Indirect Tax Laws · Demands and Recovery

Section 128A CGST: Waiver of Interest and Penalty

Updated 5 October 2026 · Fact-checked

Section 128A CGST waives interest and penalty on section 73 demands for 2017-18, 2018-19 and 2019-20 if you pay the full tax demanded by 31 March 2025 and apply in FORM SPL-01 or SPL-02 by 30 June 2025, withdrawing any pending appeal. Check period, section, full tax, timing and appeal.

Understand Section 128A Waiver of Interest and Penalty

Many GST demands for the early years were raised under section 73, which covers tax not paid or short paid without fraud, wilful misstatement or suppression. Such a demand carries tax, interest under section 50 and penalty. Over time these demands became large and were stuck in litigation.

Section 128A is a one-time amnesty for these cases. If the taxpayer pays the entire tax in the notice, statement or order, the interest and penalty on that demand are waived. The Government gave relief on the add-ons, not on the tax itself.

The waiver is narrow. It covers only demands under section 73 (or orders under it) for 2017-18, 2018-19 and 2019-20. It does not cover fraud-type demands under section 74. It also does not cover other years.

The benefit depends on timing. Payment of the tax was due by 31 March 2025. The application is made in FORM SPL-01 where a notice or statement is pending, and FORM SPL-02 where an order has already been passed. Applications in these forms were due by 30 June 2025. If the question gives its own dates, follow the question.

If an appeal or writ is pending on the same demand, you must withdraw it as a condition of the waiver. Under rule 164, you furnish proof of the withdrawal in FORM SPL-04, together with the order of the appellate authority or court permitting the withdrawal. Interest or penalty already paid is not refunded.

After the application is examined, the proper officer issues the waiver order in FORM SPL-05. If the conditions are not met, the proper officer can reject the application by an order in FORM SPL-07, after giving an opportunity of being heard, and no waiver is available.

Key rules to remember

Scope of the waiver: Section 73 demand + tax periods 2017-18 / 2018-19 / 2019-20 + full tax paid on time = interest (s.50) and penalty waived; All of these conditions must be met together. A section 74 demand or a different year is outside the section.
What is waived: Waiver = interest under section 50 + penalty under the Act on that demand; Tax is never waived. Interest and penalty are waived only on the demand covered by the notice or order.
Condition on payment: Full tax in notice / statement / order paid on or before 31 March 2025; Part payment does not qualify. Pay the whole tax shown in the demand, not only the disputed part.
Forms and application dates: Notice or statement: FORM SPL-01. Order: FORM SPL-02. Applications due by 30 June 2025; Payment of tax was due by 31 March 2025. The applications were due by 30 June 2025. If the question gives different dates, follow the question.
Appeal / writ condition: Pending appeal or writ on same demand must be withdrawn, and proof of withdrawal (FORM SPL-04, with the order of the appellate authority or court) furnished; Withdrawal is a condition of the waiver, not an optional step.
Grant of waiver: Waiver order is issued in FORM SPL-05 after the application is examined; Filing the application does not by itself complete the waiver. If the conditions are not met, the officer can reject the application by an order in FORM SPL-07 after a hearing.
No refund: Interest or penalty already paid is not refunded; The section gives relief only for amounts not yet paid.

How to solve Section 128A Waiver of Interest and Penalty questions

Treat every question as an eligibility test. Run the same checks in order and then compute the saving.

1Identify the section under which the demand was raised. Only section 73 demands qualify. Fraud, wilful misstatement or suppression (section 74) is outside.
2Check the tax period. It must be 2017-18, 2018-19 or 2019-20. Reject any other year or any demand mixing years unless you split it year-wise.
3Identify the stage: notice or statement (use SPL-01) or order (use SPL-02).
4Check whether the full tax in the notice or order was paid by the notified last date. Part payment fails.
5Check whether any appeal or writ on the same demand is pending and state that it has to be withdrawn, with proof of withdrawal furnished in FORM SPL-04 along with the order of the appellate authority or court.
6Check the application timeline. The application must be filed on the portal within the notified time.
7Compute the benefit. Interest and penalty are waived by the order in FORM SPL-05, tax is payable in full, and nothing is refunded for amounts already paid.
8Write the answer in provision, facts, conclusion form.

Quickest way: Four-gate check

When to use it: Use this for MCQs and short case questions where you only need to decide whether the waiver applies.

Gate 1: Section 73? If it is section 74 or any other section, stop: no waiver.
Gate 2: Year in 2017-18 to 2019-20? If not, stop: no waiver.
Gate 3: Full tax paid by the notified date? If not, stop: no waiver.
Gate 4: Appeal or writ withdrawn and application filed? If yes to all four gates, interest and penalty are waived; tax stays payable.

