Section 128A of the Central Goods and Services Tax Act, 2017 introduced a one-time conditional waiver of interest or penalty or both in respect of certain tax demands raised under Section 73 of the CGST Act for the initial years of GST implementation.
The provision was inserted through the Finance (No. 2) Act, 2024 and came into effect from 1 November 2024. It was introduced to provide relief in specified Section 73 cases relating to the period from 1 July 2017 to 31 March 2020, subject to payment of the full eligible tax demand and compliance with the prescribed conditions. CBIC subsequently issued Circular No. 238/32/2024-GST to clarify the implementation of Section 128A, while Rule 164 was inserted in the CGST Rules to prescribe the procedure.
A very important point for understanding Section 128A in 2026 is that the ordinary waiver window has already closed. For the normal categories covered by Section 128A(1), the full tax had to be paid by 31 March 2025, and the application for waiver in FORM GST SPL-01 or SPL-02 generally had to be filed within three months from that date, i.e. by 30 June 2025. A separate six-month route applies in certain cases where a Section 74 demand is subsequently redetermined as a Section 73 demand pursuant to an appellate or court direction under Section 75(2).
What Is Section 128A of the CGST Act?
Section 128A provides a special waiver of interest or penalty or both relating to specified demands under Section 73.
The provision does not waive the tax itself.
The taxpayer was required to pay the full amount of tax covered by the eligible notice, statement or order within the applicable notified time in order to claim the waiver.
The relief was specifically designed for the early GST period covering:
- Financial Year 2017-18
- Financial Year 2018-19
- Financial Year 2019-20
In statutory terms, the covered period is 1 July 2017 to 31 March 2020, or a part thereof.
The measure was recommended by the GST Council at its 53rd meeting and subsequently incorporated into the CGST Act. The GST Council records explain that the recommendation was intended to provide relief in relation to demands arising during the initial years of GST implementation, subject to payment of the full tax demanded.
Why Was Section 128A Introduced?
The GST Council considered representations seeking relief from interest and penalties associated with demands for the initial years of GST.
The Council records noted that the early years of GST involved changes in law and compliance procedures, while assessments and audits for those years were also affected by various circumstances, including the COVID-19 period.
Against this background, the GST Council recommended a conditional waiver for eligible Section 73 demands for FY 2017-18, FY 2018-19 and FY 2019-20, subject to payment of the full tax amount.
The waiver was not intended to eliminate the underlying tax liability. Instead, it provided a mechanism through which eligible taxpayers could settle the tax component and obtain relief from the associated interest and penalty, subject to the statutory and procedural conditions.
Section 128A Is a One-Time Relief Provision
Section 128A was introduced as a special, time-bound measure.
It was not designed as a permanent provision allowing taxpayers to obtain a waiver whenever a Section 73 demand arises.
The ordinary application period has now passed. Therefore, a taxpayer reading about Section 128A in 2026 should distinguish between:
- the substantive relief created by Section 128A; and
- the current availability of the application window.
The ordinary window for filing the waiver application closed on 30 June 2025. However, the legislation and rules provide a separate timeline for certain cases that are subsequently redetermined as Section 73 cases following appellate or court proceedings.
Which Tax Periods Are Covered?
Section 128A covers the period beginning 1 July 2017 and ending 31 March 2020, or a part of that period.
This corresponds to:
| Financial Year | Covered Period |
|---|---|
| FY 2017-18 | 1 July 2017 to 31 March 2018 |
| FY 2018-19 | 1 April 2018 to 31 March 2019 |
| FY 2019-20 | 1 April 2019 to 31 March 2020 |
Therefore, Section 128A does not generally cover demands relating to FY 2020-21 or later financial years.
Which Section 73 Demands Can Qualify?
Section 128A covers specified situations in which tax is payable pursuant to:
- a notice issued under Section 73(1) or a statement under Section 73(3), where no order under Section 73(9) has been issued;
- an order under Section 73(9), where no order under Section 107(11) or Section 108(1) has been passed; or
- an order under Section 107(11) or Section 108(1), where no order under Section 113(1) has been passed.
These categories correspond broadly to different stages of the demand and appellate process.
Section 128A Applies to Section 73, Not Ordinary Section 74 Demands
Section 73 applies to tax not paid, short-paid, erroneously refunded, or input tax credit wrongly availed or utilised for reasons other than fraud, wilful misstatement or suppression of facts to evade tax.
Section 74, by contrast, concerns cases involving fraud, wilful misstatement or suppression of facts to evade tax.
The GST Council specifically recommended that the Section 128A waiver should not ordinarily extend to Section 74 cases involving those allegations.
