Section 128A of the Central Goods and Services Tax Act, 2017 provides a one-time, conditional waiver of interest or penalty or both in specified cases involving demands raised under Section 73 for the initial years of GST implementation.
The provision was introduced with effect from 1 November 2024 and applies to specified demands relating to the period from 1 July 2017 to 31 March 2020, subject to the conditions prescribed under the law and Rule 164 of the CGST Rules.
The provision was introduced as a relief measure for taxpayers facing Section 73 demands for Financial Years 2017-18, 2018-19 and 2019-20. The GST Council explained that the early years of GST involved frequent changes, evolving compliance mechanisms and difficulties for taxpayers in adapting to the new system.
An important point for understanding Section 128A today is that the notified payment deadline for the main category of eligible cases was 31 March 2025. Therefore, Section 128A was a time-bound relief mechanism rather than a permanent waiver available for new Section 73 demands. A special six-month period applies to certain cases that came under Section 128A through the first proviso, where tax was redetermined under Section 73 following an appellate or court direction under Section 75(2).
What Is Section 128A of the CGST Act?
Section 128A is titled:
“Waiver of interest or penalty or both relating to demands raised under section 73, for certain tax periods.”
The provision allows eligible taxpayers to obtain waiver of:
- interest payable under Section 50;
- penalty under the CGST Act; or
- both interest and penalty,
provided the taxpayer satisfies the statutory and prescribed conditions, including payment of the applicable tax demand within the notified time.
The main relief relates to demands under Section 73, which deals with tax not paid or short paid, erroneous refunds, or input tax credit wrongly availed or utilised for reasons other than fraud, wilful misstatement or suppression of facts.
The waiver therefore does not generally apply to every GST demand.
Why Was Section 128A Introduced?
The GST Council considered the difficulties faced by taxpayers during the initial implementation years of GST.
The Council noted that the early GST period involved:
- significant changes in the law;
- frequent amendments;
- evolving compliance mechanisms;
- difficulties in adapting to the new system; and
- delays in audits and assessments, including issues associated with the COVID-19 period.
A large number of Section 73 demands relating to the initial years were therefore being finalised later. The GST Council recommended a conditional waiver of interest and penalty where the taxpayer paid the full tax demanded for the eligible period.
Section 128A was subsequently inserted into the CGST Act with effect from 1 November 2024. Rule 164 was also introduced to prescribe the procedure and conditions for implementing the waiver.
Which Tax Periods Are Covered by Section 128A?
Section 128A covers the period:
1 July 2017 to 31 March 2020
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 |
The provision can apply to the whole period or a part of the period, subject to its other conditions.
Therefore, a Section 73 demand relating exclusively to FY 2020-21 or a later financial year does not fall within the ordinary tax-period coverage of Section 128A.
Section 128A Applies to Section 73 Demands
The basic requirement is that the relevant demand must fall within the framework specified in Section 128A and relate to Section 73.
Section 73 concerns cases where tax has not been paid or has been short paid, an erroneous refund has been granted, or input tax credit has been wrongly availed or utilised for reasons other than fraud, wilful misstatement or suppression of facts to evade tax.
Section 74, in contrast, deals with cases involving fraud, wilful misstatement or suppression of facts to evade tax.
The GST Council specifically recommended that the waiver should cover the specified Section 73 demands and not ordinarily extend to demands involving Section 74 allegations.
What Does the Waiver Cover?
Where the conditions of Section 128A are satisfied, the taxpayer can obtain waiver of:
Interest
Interest payable under Section 50 relating to the eligible demand can be waived.
Penalty
Penalty under the GST law relating to the eligible demand can also be waived.
Interest and Penalty Together
Where the conditions are satisfied, both interest and penalty may be waived.
The basic principle is that the taxpayer must pay the eligible tax amount within the prescribed time and satisfy the other conditions.
The waiver does not mean that the principal tax demand itself is waived.
Tax Must Be Paid
One of the most important conditions under Section 128A is that the taxpayer must pay the full amount of tax payable as specified in the relevant notice, statement or order, subject to the statutory and prescribed adjustments.
In other words:
Section 128A does not waive the tax.
It provides relief from specified interest and penalty after the required tax is paid.