Common mistakes in Section 128A Waiver of Interest and Penalty

Saying that tax is also waived.
The word amnesty suggests complete relief.
Fix: Write that only interest and penalty are waived. The whole tax must be paid.
Applying the waiver to a section 74 demand.
Students mix sections 73 and 74 because both deal with demands.
Fix: Check the section first. Section 128A covers section 73 demands only.
Allowing the waiver on part payment of tax.
Students think paying the disputed portion is enough.
Fix: The condition is payment of the full tax as per the notice, statement or order. Part payment fails.
Ignoring the pending appeal.
Students treat the waiver as only a payment matter.
Fix: State that the appeal or writ on the same demand must be withdrawn, and that proof of withdrawal (FORM SPL-04, with the order of the appellate authority or court) must be furnished.
Extending the scheme to 2020-21 or later years.
Students assume that the scheme covers all old demands.
Fix: Only 2017-18, 2018-19 and 2019-20 are covered.
Expecting a refund of interest or penalty already paid.
Students assume the waiver works retrospectively.
Fix: The section does not grant any refund of interest or penalty already paid.

Worked examples

Example 1

Aarav Traders received a notice under section 73 for 2018-19 demanding tax of ₹8,00,000. Interest computed on it is ₹2,40,000 and penalty is ₹80,000. No appeal is pending. Aarav pays the full tax of ₹8,00,000 on or before the notified date and files the application in the prescribed form. What is the total amount payable?

Show the solution

Section: the demand is under section 73. This is covered.
Period: 2018-19 falls in the covered years.
Payment: the full tax of ₹8,00,000 has been paid on time.
Stage: only a notice is pending, so the application goes in FORM SPL-01.
Effect: interest of ₹2,40,000 and penalty of ₹80,000 are waived. The saving is ₹2,40,000 + ₹80,000 = ₹3,20,000.

Answer: Aarav pays only the tax of ₹8,00,000. Interest and penalty totalling ₹3,20,000 are waived under section 128A, once the proper officer passes the waiver order on the application.

Example 2

Meera & Co. has two section 73 orders. Order A is for 2019-20 with tax of ₹6,00,000. An appeal is pending against it. Order B is for 2020-21 with tax of ₹3,00,000. By the notified date, it pays ₹6,00,000 for Order A and ₹1,00,000 for Order B. Advise on the waiver for each order.

Show the solution

Order A: the section is 73 and the year 2019-20 is covered. The full tax of ₹6,00,000 has been paid on time.
Order A: because an appeal is pending, it must be withdrawn. An order has been passed, so the application goes in FORM SPL-02. Order A qualifies only if the appeal is actually withdrawn and proof of withdrawal is furnished under rule 164, in FORM SPL-04 with the order of the appellate authority or court.
Order A: once these conditions are met, the proper officer grants the waiver of interest and penalty by an order in FORM SPL-05. If they are not met, the application can be rejected by an order in FORM SPL-07 after a hearing.
Order B: the year 2020-21 is outside the scheme, so section 128A does not apply regardless of payment.
Order B: the ₹1,00,000 paid is a payment of tax outside the scheme. It gives no waiver, and interest and penalty continue to apply on the balance.

Answer: Meera & Co. can get the waiver on Order A if it applies in FORM SPL-02, withdraws the appeal and furnishes proof of withdrawal (FORM SPL-04, with the appellate authority's order). The waiver is then granted by an order in FORM SPL-05. It gets no waiver on Order B for 2020-21, and the unpaid tax, interest and penalty remain payable.

Exam tips

Start every answer with the three eligibility checks: section 73, years 2017-18 to 2019-20, and full tax paid.
In case-scenario MCQs, look for a trap: a different year, a fraud-based demand, part payment, or a missed date.
Name the forms precisely: SPL-01 for notices or statements and SPL-02 for orders. Use the dates exactly as given in the question.
State clearly that the tax is still paid and only interest and penalty are waived.
Always mention the withdrawal of a pending appeal or writ, with proof, when the facts show one.

Practice questions from Demands and Recovery

Section 128A Waiver of Interest and Penalty: frequently asked questions

Which demands does Section 128A cover?

It covers demands raised by a notice, statement or order under section 73 for the periods 2017-18, 2018-19 and 2019-20. Demands under section 74 and other years are not covered. The demand must relate to tax not paid, short paid, erroneously refunded or input tax credit wrongly availed or utilised.

Do I need to pay the whole tax to get the waiver?

Yes. The full tax payable as per the notice, statement or order must be paid by the notified date. Partial payment does not qualify. Only the interest and penalty are waived.

Which form is used to apply under Section 128A?

FORM SPL-01 is used where a notice or statement has been issued. FORM SPL-02 is used where an order has been passed. Both are filed on the GST portal within the notified time. The waiver order is issued in FORM SPL-05, and a rejection is by an order in FORM SPL-07 after a hearing.

What happens if I have an appeal pending on the same demand?

You must withdraw the appeal or writ on that demand as a condition of the waiver. You must also furnish proof of withdrawal under rule 164, in FORM SPL-04 with the order of the appellate authority or court. Without the withdrawal you cannot get the benefit.

Can I get a refund of interest or penalty I already paid?

No. The section does not provide a refund of interest or penalty already paid. The waiver applies only to amounts that are still unpaid.