GST Amnesty Under Section 128A: A Chance to Waive Interest and Penalty

Short answer: The new Section 128A of the CGST Act, 2017, introduced via the Finance Act 2025, empowers the government to launch amnesty schemes. The first such scheme, now active, allows businesses to clear past GST dues (from July 2017 to March 2023) by paying the principal tax amount, in return for a complete waiver of penalties and a substantial reduction or waiver of interest. It's a critical opportunity for businesses to become compliant without facing hefty financial burdens.

What is the new GST Amnesty Scheme under Section 128A?

This is a special, time-bound relief measure notified by the government for taxpayers who have failed to comply with GST law for previous financial years. Section 128A was specifically inserted into the CGST Act to provide a legal framework for the government to waive or reduce penalties, interest, or late fees for specified tax periods. The current scheme is the first of its kind under this new section, aimed at reducing litigation and helping businesses clean their compliance slate for the initial years of GST implementation.

Who is eligible to apply for this amnesty scheme?

Eligibility is defined in the government notification and generally covers taxpayers who have outstanding GST liabilities for the period from 1 July 2017 to 31 March 2023. This includes:

• Non-filers: Businesses that did not file their GSTR-3B, GSTR-1, or annual returns (GSTR-9) for any period within the specified timeframe.
• Short-payers: Taxpayers who filed their returns but declared and paid less tax than what was actually due.
• Taxpayers with Demands: Businesses that have received a Show Cause Notice (SCN) or an Order confirming a tax demand (Order-in-Original) but have not yet paid the full amount.

The scheme is generally not available for cases involving proven fraudulent intent to evade tax where proceedings have been initiated for wilful misstatement or suppression of facts.

What are the benefits of the Section 128A scheme?

The primary benefit is significant financial relief. By opting for the scheme and paying the outstanding principal tax amount, a taxpayer can receive:

1. Complete Waiver of Penalty: Any penalty imposed or imposable under the CGST Act for the non-payment or short payment of tax is fully waived.
2. Substantial Reduction or Waiver of Interest: The interest liability, which is typically calculated at 18% per annum, is either completely waived or capped at a very nominal rate as specified in the notification.
3. Waiver of Late Fees: For non-filing of returns, the accumulated late fees under Section 47 are also waived upon filing the pending returns and paying the tax.

This allows a business to regularise its compliance status without the crippling burden of accumulated interest and penalties, which often exceed the principal tax amount itself.

Which tax periods and returns are covered?

The current amnesty scheme specifically targets the initial years of GST implementation. It covers all tax periods from 1 July 2017 to 31 March 2023. This includes any pending monthly/quarterly returns like GSTR-1 and GSTR-3B, as well as annual returns like GSTR-9 for the financial years falling within this period. The deadline to avail this scheme is typically a fixed date (e.g., 31 December 2026), and it is crucial to complete all formalities before this cut-off.

What is the procedure to apply for the amnesty?

The procedure is designed to be straightforward and is executed on the GST portal. The key steps are:

1. Calculate Liability: Accurately determine the total outstanding tax liability for the relevant periods. This may involve reconciling your books of accounts with returns filed (or not filed).
2. File Pending Returns: File all pending GST returns (GSTR-1, GSTR-3B, GSTR-9) for the periods you wish to cover under the scheme.
3. Pay Principal Tax: Pay the entire principal tax amount due through Form DRC-03 on the GST portal.
4. Apply for Amnesty: File the specific application form for the amnesty scheme (the form number will be notified) on the GST portal, acknowledging the payment of tax and seeking a waiver of interest and penalty.
5. Receive Acknowledgement: Upon successful submission, the system will process the application, and a final order confirming the waiver of penalty and interest will be issued.

Action	Without Amnesty Scheme	With Section 128A Amnesty Scheme
Outstanding Tax Due	₹5,00,000	₹5,00,000
Interest @ 18% p.a. (Approx.)	₹3,60,000	₹0 (or a capped nominal amount)
Penalty @ 10% of tax (Min.)	₹50,000	₹0
Late Fees for Non-filing	Potentially up to ₹10,000 per return	₹0 (upon filing)
Total Outflow	₹9,10,000+	₹5,00,000
Total Savings	-	₹4,10,000+

Worked example

Let's consider Bengaluru Tech Solutions Pvt. Ltd., a small IT services company. Due to cash flow issues, they did not file GSTR-3B for the months of October 2021 to March 2022. Their total tax liability for this period was ₹4,00,000.