The GST Council’s recommendation expressly linked the waiver to payment of the full amount of tax demanded.
Types of Section 128A Cases
Section 128A covers three principal procedural situations.
1. Section 73 Notice or Statement Where No Order Has Been Issued
The first category covers:
- a notice under Section 73(1); or
- a statement under Section 73(3),
where the order under Section 73(9) has not yet been issued.
In such cases, the taxpayer could apply for the waiver under the prescribed procedure after paying the required tax.
2. Section 73 Order Where No Appellate or Revisional Order Has Been Passed
The second category covers an order under Section 73(9) where no order has been passed by:
- the Appellate Authority under Section 107(11); or
- the Revisional Authority under Section 108(1).
This category deals with demands that had already reached the adjudication stage but had not proceeded to the specified appellate or revisional stage.
3. Appellate or Revisional Order Where No Tribunal Order Has Been Passed
The third category covers cases where an order has been passed under:
- Section 107(11); or
- Section 108(1),
but no order has been passed by the Appellate Tribunal under Section 113(1).
These cases could also fall within the Section 128A mechanism subject to the prescribed conditions.
Section 128A and Section 74 Cases Converted to Section 73
An important special provision exists for certain cases that originally started under Section 74.
Suppose a notice was originally issued under Section 74 for FY 2017-18, 2018-19 or 2019-20.
Later, during appellate or court proceedings, it is determined that the allegations of fraud, wilful misstatement or suppression are not established.
Under Section 75(2), the matter may have to be dealt with as a Section 73 case.
The first proviso to Section 128A allows such specified cases to be considered for the waiver. CBIC clarified that these cases are covered where the proper officer passes or is required to pass an order under Section 73 pursuant to the relevant appellate, tribunal or court direction.
Section 128A and Erroneous Refunds
Erroneous refunds require special attention.
The waiver under Section 128A is not available for the interest and penalty relating to the demand of erroneous refund.
However, where a notice, statement or order contains both:
- a demand relating to an erroneous refund; and
- another eligible Section 73 demand,
the taxpayer can still seek the benefit for the eligible portion, subject to the prescribed conditions.
CBIC clarified that in such cases the taxpayer must pay the full tax demand, including the amount relating to erroneous refund, to avail the waiver. The interest and penalty associated with the erroneous-refund portion remain payable.
Example of a Mixed Demand
Suppose a Section 73 order contains:
- ₹5 lakh tax relating to wrongly availed ITC; and
- ₹2 lakh tax relating to an erroneous refund.
The taxpayer cannot simply pay ₹5 lakh and ignore the ₹2 lakh erroneous-refund component if seeking the Section 128A benefit for the eligible portion.
The prescribed procedure requires payment of the full tax demand.
The waiver can then apply to the eligible interest and penalty, while the interest and penalty relating to the erroneous-refund demand remain payable.
Payment Deadline Under Section 128A
The Government notified 31 March 2025 as the date by which the full tax demanded had to be paid for the principal Section 128A cases covered by Section 128A(1).
This date was notified through Notification No. 21/2024-Central Tax dated 8 October 2024.
The application under the prescribed procedure generally had to be filed within three months from 31 March 2025.
Thus, the main application window under Rule 164 was linked to the notified 31 March 2025 deadline.
Special Six-Month Window for Section 75(2) Cases
A special situation exists for cases covered by the first proviso to Section 128A(1).
Where a case originally involved a Section 74 notice and an appellate authority, Appellate Tribunal or court directs redetermination under Section 73 in accordance with Section 75(2), the taxpayer gets a different time framework.
CBIC clarified that the taxpayer can file FORM GST SPL-02 within six months from the date of communication of the order of the proper officer redetermining the tax under Section 73. The corresponding tax payment is also required within the notified six-month period.
FORM GST SPL-01
For cases involving a Section 73 notice or statement where the adjudication order had not yet been issued, the taxpayer was required to use FORM GST SPL-01.
The application is filed electronically on the common portal and contains details of the relevant notice or statement and the payment made toward the tax demanded.
CBIC Circular 238/32/2024-GST specifically explains the use of SPL-01 for this category.
