under Section 29(2)(e), the revocation route — even under amnesty — is not available. The amnesty applies exclusively to cancellations triggered by filing non-compliance. Additionally, if an earlier revocation application was rejected, specific amnesty notifications have allowed fresh applications — verify whether the current notification covers rejected-application scenarios before concluding your GSTIN is permanently gone.

Worked Example: Closing a FY 2018-19 Demand Under Section 128A

Scenario: A trader in Maharashtra received a demand order under Section 73(9) for FY 2018-19. An ITC mismatch between GSTR-2A and the trader's GSTR-3B filings resulted in a confirmed demand. The trader had filed an appeal at the First Appellate Authority level, which remained pending.

The numbers without amnesty:

Under Section 128A:

• Appeal withdrawal filed before the First Appellate Authority — withdrawal order obtained
• Rs. 6,00,000 paid via Form GST DRC-03, referencing the Section 73(9) demand order, correctly mapped to CGST and SGST heads per the demand
• Form GST SPL-02 filed on the portal with the DRC-03 ARN and the appeal withdrawal order attached
• Proper officer issues closure order within the statutory review period
• Total saving: Rs. 8,16,000 (interest Rs. 7,56,000 + penalty Rs. 60,000)

Working capital note: The trader arranged a short-term overdraft of Rs. 6 lakh at 10% per annum for 90 days — interest cost approximately Rs. 15,000. Set against a saving of Rs. 8.16 lakh, the net benefit of availing amnesty is Rs. 8,01,000. The economics are not a close call.

Appeal vs. Amnesty: The Decision Framework

This is the most consequential judgment call you will face with any legacy GST demand.

When amnesty is almost always the better choice:

• The demand is squarely within Section 128A scope (Section 73, FY 2017-18 to 2019-20) and the legal position is genuinely uncertain
• Interest has been accruing for more than three years — the quantum grows faster than most appeal success rates justify
• The appeal will consume management time over three to five years without a guaranteed outcome
• Your cash flow can support the upfront tax payment

When appeal may still make sense:

• The demand is legally unsustainable and you have clean documentary evidence — purchase invoices, e-way bills, bank statements, and supplier filings that fully corroborate your position
• A High Court or GSTAT ruling on the identical issue has come in the taxpayer's favour
• The demand falls outside FY 2017-18 to 2019-20, making Section 128A unavailable regardless
• The tax amount is of a scale that makes upfront payment genuinely impossible

The hybrid option: Pay the tax via DRC-03 voluntarily (as a self-ascertained liability, not linked to the demand) to stop interest accruing, then continue the appeal. If the appeal is decided in your favour, apply for a refund under Section 54. This preserves optionality while capping the interest clock — a middle path worth considering for larger disputes where legal merit is strong.

Common Mistakes That Cost Taxpayers the Benefit

1. Treating a Section 74 Demand as Section 73

Many assessment orders begin as Section 73 proceedings and are escalated to Section 74 mid-stream. The section under which the final order was passed — not the SCN — determines eligibility. Filing SPL-01 or SPL-02 for a Section 74 order results in automatic rejection.

2. Not Withdrawing the Appeal Before Filing SPL-02

Withdrawal must happen before SPL-02 is submitted. Filing SPL-02 while the appeal is still formally pending causes rejection. Obtain the written withdrawal order and upload it as part of the SPL-02 filing, not after.

3. Paying Under the Wrong Tax Head

GST has separate ledgers for CGST, SGST, and IGST. A demand for Rs. 3 lakh CGST and Rs. 3 lakh SGST cannot be discharged by paying Rs. 6 lakh IGST — the mapping will fail. Verify the head of tax in the demand order line by line before generating the DRC-03 challan.

4. Missing the Cut-Off Date

CBIC does not always grant extensions, and extensions when granted are not always long. Begin the process at least 30 days before the notified cut-off for Section 128A, late fee amnesty, and GSTIN revocation. Factor in the time needed to obtain appeal withdrawals, which themselves can take weeks if the authority does not respond promptly.

5. Assuming Late Fee Amnesty Is Automatic

Late fee reduction requires the return to be filed during the amnesty window. No action = full late fee, regardless of the amnesty notification. This is a participation condition, not a blanket relief.

