GST Council – Conditional Waiver of Interest and Penalty for FY 2017-18 to 2019-20


GST Council Conditional Waiver of Interest and Penalty for FY 2017-18 to 2019-20


The GST council’s recommendation states that if a demand pertains to 2017-18 to 2019-20 under Section 73 of the CGST Act, interest and penalty will be waived by inserting a new provision under the law. The Council’s intent behind this recommendation could be faster recovery or closing these financial years. However, the fairness of this recommendation for honest taxpayers is a significant debate.

Interest is a compensatory levy, while a penalty is a punitive levy. If the waiver were only for the penalty, it would make sense. But by declaring a waiver of interest, the Council has disregarded the efforts of compliant taxpayers, in my personal opinion.

Although the council’s recommendation does not clarify whether those who have already paid interest and penalties can apply for a refund, I believe that once this fine print of law is introduced, many interest refund applications would be filed, and the matter would soon be addressed by Writ Courts.

Aside from the important debate mentioned above, there are some crucial points to consider due to this recommendation:

a) In specific cases where only tax was paid and interest was not, this recommendation will be quite helpful.

b) It is not entirely clear if the benefit will be available if a demand order has already been passed. In my opinion, it should be, as the time limit for passing orders for FY 2017-18 and 2018-19 has already lapsed.

c) Notably, the recommendation states that the benefit of interest will only apply if the full amount of tax has been paid. This is very clear, as the kind of notices issued (especially by state authorities) often have no basis for a significant portion of the demand. Hence, the practical help of this recommendation remains to be seen.

d) Interestingly, the recommendation states that the waiver will not apply to erroneous refunds. However, the doubt remains whether any interest levy exists on erroneous refunds.

In my opinion, taxpayers should thoroughly review their litigation over the concerned three years to determine if they can claim this benefit, as it is available if the tax payment is made by 31-03-2025.