FORM GST SPL-02
FORM GST SPL-02 applies to the categories involving an order under Section 73 or an order under Section 107 or Section 108 where the matter falls within Section 128A.
The taxpayer must provide details of the relevant order and the payment made towards the tax demanded.
Payment Through FORM GST DRC-03
For a notice or statement covered by Section 128A where the matter had not yet been adjudicated, CBIC clarified that payment of the tax demanded was to be made through FORM GST DRC-03.
For a demand order, the payment is generally made against the debit entry created in Part II of the Electronic Liability Register.
Where tax relating to an order had already been paid through DRC-03, the prescribed DRC-03A mechanism may be relevant for adjusting the payment against the demand in the Electronic Liability Register before filing SPL-02.
CBIC also clarified that, for determining the date of payment of the full tax amount, the date of payment through DRC-03 can be considered rather than the later date on which the amount is adjusted using DRC-03A.
What If Tax Was Already Paid Through GSTR-3B?
CBIC subsequently clarified that taxpayers who had already paid the tax component through GSTR-3B before 1 November 2024 could still be eligible for the Section 128A benefit if the other conditions were satisfied.
This clarification was important because the original procedural framework focused on the manner in which tax payments were reflected against the demand.
What If Only Interest or Penalty Remains?
A particularly important clarification was issued regarding cases where the tax component had already been fully paid and the remaining Section 73 proceedings related only to interest and/or penalty.
CBIC’s Instruction No. 02/2025-GST clarified that such cases can be considered for Section 128A, subject to fulfilment of the other statutory and prescribed conditions.
The instruction also addressed cases where the department had appealed or was considering an appeal only concerning interest calculation or penalty. The existence of such departmental proceedings does not, by itself, prevent an otherwise eligible taxpayer from receiving the Section 128A benefit.
Withdrawal of Appeal or Writ Petition
Where a taxpayer had filed an appeal or writ petition against a relevant demand covered by Section 128A, the taxpayer generally had to withdraw it before applying for the waiver.
The taxpayer had to provide evidence of withdrawal along with the application.
CBIC clarified that where the taxpayer had already filed an application for withdrawal but the formal withdrawal order had not yet been issued, the taxpayer could upload evidence of the withdrawal application and subsequently upload the final withdrawal order within the prescribed period.
Multiple Notices or Orders
If a taxpayer had multiple Section 73 notices, statements or orders relating to the eligible period, a separate application was required for each relevant notice, statement or order.
Therefore, a taxpayer could not necessarily combine every Section 73 demand into one Section 128A application.
What Happens If the Demand Covers Multiple Periods?
A demand may sometimes cover:
- the Section 128A period from 1 July 2017 to 31 March 2020; and
- another period outside the Section 128A period.
Rule 164 and the CBIC clarifications provide specific treatment for such mixed-period demands.
The taxpayer must satisfy the payment conditions applicable to the eligible demand, and the waiver is available only for the demand falling within the statutory Section 128A period and other eligible conditions.
The 2025 amendment to Rule 164 also addressed the treatment of tax, interest and penalty already discharged in certain mixed-period cases. The amended rule provides that no refund is available for amounts already discharged for the entire period in the specified circumstances.
Retrospective Section 16 Amendments and Section 128A
Another important issue concerns Sections 16(5) and 16(6), which were retrospectively inserted to provide relief in specified input tax credit cases.
CBIC clarified that where the amount included in a Section 73 demand is no longer payable because of the retrospective provisions of Section 16(5) or 16(6), that amount can be deducted while determining the amount payable for Section 128A.
However, this deduction is available only where the ITC had been denied solely because of the earlier Section 16(4) limitation and not because of another ground.
Processing of Section 128A Applications
The proper officer examines the application filed in:
- FORM GST SPL-01; or
- FORM GST SPL-02.
If the officer proposes to reject the application, a notice is issued in FORM GST SPL-03.
The applicant can respond through FORM GST SPL-04.
The applicant must also be given an opportunity of personal hearing.
FORM GST SPL-05
Where the proper officer is satisfied that the applicant is eligible for the waiver, the application is accepted through FORM GST SPL-05.
This order concludes the eligible proceedings under Section 128A and records the applicable waiver.