However, Section 128A contains an important special route where a demand initially issued under Section 74 is subsequently required to be redetermined under Section 73 in accordance with Section 75(2).
Special Case – Section 74 Demand Later Redetermined Under Section 73
This is one of the most important exceptions under Section 128A.
Suppose a taxpayer originally receives a demand under Section 74.
During appellate or court proceedings, it is concluded that the allegations of fraud, wilful misstatement or suppression of facts are not established.
Under Section 75(2), the proper officer can be required to determine the tax as if the notice were issued under Section 73.
In such a case, the Section 128A benefit can become available subject to the conditions and timelines prescribed for this category. The GST Council specifically recommended this treatment.
For these cases, the payment and application timeline is different from the ordinary 31 March 2025/30 June 2025 timeline.
CBIC clarified that where the proper officer passes the redetermination order under Section 73, the taxpayer has six months from the date of issuance/communication of that order, as applicable under the prescribed framework, to make the required payment and claim the waiver.
Full Tax Payment Is the Main Condition
Section 128A does not waive the tax demanded.
The taxpayer must pay the full amount of tax payable as specified in the relevant notice, statement or order, subject to the statutory adjustments and specific rules applicable to the case.
For ordinary eligible cases, the notified payment deadline was 31 March 2025.
This means that a taxpayer could not simply request cancellation of the interest and penalty without paying the underlying tax.
Example
Suppose an eligible Section 73 demand contains:
- Tax: ₹5,00,000
- Interest: ₹1,20,000
- Penalty: ₹50,000
If all Section 128A conditions were satisfied and the tax was paid within the applicable period, the waiver could cover the eligible interest and penalty.
The ₹5,00,000 tax itself was not waived.
What Does Section 128A Waive?
Depending on the circumstances, Section 128A can provide waiver of:
- interest;
- penalty; or
- both interest and penalty.
The provision does not operate as a general waiver of every amount appearing in a GST demand.
The underlying tax remains payable.
This distinction is essential when comparing Section 128A with other GST relief provisions.
Interest Under Section 50
Section 50 generally provides for interest on delayed payment of tax.
Section 128A was specifically designed to provide relief from eligible interest associated with qualifying Section 73 demands for the specified period.
The GST Council’s recommendation expressly contemplated waiver of interest and penalty while retaining the requirement to pay the full tax demanded.
Penalty Under Section 73
Section 73 contains provisions for penalty in cases covered by that section.
The GST Council records referred to the penalty applicable to Section 73 demands and recommended waiver of the interest and penalty for qualifying demands for FY 2017-18 to FY 2019-20, subject to payment of the full tax.
Section 128A therefore provided a special departure from the ordinary consequence of an eligible Section 73 demand.
Erroneous Refund Cases Are Excluded
An important limitation is that Section 128A was not intended to provide waiver in cases involving erroneous refund.
The GST Council’s recommendation specifically stated that the waiver should not extend to cases involving erroneous refund.
Therefore, when examining a demand for Section 128A purposes, the taxpayer needs to determine not merely whether the demand relates to FY 2017-18, FY 2018-19 or FY 2019-20, but also the nature of the underlying demand.
What If Interest or Penalty Was Already Paid?
The GST Council’s recommendation stated that where interest and penalty had already been paid in respect of the relevant demand or proceedings, no refund would be admissible for the same under the proposed waiver mechanism.
Therefore, Section 128A was not designed as a general refund scheme for interest and penalties already paid.
Payment Through FORM GST DRC-03
For a notice or statement covered by Section 128A where no order had yet been issued, CBIC clarified that payment of the demanded tax was to be made through FORM GST DRC-03.
For demands covered by an order, the payment mechanism differs because the tax demand may already have been recorded in the electronic liability register.
CBIC clarified that, in such cases, payment generally had to be made against the debit entry created in Part II of the Electronic Liability Register. Where the taxpayer had already paid through DRC-03, the prescribed DRC-03A mechanism could be relevant for adjustment of that payment against the demand.
FORM GST SPL-01
FORM GST SPL-01 was prescribed for specified Section 128A cases involving a notice or statement under Section 73 where no order had yet been issued.
CBIC Circular No. 238/32/2024-GST clarified that the application could be filed electronically on the common portal.
The ordinary application deadline was within three months from 31 March 2025, meaning 30 June 2025.
FORM GST SPL-02
FORM GST SPL-02 was prescribed for specified cases involving:
- an order under Section 73(9) where no relevant Section 107 or Section 108 order had been passed; or
- an order under Section 107 or Section 108 where no relevant Section 113 order had been passed.
