Identifying a Drafting Error in GST Amnesty Provisions

 Provision Regarding Amnesty Scheme

Section 128A was introduced into the Central Goods and Services Tax (CGST) Act by the Finance Act, 2024, with effect from November 1, 2024. The relevant portion of the provision is as follows:

Section 128A(1): Notwithstanding anything to the contrary contained in this Act, where any amount of tax is payable by a person chargeable with tax in accordance with—

(a) a notice issued under sub-section (1) of section 73 or a statement issued under sub-section (3) of section 73, and where no order under sub-section (9) of section 73 has been issued; or

(b) an order passed under sub-section (9) of section 73, and where no order under sub-section (11) of section 107 or sub-section (1) of section 108 has been passed; or

(c) an order passed under sub-section (11) of section 107 or sub-section (1) of section 108, and where no order under sub-section (1) of section 113 has been passed.

Analysis of the Provision

The newly inserted Section 128A lays out the framework for the GST amnesty scheme, which is applicable to the following categories:

1. Show Cause Notices (SCNs) issued under Section 73 or statements issued under Section 73(3), where no order under Section 73(9) has been passed.

2. Orders passed under Section 73(9), where no appeal order under Section 107(11) or Section 108(1) has been issued.

3. Orders passed under Section 107(11) or Section 108(1), where no order under Section 113(1) has been passed.

These three limbs are distinct and connected by the word "or," indicating that any taxpayer who satisfies the conditions of any of these clauses is eligible for the benefits of the amnesty scheme.

Identifying the Drafting Anomaly

Clause (c) of Section 128A offers amnesty for cases involving appeal orders under Section 107(11) or Section 108(1). However, upon a closer reading, it becomes evident that the provision does not distinguish between orders or notices issued under Section 73 (pertaining to non-fraudulent tax demands) and Section 74 (pertaining to tax demands involving fraud or willful misstatement). The provision as currently drafted extends amnesty for appeal orders without limiting its application to cases originating from Section 73.

This interpretation implies that amnesty could be available against first appeal orders irrespective of whether the underlying notice or order was under Section 73 or Section 74. Such an outcome seems inconsistent with the legislative intent, as Section 74 addresses more serious tax liabilities, which are typically excluded from amnesty benefits.

Possible Legislative Correction

The apparent discrepancy in the language of Section 128A appears to be a drafting oversight rather than a deliberate policy decision. It is likely that the Parliament, upon the recommendation of the GST Council, will introduce a clarificatory amendment to rectify this inconsistency. Until such an amendment is enacted, taxpayers may interpret the provision as written, potentially availing amnesty for appeal orders under both Sections 73 and 74.

Conclusion

The insertion of Section 128A in the CGST Act provides a significant relief mechanism for taxpayers. However, the current drafting of clause (c) creates an ambiguity that may not align with the intended scope of the amnesty scheme. Taxpayers and practitioners should exercise caution and monitor any legislative updates or clarifications that may address this issue.