CBIC clarified that where SPL-01 is approved through SPL-05, a separate DRC-07 summary need not be issued in the same manner because the Section 73 proceedings are being concluded through the prescribed mechanism.
FORM GST SPL-06
FORM GST SPL-06 is relevant where an appellate authority allows the taxpayer’s appeal against rejection of the Section 128A waiver application.
Where the appellate authority finds that the taxpayer was eligible for the waiver, it can pass the prescribed order in SPL-06 and modify the liability accordingly.
FORM GST SPL-07
If the proper officer concludes that the taxpayer is not eligible for the Section 128A waiver, the application is rejected through FORM GST SPL-07.
Unlike an approved SPL-05 order, a rejection order in SPL-07 can be challenged through the prescribed appellate mechanism under Section 107.
Deemed Approval
Rule 164 provides an important procedural safeguard.
If the proper officer does not issue the order within the prescribed time limit, the application can be deemed to be approved, and the corresponding approval order in FORM GST SPL-05 is made available on the common portal.
This means that the taxpayer should also keep track of the statutory processing period after filing the application.
Appeal Against Rejection of Section 128A Application
An order in FORM GST SPL-05 concluding the Section 128A proceedings is not appealable under Section 107 merely as an ordinary demand order.
However, an order in FORM GST SPL-07 rejecting the waiver application is appealable under Section 107.
CBIC also clarified that the subject matter of such an appeal is the eligibility for the Section 128A waiver, rather than reopening the merits of the original Section 73 demand.
What Happens If the Department Has Filed an Appeal?
Section 128A contains a special condition where the department has challenged a relevant order or initiated revisional proceedings.
If the taxpayer receives the Section 128A waiver but a subsequent appellate, tribunal, court or revisional order determines that an additional amount of tax is payable, the taxpayer must pay that additional tax within three months from the date of the relevant order.
If the additional tax is not paid within the specified period, the waiver can become void under Rule 164.
Waiver Does Not Mean Refund of Interest or Penalty Already Paid
Section 128A expressly provides that where the interest and penalty have already been paid, no refund of those amounts is available under the provision.
This is an important distinction.
The scheme was intended to waive eligible unpaid interest or penalty subject to conditions. It was not designed as a general refund mechanism for interest or penalty that had already been discharged.
Does Section 128A Waive the Tax?
No.
Section 128A does not waive the principal tax liability.
The taxpayer must pay the applicable tax demand within the prescribed time to obtain the benefit.
The relief is directed towards eligible:
- interest; and
- penalty.
Therefore, the basic structure is:
Pay eligible tax → satisfy conditions → obtain waiver of eligible interest and/or penalty.
Does Section 128A Apply to Section 74 Demands?
Ordinarily, no.
Section 128A was designed for specified demands under Section 73.
However, the first proviso creates a specific exception for certain cases that originally had a Section 74 notice but were subsequently required to be dealt with under Section 73 following the operation of Section 75(2).
Therefore, a Section 74 demand cannot simply be treated as eligible merely because it relates to FY 2017-18, 2018-19 or 2019-20.
The statutory route through Section 75(2) must be considered where applicable.
Does Section 128A Apply to Fraud Cases?
Section 128A is not a general waiver mechanism for fraud-related demands.
The GST Council specifically recommended that the waiver should not extend to cases involving fraud, wilful misstatement or suppression of facts where the demand was under Section 74.
Only the specific Section 74-to-Section 73 situation covered by the first proviso can come within the Section 128A framework.
Section 128A and Section 128 – Difference
Section 128 and Section 128A are different provisions.
| Basis | Section 128 | Section 128A |
|---|---|---|
| Main subject | Power to waive penalty or fee or both | Waiver of interest or penalty or both |
| Nature | General enabling provision | Specific one-time relief |
| Main coverage | Specified penalties/late fee through notification | Specified Section 73 demands |
| Tax period restriction | Depends on notification | 1 July 2017 to 31 March 2020 |
| Interest | Not the principal subject | Specifically covered |
| Time-bound scheme | Not necessarily | Yes, specific notified dates |
Section 128 is a general power under which the Government may waive specified penalties or late fees in prescribed circumstances. Section 128A was introduced specifically for the historical Section 73 demand relief.