It was also relevant in specified cases where a Section 74 demand was subsequently redetermined as a Section 73 demand under Section 75(2).
Separate Application for Each Demand
Where a taxpayer had multiple notices, statements or orders relating to different eligible demands, CBIC clarified that a separate application in FORM GST SPL-01 or SPL-02, as applicable, was required for each concerned notice, statement or order.
This is important because a taxpayer could not necessarily combine every qualifying Section 73 demand into a single application.
Withdrawal of Pending Appeal or Writ Petition
Another important condition concerned pending litigation.
CBIC clarified that where the taxpayer had filed an appeal or writ petition against an eligible notice, statement or order, the taxpayer was required to withdraw it before filing the Section 128A waiver application.
The relevant withdrawal documentation had to be uploaded with the application.
Where the withdrawal order had not yet been issued at the time of filing the waiver application, CBIC provided a procedure for uploading evidence of the withdrawal request and subsequently furnishing the final withdrawal order within the prescribed period.
What If the Taxpayer Had Already Paid the Tax?
Payment of the tax before the introduction of Section 128A did not automatically prevent eligibility.
CBIC clarified that where the eligible tax amount had already been paid on or before the notified payment date, such payment could be considered for the purpose of Section 128A, subject to fulfillment of the other conditions.
The important issue was whether the full eligible tax had been paid within the applicable statutory and notified timeline.
What If the Taxpayer Paid Interest or Penalty Instead of Tax?
CBIC clarified that interest or penalty already recovered could not simply be treated as payment of the tax amount required for Section 128A.
The taxpayer had to satisfy the requirement relating to payment of the eligible tax demand.
Therefore, the different components of the demand had to be properly identified before claiming the waiver.
Section 128A and Section 16(5) and 16(6)
The implementation of Section 128A also interacted with the retrospective relief introduced through Sections 16(5) and 16(6).
CBIC clarified that where a demand included an amount relating to Section 16(4), but that amount was no longer payable because of the retrospective insertion of Sections 16(5) or 16(6), the eligible tax amount for Section 128A purposes could be calculated after deducting the amount that was no longer payable, subject to Rule 164.
This was particularly relevant for old ITC disputes relating to the statutory time limit under Section 16(4).
Section 128A and GSTR-1 vs GSTR-3B Differences
Section 128A can also be relevant where a Section 73 demand arose from a difference between the tax liability reported through different GST returns, provided the demand otherwise satisfied the statutory conditions.
However, the waiver should not be confused with interest arising from a taxpayer’s self-assessed liability that is independently recoverable under Section 75(12).
CBIC’s clarification under Circular No. 238/32/2024-GST needs to be considered when determining whether the particular interest demand is connected with an eligible Section 73 tax demand.
Section 128A and Self-Assessed Tax
Section 128A is linked to qualifying demands under Section 73.
It does not operate as a general waiver of interest arising from every delayed payment of self-assessed tax.
This distinction is important because unpaid self-assessed tax and related interest can be dealt with under Section 75(12) and the recovery provisions of the Act.
Therefore, taxpayers should examine the legal source of the demand rather than looking only at the amount of interest appearing in the liability.
Current Status of Section 128A in 2026
As of 2026, the ordinary Section 128A waiver window has closed.
For the normal eligible cases:
- full tax payment was required by 31 March 2025; and
- the waiver application was generally required by 30 June 2025.
CBIC’s Circular No. 238/32/2024-GST confirms the 31 March 2025 payment date and the three-month application period.
Therefore, a taxpayer cannot ordinarily file a fresh SPL-01 or SPL-02 application in 2026 merely because an old Section 73 demand relates to FY 2017-18, 2018-19 or 2019-20.
However, the special six-month route can still become relevant where a Section 74 matter is subsequently redetermined under Section 73 pursuant to the circumstances described in Section 128A and Section 75(2). The applicable period in such a case is linked to the date of communication of the redetermination order rather than the original 30 June 2025 deadline.
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Section 128A vs Section 73
| Basis | Section 73 | Section 128A |
|---|---|---|
| Main purpose | Determination of tax demand | Special waiver of eligible interest/penalty |
| Nature | Demand/adjudication provision | One-time relief provision |
| Fraud | Generally applies where fraud etc. is not alleged | Eligible waiver is linked to Section 73 demands |
| Tax | Determines tax | Tax must be paid; tax is not waived |
| Interest | Applicable according to law | Eligible interest may be waived |
| Penalty | Applicable according to Section 73 | Eligible penalty may be waived |
| Period | Applies according to statutory scope | Specially covered period from 1 July 2017 to 31 March 2020 |
Section 128A therefore does not replace Section 73. It provides a special relief mechanism for qualifying historical Section 73 demands.