6. Filing GSTR-9 Without Reconciliation

GSTR-9 must reflect the reconciled position between GSTR-1, GSTR-3B, and books of accounts. Filing an inaccurate GSTR-9 simply to exit the late fee amnesty window creates a fresh disclosure inconsistency that can generate notices under Section 61 (scrutiny of returns) — exchanging one problem for another.

7. Losing the Closure Order

Portal access policies change. Download the closure order immediately when it is issued, store it in a named folder offline, and take a physical printout. A taxpayer who cannot produce the Section 128A closure order in a future audit faces the real risk of the demand being treated as unresolved — even if it is legally closed.

Documentation You Must Retain After Closure

Build a permanent closure file for every amnesty availed. Maintain this for eight years from the date of the closure order, as Section 36 of the CGST Act permits records to be called for within this window.

The file must contain:

• [ ] Original demand order (Form GST DRC-07 or the relevant SCN/order form) — certified copy
• [ ] Your own working sheet showing how the tax amount was reconciled and verified
• [ ] Form GST DRC-03 challan and payment acknowledgment — with ARN
• [ ] Form GST SPL-01 or SPL-02 filing acknowledgment — with ARN
• [ ] Closure order from the proper officer — downloaded from the portal
• [ ] Appeal withdrawal order — from the relevant appellate authority, if applicable
• [ ] Ledger entries in books of accounts showing the tax payment and write-back of any interest or penalty provision

Cross-reference the closure in your GST reconciliation statement and in the notes to your financial statements for the year in which it was availed.

Compliance Hygiene Post-Amnesty

An amnesty is a one-time reset. The compliance expectation after availing it is higher, not lower, because your GST record now carries a prior default that will be visible to any officer conducting future scrutiny or audit. Build the following into your monthly and annual calendar:

• GSTR-1: Filed by the 11th of every month (or IFF by the 13th of the second month of the quarter under QRMP) — no carry-over
• GSTR-3B: Filed by the 20th for monthly filers (22nd or 24th for quarterly filers depending on State category) — with matching tax payment
• Rule 88C and Rule 88D notices: Respond within the specified window when the system flags a mismatch between your GSTR-1 and GSTR-3B or between GSTR-2B and ITC claimed in GSTR-3B
• Rule 37A reversals: Monitor monthly for ITC reversal triggers where suppliers have not filed GSTR-3B; follow up with vendors before the reversal is confirmed
• GSTR-9 and GSTR-9C: File by 31 December following each financial year end — for FY 2026-27, the deadline is 31 December 2027; do not carry this into the extension-hunting zone
• GSTR-10: If registration is surrendered, file within three months of the effective date of cancellation to avoid accumulating Rs. 200/day from day one

The next round of demand notices — whether from GSTR-2B mismatch, ASMT-10 scrutiny, or Section 65/66 audit — will arrive without any amnesty backstop for FY 2020-21 onwards. The window to build clean habits is now, not when the next notice lands.

Key Takeaways

• Section 128A waives interest (18% p.a. simple) and penalty (10% of tax) on Section 73 demands for FY 2017-18, FY 2018-19, and FY 2019-20 — but only if you pay 100% of the principal tax and file Form GST SPL-01 or SPL-02 by the notified cut-off date; partial payment does not unlock partial relief.
• Section 74 demands are categorically excluded — confirm the section under which the final order was passed, not the SCN, before filing any amnesty application.
• Appeal withdrawal must precede SPL-02 filing — submit the withdrawal order as an attachment at the time of filing, not after; this is a sequencing requirement, not a formality.
• Late fee amnesty requires active participation — you must file the pending return during the notified window; the fee reduction is not applied retrospectively to returns filed after the cut-off.
• GSTIN revocation under Section 30 is available for non-filing-based cancellations upon clearing all dues and filing all pending returns via Form GST REG-21 within the extended window — fraud-based cancellations are not eligible.
• Document every closure meticulously — retain the DRC-03, SPL-01/SPL-02 acknowledgment, closure order, and appeal withdrawal for eight years; the closure order is your primary defence in any future inquiry.
• Post-amnesty, the bar is higher — monthly GSTR-1 and GSTR-3B on time, annual GSTR-9 by 31 December, and prompt response to Rule 88C, 88D, and 37A system-generated intimations are now the baseline, not the aspiration.