Section 128A and Section 73 – Difference
| Basis | Section 73 | Section 128A |
|---|---|---|
| Main purpose | Determination of tax demand | Waiver of specified interest/penalty |
| Nature | Demand/adjudication provision | Relief provision |
| Tax period | Applies according to its statutory framework | Specified period from 1 July 2017 to 31 March 2020 |
| Fraud | Excludes fraud/wilful misstatement/suppression | Primarily relates to Section 73 cases |
| Tax | Determines tax liability | Requires payment of applicable tax |
| Interest | Normally payable under Section 50 | Eligible interest can be waived |
| Penalty | May be imposed | Eligible penalty can be waived |
Thus, Section 128A does not replace Section 73. It provides a special relief mechanism for specified historical Section 73 demands.
Section 128A and Section 74 – Difference
Section 74 deals with tax demands involving fraud, wilful misstatement or suppression of facts to evade tax.
Section 128A was primarily created for Section 73 demands for the initial GST years.
The only important connection is the first proviso to Section 128A(1), under which certain Section 74 cases that are subsequently required to be redetermined under Section 73 pursuant to Section 75(2) can become eligible.
Section 128A and Section 75(2)
Section 75(2) becomes important where a demand originally issued under Section 74 is found, in appellate or court proceedings, not to involve the necessary fraud, wilful misstatement or suppression.
The tax can then be determined under Section 73.
Section 128A’s first proviso specifically connects such cases with the waiver mechanism.
Practical Example – Section 73 Demand
Suppose a taxpayer receives a Section 73 demand for FY 2018-19:
- Tax: ₹4,00,000
- Interest: ₹1,20,000
- Penalty: ₹40,000
If the case satisfies all Section 128A conditions and the taxpayer pays the required tax within the notified time, the eligible interest and penalty can be waived under the scheme.
The taxpayer does not receive a waiver of the ₹4,00,000 tax itself.
Practical Example – Demand Outside the Eligible Period
Suppose a taxpayer has a Section 73 demand for FY 2021-22.
Section 128A’s ordinary period coverage is only from 1 July 2017 to 31 March 2020.
Therefore, the FY 2021-22 demand does not fall within the ordinary tax-period coverage of Section 128A.
The taxpayer cannot claim the Section 128A waiver merely because the demand was raised under Section 73.
Practical Example – Erroneous Refund
Suppose a demand contains:
- ₹3 lakh relating to wrongly availed ITC; and
- ₹1 lakh relating to an erroneous refund.
The taxpayer must satisfy the prescribed tax-payment requirements for the full demand.
However, the waiver of interest and penalty does not extend to the erroneous-refund component.
Practical Example – Section 74 Converted to Section 73
Suppose a taxpayer originally receives a Section 74 notice for FY 2019-20.
During appellate proceedings, the authority concludes that fraud or wilful misstatement or suppression has not been established and directs redetermination under Section 73 pursuant to Section 75(2).
If the remaining statutory and procedural conditions are satisfied, the case can potentially qualify for Section 128A.
The special six-month payment and application framework applies to this category.
Practical Compliance Points
For taxpayers dealing with historical Section 73 demands, the following points are important:
Check the Financial Year
Confirm that the demand relates to the period from 1 July 2017 to 31 March 2020.
Check the Nature of Demand
Determine whether the demand is under Section 73 or falls within the special Section 75(2) route.
Check for Erroneous Refund
Separate any erroneous-refund component because the waiver does not extend to interest and penalty relating to that component.
Check Tax Payment
Confirm that the required tax amount has been fully paid.
Check Appeals
Review any pending appeal, writ petition or other proceeding that must be withdrawn before applying.
Check the Correct Form
Determine whether SPL-01 or SPL-02 applies.
Preserve Payment Evidence
Maintain DRC-03, DRC-03A, liability-register and other payment records where relevant.
Check the Application Status
Track the processing of the waiver application and any SPL-03, SPL-04, SPL-05, SPL-06 or SPL-07 forms issued.
Current Status of Section 128A
Section 128A remains an important provision of the CGST Act, but its principal waiver window was time-bound.