Section 128A vs Section 74
| Basis | Section 128A | Section 74 |
|---|---|---|
| Main purpose | Waiver of eligible interest/penalty | Determination involving fraud, wilful misstatement or suppression |
| Covered historical period | 1 July 2017 to 31 March 2020 | Applicable according to Section 74’s statutory period |
| Fraud-related demand | Ordinary Section 128A route does not cover it | Specifically addressed |
| Tax payment | Full eligible tax required for waiver | Tax liability determined under Section 74 |
| Interest/penalty | Eligible interest/penalty can be waived under Section 128A | Consequences follow Section 74 |
A Section 74 case may enter the Section 128A framework only in the specific situation where the fraud-related allegation is not sustained and the tax is redetermined under Section 73 in accordance with Section 75(2), subject to the prescribed conditions.
Section 128A vs Section 75(2)
Section 75(2) provides a mechanism for dealing with a Section 74 notice where the fraud, wilful misstatement or suppression allegation is not sustained by the appellate authority, Appellate Tribunal or court.
Section 128A then becomes relevant in the qualifying historical case if the tax is required to be redetermined under Section 73.
Therefore:
Section 75(2) → Redetermination under Section 73
Section 128A → Possible waiver of eligible interest/penalty after such redetermination
This connection is particularly important for old Section 74 disputes that are subsequently converted to the Section 73 framework.
Section 128A and Rule 164
Section 128A establishes the statutory waiver.
Rule 164 provides the detailed procedure and conditions for implementing that waiver.
Rule 164 was inserted with effect from 1 November 2024. It introduced the procedural framework and forms required for Section 128A applications.
The prescribed forms included:
- FORM GST SPL-01
- FORM GST SPL-02
- FORM GST SPL-03
- FORM GST SPL-04
- FORM GST SPL-05
- FORM GST SPL-05A
- FORM GST SPL-06
- FORM GST SPL-07
The GST Council records specifically document the introduction of these forms as part of the Section 128A implementation framework.
What Happens After a Section 128A Application?
The prescribed process provided for scrutiny of the application by the proper officer.
Where the officer had grounds to reject the application, a notice could be issued in FORM GST SPL-03.
The applicant could respond through FORM GST SPL-04.
Where the application was accepted, the prescribed order was issued in FORM GST SPL-05.
The procedure also contained deemed-approval provisions if the proper officer did not issue the relevant notice within the prescribed period, subject to the rules.
The precise procedural consequences depend on the applicable Rule 164 provisions and the category of application.
What If the Application Is Rejected?
A taxpayer whose application is rejected should examine:
- the reason for rejection;
- the demand covered by the application;
- the payment records;
- the applicable financial year;
- whether the demand actually falls under Section 73;
- whether any excluded component is involved;
- whether the application was filed within the applicable period; and
- whether the prescribed procedural conditions were satisfied.
Section 128A relief is conditional, so failure to satisfy a statutory or prescribed requirement can affect eligibility.
What If the Department Files an Appeal?
CBIC also issued Instruction No. 02/2025-GST concerning department appeals filed only in relation to interest and/or penalty connected with Section 128A.
The instruction addresses situations where the taxpayer has paid the tax and the department subsequently files an appeal concerning the interest or penalty component.
This demonstrates that the Section 128A framework can continue to have procedural consequences even after the original waiver application has been processed.
Practical Example – Eligible Section 73 Demand
Suppose a taxpayer received a Section 73 demand relating to FY 2018-19.
The demand contained:
- Tax: ₹8,00,000
- Interest: ₹2,00,000
- Penalty: ₹80,000
The taxpayer paid the full eligible tax by 31 March 2025 and complied with the applicable Section 128A procedure within the prescribed period.
Subject to all statutory conditions, the eligible interest and penalty could be waived.
The ₹8,00,000 tax itself remained payable.
Practical Example – Section 74 Converted to Section 73
Suppose a taxpayer originally received a Section 74 demand for FY 2019-20.
The taxpayer challenged the demand.
The appellate authority or court subsequently concludes that fraud, wilful misstatement or suppression has not been established and directs redetermination under Section 73 in accordance with Section 75(2).
The proper officer then redetermines the tax under Section 73.
If the case satisfies Section 128A and Rule 164, the taxpayer may use the special route applicable to such redetermined cases, including the six-month payment/application timeline prescribed for that category.
Practical Example – Demand for an Excluded Erroneous Refund
Suppose a taxpayer has an old demand for FY 2018-19 but the demand relates to an erroneous refund.