Calculation without the Amnesty Scheme (as of September 2026):

1. Principal Tax Due: ₹4,00,000
2. Interest Calculation: The delay is approximately 4.5 years (from April 2022 to Sep 2026). Interest under Section 50 would be roughly ₹4,00,000 * 18% * 4.5 years = ₹3,24,000.
3. Penalty: A penalty under Section 73 would be 10% of the tax due, which is ₹40,000.
4. Late Fees: For 6 months of non-filing, the maximum late fee could accumulate to thousands of rupees.

Total Liability (without amnesty): ₹4,00,000 (Tax) + ₹3,24,000 (Interest) + ₹40,000 (Penalty) = ₹7,64,000 (plus late fees).

Calculation with the GST Amnesty Scheme:

1. Principal Tax Due: Bengaluru Tech Solutions pays the full ₹4,00,000 using Form DRC-03.
2. File Pending Returns: They file all 6 pending GSTR-3B returns.
3. Amnesty Benefit: Under the scheme, the entire interest of ₹3,24,000 and the penalty of ₹40,000 are waived. Late fees are also waived.

Total Liability (with amnesty): ₹4,00,000.

By using the scheme, the company saves ₹3,64,000 and becomes fully compliant, avoiding further legal proceedings.

Common mistakes

1. Missing the Deadline: Amnesty schemes are strictly time-bound. Waiting until the last minute can lead to portal glitches or procedural errors, causing you to miss the opportunity entirely.
2. Not Paying the Full Tax: The waiver of interest and penalty is conditional upon the payment of the entire principal tax amount. Partial payment will not make you eligible.
3. Assuming Automatic Application: The scheme is not automatic. You must file the necessary returns, pay the tax, and submit the specific application form on the GST portal to claim the benefits.
4. Ignoring Pending Adjudication: If you have already received a notice or order, you must follow the specific procedure outlined in the scheme for such cases. Simply ignoring the notice is not an option.
5. Trying to Claim Refunds: The scheme is designed to waive pending dues, not to refund penalties or interest that have already been paid.

How SP & SC helps

Navigating the complexities of an amnesty scheme requires careful calculation and precise execution. SP & SC Legal and Taxation Services can help you make the most of this opportunity. We will review your books and GST data to accurately determine your outstanding liability, assist in filing all pending returns, manage the payment process through DRC-03, and ensure your application for the waiver is filed correctly and on time. Our goal is to handle the entire process end-to-end, making your business fully compliant with minimum financial outflow. For expert assistance with the GST amnesty scheme, check our tax consultation services.

Frequently asked questions

H3: Can I avail the amnesty if a Show Cause Notice (SCN) has already been issued to me?

Yes, the scheme typically allows taxpayers who have received an SCN to participate. However, you will need to pay the principal tax amount mentioned in the notice and then apply. The procedure may have specific steps for cases under adjudication.

H3: What if I have already paid the tax but not the interest and penalty?

You are still eligible. You can apply under the scheme to get a waiver of the outstanding interest and penalty amounts. The primary condition is that the principal tax must be fully paid.

H3: Does the amnesty scheme cover cases of fraud or wilful misstatement?

Generally, no. Amnesty schemes are intended to provide relief for non-compliance due to procedural lapses or financial difficulties. Cases where prosecution for tax evasion has been initiated or where fraud is established are typically kept out of the scheme's purview.

H3: Will my GST registration, which was cancelled for non-filing of returns, be restored if I use the scheme?

The scheme notification usually includes a provision for the restoration of cancelled registrations. By filing all pending returns and paying the dues under the amnesty, you can apply for the revocation of your GST registration cancellation.

H3: Can I pay the outstanding tax in instalments under the amnesty scheme?

No. The benefit of the amnesty scheme is conditional upon the full, one-time payment of the entire outstanding principal tax liability. Instalment options are not permitted.

Get a fixed-fee quote

Are you unsure about your GST liabilities or how to apply for the amnesty scheme? Share your documents with us, and we will provide a written, fixed-fee quote for handling your case end-to-end. Contact SP & SC on WhatsApp at +91 90356 74566 or through our contact page. We make compliance simple and stress-free.