The Government notified 31 March 2025 as the main date for payment of the full tax demanded for availing the waiver. Applications under Rule 164 for the ordinary cases were linked to a three-month period from that date.
Therefore, in 2026, Section 128A should not be described as a generally available fresh waiver for newly arising GST demands.
Its practical relevance today is primarily in relation to:
- cases where the Section 128A process was already invoked;
- processing or consequences of applications;
- orders passed under the scheme;
- appeals against rejection;
- special cases covered by the Section 75(2) route and its separate timeline; and
- compliance with conditions attached to an already granted waiver.
This distinction is important because the provision itself continues to exist in the CGST Act, but the principal notified payment window has already passed.
Key Takeaways of Section 128A
Section 128A can be summarised through the following points:
- Section 128A provides for waiver of interest or penalty or both relating to specified Section 73 demands.
- It was inserted with effect from 1 November 2024.
- It primarily covers the period from 1 July 2017 to 31 March 2020.
- The corresponding financial years are FY 2017-18, FY 2018-19 and FY 2019-20.
- The taxpayer must satisfy the statutory and prescribed conditions.
- The principal tax liability is not waived.
- The required tax amount must be paid within the applicable notified time.
- The main payment deadline was 31 March 2025.
- The ordinary application window was linked to three months from that date.
- A special six-month framework applies to specified Section 74 cases redetermined under Section 73 pursuant to Section 75(2).
- FORM GST SPL-01 is used for specified notice or statement cases.
- FORM GST SPL-02 is used for specified order cases.
- FORM GST SPL-03 is a notice where rejection is proposed.
- FORM GST SPL-04 is the taxpayer’s reply.
- FORM GST SPL-05 is the approval/conclusion order.
- FORM GST SPL-06 is used in specified appellate situations allowing the waiver.
- FORM GST SPL-07 is the rejection order.
- Eligible interest and penalty can be waived where the statutory requirements are satisfied.
- Interest and penalty relating to erroneous-refund demand are not covered by the waiver.
- If interest or penalty has already been paid, Section 128A does not provide a refund of those amounts.
- Certain pending appeals or writ petitions had to be withdrawn before applying.
- Multiple eligible notices or orders generally required separate applications.
- Retrospective Section 16(5) and 16(6) relief can affect the amount of tax payable for Section 128A purposes in the prescribed circumstances.
- If a later appellate, tribunal, court or revisional order creates additional tax liability, the prescribed additional tax must be paid within the applicable three-month period to preserve the waiver.
- Section 128A is a specific, historical, one-time relief mechanism and should not be confused with the general waiver power under Section 128.
Conclusion
Section 128A of the CGST Act was introduced as a one-time conditional relief mechanism for specified Section 73 demands relating to the initial period of GST implementation. It provides for waiver of eligible interest or penalty or both where the taxpayer satisfies the statutory and prescribed conditions and pays the required tax.
The provision covers demands relating to the period from 1 July 2017 to 31 March 2020, including specified cases where Section 73 notices, orders or appellate/revisional orders existed. A special route also covers certain cases originally initiated under Section 74 but subsequently required to be redetermined under Section 73 under Section 75(2).
An important limitation is that Section 128A does not waive the principal tax. Further, the waiver does not cover interest and penalty associated with erroneous-refund demands, and the provision does not provide a refund of interest or penalty that had already been paid.
The implementation framework was supported by Rule 164 and forms including SPL-01, SPL-02, SPL-03, SPL-04, SPL-05, SPL-06 and SPL-07. CBIC also issued Circular No. 238/32/2024-GST and Circular No. 248/05/2025-GST to clarify several practical issues concerning eligibility, payment, appeals, mixed-period demands and processing of applications.
For current purposes, taxpayers should remember that the principal notified payment deadline for the ordinary Section 128A cases was 31 March 2025. Consequently, Section 128A should not be presented as an open-ended waiver available for new GST demands in 2026. Its continuing relevance is mainly connected with eligible cases already covered by the scheme and the statutory consequences and procedures associated with those cases.
Based on Google's Helpful Content System, this article emphasizes user value, transparency, and accuracy. It incorporates principles of E-E-A-T (Experience, Expertise, Authoritativeness, Trustworthiness).
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