The taxpayer cannot assume that the Section 128A waiver applies simply because the financial year falls within the 2017-18 to 2019-20 period.
The nature of the demand must also satisfy the statutory conditions, and erroneous refund cases are excluded from the waiver framework.
Practical Example – Multiple Notices
Suppose a taxpayer has three separate Section 73 notices relating to eligible periods.
Even if the taxpayer wants to settle all three matters under Section 128A, separate applications were required for each relevant notice, statement or order.
Important Compliance Points
Businesses dealing with historical GST demands should carefully identify the legal basis of each demand.
The following points are particularly important:
Check the Financial Year
Confirm that the demand relates to the period from 1 July 2017 to 31 March 2020.
Check the Section
Determine whether the demand was actually raised under Section 73 or falls within the special Section 75(2) route.
Check the Nature of Demand
Determine whether the demand relates to tax, interest, penalty or an excluded erroneous refund.
Check Tax Payment
The waiver does not eliminate the underlying tax.
Check the Payment Date
For the ordinary Section 128A category, the full tax had to be paid by 31 March 2025.
Check the Application
The ordinary SPL-01/SPL-02 application period ended on 30 June 2025.
Check Pending Appeals
Pending appeals or writ petitions had to be withdrawn in accordance with the prescribed procedure before applying for the waiver.
Check Supporting Documents
Maintain payment evidence, demand orders, withdrawal documents and Section 128A application records.
Key Takeaways of Section 128A
Section 128A can be summarised through the following points:
- Section 128A provides a special waiver of interest or penalty or both relating to specified Section 73 demands.
- It was inserted through the Finance (No. 2) Act, 2024.
- It came into effect from 1 November 2024.
- It covers eligible demands relating to the period from 1 July 2017 to 31 March 2020.
- This corresponds broadly to FY 2017-18, FY 2018-19 and FY 2019-20.
- The provision does not waive the underlying tax.
- The taxpayer was required to pay the full eligible tax amount.
- The ordinary tax-payment deadline was 31 March 2025.
- The ordinary application deadline for SPL-01/SPL-02 was 30 June 2025.
- FORM GST SPL-01 applied to specified pending notice/statement cases.
- FORM GST SPL-02 applied to specified order and appellate cases.
- Separate applications were required for separate notices, statements or orders.
- Erroneous refund cases are excluded from the waiver.
- Ordinary Section 74 fraud-related demands are not covered.
- A qualifying Section 74 case can become eligible where the fraud allegation is not sustained and the matter is redetermined under Section 73 in accordance with Section 75(2).
- Such redetermined cases have a separate six-month timeline under the prescribed framework.
- Pending appeals or writ petitions were subject to withdrawal requirements.
- Rule 164 provides the procedural framework for implementing Section 128A.
- CBIC Circular No. 238/32/2024-GST clarifies several practical issues relating to the provision.
- The ordinary Section 128A waiver window is closed as of 2026, although the special redetermination route can still become relevant where its statutory conditions are subsequently satisfied.
Conclusion
Section 128A of the CGST Act introduced a one-time conditional waiver of interest or penalty or both for specified GST demands under Section 73 relating to the initial GST period from 1 July 2017 to 31 March 2020.
The provision was introduced to provide relief in eligible historical demands while requiring taxpayers to pay the full underlying tax. The GST Council recommended the measure in 2024, and it was brought into the CGST Act with effect from 1 November 2024. Rule 164 and CBIC Circular No. 238/32/2024-GST subsequently established the detailed implementation framework.
The most important point is that Section 128A does not waive tax. The taxpayer had to pay the full eligible tax demand within the applicable time. In ordinary cases, the payment deadline was 31 March 2025 and the waiver application generally had to be filed by 30 June 2025. Therefore, the ordinary Section 128A waiver window is no longer open in 2026.
At the same time, Section 128A contains an important mechanism for certain cases that originally involved Section 74. Where an appellate authority, Appellate Tribunal or court concludes that the allegations of fraud, wilful misstatement or suppression are not established and the tax is required to be redetermined under Section 73 in accordance with Section 75(2), the taxpayer may fall within the special Section 128A route, subject to the prescribed conditions and six-month timeline connected with the redetermination order.
Section 128A should therefore be understood as a specific historical dispute-resolution and relief mechanism, rather than a general waiver of GST interest and penalties. Taxpayers dealing with old GST demands should carefully examine the financial year, statutory section under which the demand was raised, nature of the demand, payment history, appellate status and applicable procedural deadlines before determining whether any Section 128A benefit is available.
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