GST Waiver on Interest and Penalty: A Big Relief for Taxpayers Under Notification No. 21/2024

The introduction of Rule 164 in the CGST Rules, 2017 is a crucial step forward in resolving past tax liabilities for businesses. Following the 54th GST Council meeting on September 9, 2024, the government has offered a significant relief to taxpayers by waiving the interest and penalty on tax demands arising under Section 73 of the CGST Act, specifically for the financial years 2017-18, 2018-19, and 2019-20.

On October 8, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 21/2024 to outline the procedure for taxpayers to avail of this relief. This new provision allows registered taxpayers to settle their outstanding tax liabilities without facing the additional burden of interest or penalties, as long as they meet the specified conditions and deadlines.

What Is Rule 164, and How Does It Benefit Taxpayers?

Rule 164, introduced in the CGST Rules, 2017, is designed to provide taxpayers with a straightforward mechanism to waive off interest and penalty on tax liabilities that arose during the financial years 2017-18, 2018-19, and 2019-20 under Section 73 of the CGST Act. This section typically deals with tax not paid or short-paid, and taxpayers who were non-compliant or made errors in reporting can now take advantage of this relief.

Key Highlights of Notification No. 21/2024

1. Interest and Penalty Waiver: Taxpayers who have pending tax demands under Section 73 for the specified financial years can avail of the waiver of interest and penalty. The waiver applies to cases where the tax was due, but the additional charges (interest and penalty) will not apply if the taxpayer adheres to the procedures outlined in the notification.
2. Extended Payment Deadline: Taxpayers must clear the outstanding tax liabilities by March 31, 2025, to avail of the interest and penalty waiver. This extended deadline gives businesses ample time to settle their dues without the fear of incurring additional charges.
3. Special Cases: In some cases, tax demands under Section 74, which usually involves cases of tax evasion or deliberate non-payment, will also be treated as if they were under Section 73 for the purpose of this waiver. This clarification is crucial as it helps taxpayers facing demands for more severe offenses under Section 74 to benefit from this relief as long as the tax liabilities are redetermined in line with Section 73.

How to Avail the Waiver: Step-by-Step Process

To avail of this relief, taxpayers need to follow the procedure outlined in Notification No. 21/2024. Below is a breakdown of the process:

1. Filing of Application:
   Taxpayers will need to file an application with the GST authorities to request the waiver of interest and penalty. The process will involve providing relevant details of the tax demand and meeting the eligibility criteria specified under the new rules.
2. Clearance of Outstanding Liabilities:
   To be eligible for the waiver, taxpayers must pay the outstanding tax amounts (for the periods 2017-18, 2018-19, and 2019-20) by March 31, 2025. The interest and penalty associated with these liabilities will be waived off, ensuring that taxpayers only pay the base tax amount.
3. Special Provision for Section 74 Cases:
   If a registered person has a notice or order under Section 74, and if the tax liability is redetermined under Section 73, such cases will also be treated under Section 73 for the purposes of this waiver. This makes it easier for taxpayers facing harsher penalties due to the nature of the offense to benefit from the relief.
4. Submission of Documents and Forms:
   Taxpayers must submit the necessary forms and documents to substantiate their claim for the waiver. These will include information about their tax liabilities and any relevant redetermination orders received from the authorities.

Key Deadlines and Important Dates

Here’s a summary of the important dates and classes of registered persons who can avail of the interest and penalty waiver:

Sl. No.	Class of Registered Person	Date for Waiver of Interest and Penalty
1	Registered persons who have received a notice, statement, or order under Section 128A	March 31, 2025
2	Registered persons with notices under Section 74 and orders passed under Section 75 to redetermine tax under Section 73	Six months from the issuance of the redetermined order

These dates provide taxpayers with a clear timeline to act on their liabilities and ensure they benefit from the waiver.

Why is This Waiver Important for Businesses?

This waiver is a significant step toward providing relief to businesses and taxpayers who have struggled with past GST compliance issues. Many businesses were penalized with interest and penalties due to errors in filing or delayed payments, and this move from the GST Council and CBIC is a positive step toward simplifying GST compliance.

Key Benefits of the Waiver:

1. Relief from Financial Burden:
   The waiver of interest and penalties allows businesses to clear their dues without the additional financial burden, making it easier for them to recover from past compliance issues.
2. Extended Timeline for Payment:
   With the deadline extended to March 31, 2025, businesses have ample time to settle their outstanding liabilities, providing much-needed flexibility.
3. Clarity for Taxpayers:
   The provision for redetermining Section 74 cases under Section 73 provides much-needed clarity, ensuring that taxpayers who may have faced harsh penalties can also benefit from the waiver.
4. Government’s Commitment to Easing Compliance:
   This initiative reflects the government’s commitment to easing the compliance burden for businesses, especially those impacted by past GST provisions. It encourages businesses to come forward and resolve their past dues without the fear of additional financial penalties.

Conclusion

The introduction of Rule 164 and Notification No. 21/2024 brings much-needed relief to taxpayers who have been facing tax demands under Section 73 of the CGST Act. The waiver of interest and penalties is a welcomed development for businesses that have struggled with past liabilities. With the extended deadline of March 31, 2025, businesses have the time to clear their dues without facing the financial strain of interest and penalties.

Taxpayers are advised to review their pending liabilities and take advantage of this opportunity to resolve outstanding issues. For further guidance and assistance, businesses should consult their tax advisors and stay updated with the latest GST regulations.

This move by the GST Council and CBIC is a step toward making the GST regime more business-friendly, ensuring compliance and fostering a smoother tax environment for businesses across the country.