GST Amnesty Scheme: Key Considerations for Budget 2024

The introduction of the Goods and Services Tax (GST) was one of the biggest tax reforms in India. As expected from a reform of this magnitude, even after a period of seven years since implementation, the GST law is still evolving with frequent legislative and procedural changes, with the GST Council addressing the issues from time to time. Lack of clarity in the initial period also resulted in a number of notices being issued to the taxpayers for tax demands, either for procedural infractions or due to differences in the interpretation of provisions.

Multiple teething issues in the law and the differences in interpretation in the initial period resulted in multiple notices issued by the GST authorities. Recognising this, the GST Council in its 53rd meeting held on 22 June 2024 recommended the introduction of an Amnesty Scheme (Scheme) offering conditional relaxation from payment of interest and/ or penalty with respect to the tax demands issued for FY 2017-18, 2018-19 and 2019-20 under section 73 of the GST law, i.e. cases, where there is no allegation of non/ short payment of tax on account of fraud, wilful misstatement, etc. To claim the benefit under this Scheme, a taxpayer is required to pay the full amount of tax demanded in the notice by 31 March 2025. Further, the Scheme would not cover instances of tax demands pertaining to erroneous refunds.

A new section 128A in the GST law is to be introduced to give statutory effect to the Scheme. It is anticipated that this section would be introduced in the Union Budget, which is scheduled to be delivered on 23 July 2024.

Key considerations for Budget 2024

While the specific details pertaining to the Amnesty Scheme at a granular level are yet to be announced, based on the announcement made by the press release, some aspects would need to be specifically addressed to avoid ambiguities, some of which are as follows:

* If a demand notice covers multiple financial years, can a taxpayer opt for the Scheme for a Financial Year and continue to litigate demands pertaining to the other Financial Year(s)? Similarly, what is the position if the demand notice covers multiple years, part of which are covered under the Scheme, and some are beyond the period covered under the Scheme?
* If a notice is issued demanding tax on multiple issues, can a taxpayer opt for the Scheme for an issue and continue to litigate the other issue(s)?

* Can the Scheme be opted if initially the notice is issued alleging fraud, wilful misstatement or suppression of facts, whereas the order (passed by adjudicating/ appellate authority, as the case may be) confirms otherwise?

* What is the manner of payment of tax dues under the Scheme, i.e., can a payment be made through utilising input tax credits or in cash?

* Should the tax be paid only as per the notice or as per the order passed (in cases where the demand is reduced in the order)?

* Are matters under ongoing appeals covered?

* Would the instances, where an order confirming the demand is issued but a taxpayer has not filed any appeal against the same also be covered, whether or not the time limit to file an appeal has lapsed?

* What is the refund eligibility if the taxpayer has already paid the disputed tax along with interest/ penalty?

* What is the precedential value of such payment of tax, i.e. can such payments be treated as an admission of liability?

* What is the specific documentary evidence about dropping off the liability of interest and penalties?

In conclusion, the proposed GST Amnesty Scheme presents a valuable opportunity for taxpayers to move forward without the baggage of past disputes. However, it is imperative for the Government to ensure that all the aspects are duly considered and addressed while unveiling the Scheme, which would go a long way to ensure its success. One of the more important impacts of the Scheme would be a reduction of the pendency before the appellate authorities (including the GST Appellate Tribunal (GSTAT), once it is operationalised). Even though the GSTAT is yet to be operationalised, there is already a significant backlog of cases waiting to be filed before the GSTAT and the success of this Scheme would reduce the initial volume of pending cases that the GSTAT would have on inception, leading to a comparatively quicker disposal of cases.

Source:- Economic Times