Section 128A offered something GST had not offered before: a waiver of interest and penalty on demands for the earliest years of the tax, on condition that the tax itself was paid. A large number of businesses took it up, paid, withdrew their appeals and applied.
The application window has since closed. What remains live is the aftermath — orders being issued, applications being rejected, and appeals that were withdrawn as a condition of applying now needing to be brought back. That aftermath is where the real difficulty lies, and it is much less written about than the eligibility rules were.
What the scheme did
Section 128A was inserted by the Finance (No. 2) Act, 2024 with effect from 1 November 2024. The procedure was prescribed by Notification No. 20/2024-Central Tax dated 8 October 2024, which inserted Rule 164, and explained in Circular No. 238/32/2024-GST.
The scheme was deliberately narrow:
- It applied to demands under section 73 — that is, cases not involving fraud, wilful misstatement or suppression. Demands under section 74 were outside it. Our note on the difference between sections 73 and 74 explains why that distinction carries so much weight.
- It covered three financial years only: 2017-18, 2018-19 and 2019-20.
- It reached three situations: a notice or statement issued with no order yet passed; an order passed with no first-appellate decision yet; and an appellate order with the matter not yet before the Tribunal.
- The relief was waiver of interest and penalty. The tax was payable in full.
The bargain, in short, was: pay the tax, keep the interest and the penalty.
The windows, and the fact that they have closed
Two dates governed the scheme, and both are now historical.
Payment of the tax had to be made by 31 March 2025.
The application — in FORM GST SPL-01 where a notice or statement had been issued and no order passed, or FORM GST SPL-02 where an order under section 73(9) had been passed — had to be filed within three months of that date, which is to say by 30 June 2025. A longer period of six months from communication of the order applied in the limited situation of a demand recast under section 75(2).
Because both windows have closed, the scheme is no longer a planning option. A business that did not apply cannot now do so, and a demand for those years that was not brought within the scheme is dealt with through the ordinary appellate route.
What continues is the processing of applications already made, and the consequences that follow.
SPL-05: approval and what it concludes
Where the proper officer is satisfied that the conditions are met, the application is allowed by an order in FORM GST SPL-05, and the proceedings are concluded.
Two points about the scope of that conclusion are worth stating plainly, because they are frequently misread.
It concludes the proceedings, not the period. An SPL-05 order concludes the specific demand to which the application related. It does not immunise the taxpayer against a different demand for the same year on a different issue, nor against proceedings under section 74 if the ingredients of that section are made out on other facts.
It does not refund anything already paid. Interest and penalty already paid before the application were not refundable under the scheme. The waiver operated on amounts unpaid, not on amounts recovered.
Where an SPL-05 has been received, the file is closed but should be kept complete — the application, the payment challans, the withdrawal of the appeal and the order itself. That set of documents is the answer if the same period is picked up again in a later verification.
The documents should be filed with the rest of that year’s GST compliance records.
SPL-07: rejection, and the two routes out
Where the officer is not satisfied, the application is rejected by an order in FORM GST SPL-07. This is the point at which the scheme becomes complicated, because the applicant is now in a worse position than before: the appeal has been withdrawn, and the waiver has been refused.
Rejections commonly turn on:
- Shortfall in the tax paid — a computation difference, or payment against the wrong period or head.
- Payment after 31 March 2025.
- The demand not being a section 73 demand, or covering periods outside the three eligible years.
- The appeal not having been withdrawn, or the withdrawal not being evidenced.
- Part of the demand falling outside the scheme, where an order covers a mixed period or mixed grounds.
Two routes follow from an SPL-07, and the choice between them has to be made deliberately.
Appeal against the rejection. An SPL-07 order is appealable to the Appellate Authority in the ordinary way. This is the route where the applicant maintains that the conditions were satisfied and the officer was wrong — for example, where the payment was in fact made in time, or where the demand was properly a section 73 demand.
Accept the rejection and restore the original appeal. Where the applicant concludes that the rejection is correct, or that contesting it is not worth the time, the original appeal against the underlying demand can be revived. That is what Form GST SPL-08 is for.
Both routes run through the ordinary forums described in our note on the GST appeal structure.
SPL-08 and restoration of a withdrawn appeal
The scheme required an applicant to withdraw any pending appeal before, or at the same time as, applying. That withdrawal was the price of admission — and it created an obvious risk: a taxpayer who withdrew an appeal and was then refused the waiver would otherwise be left with no remedy at all against a demand that had become final.
The rules address this. Where an application is rejected by an SPL-07 and the applicant does not pursue a further appeal against that rejection, an undertaking in FORM GST SPL-08 filed within three months restores the original appeal, which is then treated as never having been withdrawn.
Three things follow, and they are all time-sensitive:
- The three-month period runs from the rejection. It is not open-ended, and it is easy to lose while a decision is being taken about whether to appeal the rejection instead.
- The two routes are alternatives. SPL-08 restoration is available where a further appeal against the rejection is not filed. Choosing to appeal the SPL-07 and then changing course later is not a safe plan.
- Restoration revives the appeal as it was. The original grounds, the original pre-deposit and the original record come back. It does not create an opportunity to reframe the case.
The appeal-withdrawal trap
The single most damaging error in this area is procedural rather than substantive: withdrawing the appeal without preserving proof of the withdrawal and its date, or withdrawing it in a way the appellate authority does not record.
If an application is later rejected on the ground that the appeal was not withdrawn, and the applicant cannot produce the withdrawal, the taxpayer is caught between two forums — refused the waiver for not withdrawing, and unable to demonstrate that the appeal survives. The documents that avoid this are the withdrawal application, the acknowledgement of it, and any order recording it.
The same discipline applies to the payment. Challans should be identified by period and by head, and the payment should be traceable to the specific demand covered by the application.
A taxpayer caught between the two forums is in the worst position available in tax litigation: refused relief in one, and unable to demonstrate a surviving appeal in the other.
What the scheme never covered
For completeness, because the misunderstanding persists:
- Section 74 demands — fraud, wilful misstatement, suppression — were excluded throughout.
- Erroneous refunds were outside the relief.
- Years other than 2017-18 to 2019-20 were never covered, and the scheme was not extended to later years.
- Tax was never waived. Only interest and penalty were.
- Amounts already paid by way of interest or penalty were not refundable.
A demand for FY 2020-21 or later, or a section 74 demand for any year, was always dealt with under the ordinary appellate structure, and still is.
Those demands are contested through the ordinary remedies against a wrongful demand order.
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