Section 128 of CGST Act, 2017 – Power to Waive Penalty or Fee or Both

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Section 128 of CGST Act, 2017 – Power to Waive Penalty or Fee or Both

Act: Central Goods and Services Tax Act, 2017
Chapter: XIX – Offences and Penalties
Section Covered: Section 128
Effective From: 01st July 2017 (Subsequently amended)

🔎 Introduction

Section 128 of the CGST Act, 2017 empowers the Government, on the recommendations of the GST Council, to waive, either fully or partially, any penalty, late fee, or both payable under the CGST Act.

This provision enables the Government to provide relief to taxpayers in deserving circumstances, particularly where widespread procedural defaults, technical issues, or exceptional situations warrant relaxation. Such waivers are generally notified through Official Notifications and are applicable only to the class of taxpayers or periods specified therein.

Section 128 reflects the Government's commitment to promoting voluntary compliance while ensuring that taxpayers are not unduly burdened by penalties or late fees in genuine cases.

📜 Bare Provision – Section 128 (Key Highlights)

The Government may, on the recommendations of the GST Council, by notification:

  • Waive, in part or in full, any penalty payable under the CGST Act.
  • Waive, in part or in full, any late fee payable under Section 47.
  • Waive both penalty and late fee, subject to the conditions and restrictions specified in the notification.

Such waiver may apply:

  • To a specified class of registered persons.
  • For a specified tax period.
  • Subject to prescribed conditions.

✅ Meaning in Simple Words

Section 128 gives the Government the authority to grant relief from:

✔ Penalty

✔ Late Fee

✔ Both Penalty and Late Fee

However, such relief is not automatic. A taxpayer can claim the benefit only if the Government issues a notification covering the relevant default and the taxpayer satisfies the prescribed conditions.

📌 Purpose of Section 128

The provision has been enacted to:

  • Encourage voluntary compliance.
  • Reduce litigation relating to procedural defaults.
  • Provide relief during extraordinary situations.
  • Promote ease of doing business.
  • Facilitate timely filing of GST returns.

🏛 Who Can Grant the Waiver?

The power is vested in:

Government

Only on the recommendations of the GST Council.

Therefore, neither the Proper Officer nor any appellate authority can independently waive a penalty or late fee under Section 128 unless such waiver has been notified by the Government.

📋 What Can Be Waived?

ParticularCan be Waived?
Penalty✅ Yes
Late Fee✅ Yes
Penalty and Late Fee together✅ Yes
Tax❌ No
Interest❌ No (unless separately provided by law)

Thus, Section 128 does not empower the Government to waive the tax liability itself.

📖 Practical Illustrations

Illustration 1 – Waiver of Late Fee

The Government issues a notification waiving the late fee for GSTR-3B returns filed between specified dates.

A registered person who files the return within the notified period becomes eligible for the waiver.

Illustration 2 – Partial Waiver

A notification provides that only 50% of the applicable late fee shall be payable.

If the normal late fee is ₹10,000, the taxpayer is required to pay only ₹5,000.

Illustration 3 – No Notification Issued

A taxpayer requests the Proper Officer to waive the late fee due to financial hardship.

Since no notification has been issued under Section 128, the officer cannot grant the waiver.

📌 Important Notifications Issued Under Section 128

The Government has exercised powers under Section 128 on several occasions to waive or reduce late fees, particularly in relation to:

  • Delayed filing of GSTR-3B.
  • Delayed filing of GSTR-1.
  • Delayed filing of Annual Returns.
  • Amnesty schemes for pending GST returns.
  • Special compliance drives for defaulting taxpayers.

Taxpayers should always refer to the latest notifications to determine their eligibility for any waiver.

⚖️ Judicial Perspective

Courts have consistently held that:

  • Waiver under Section 128 is statutory, not discretionary.
  • Relief can be claimed only in accordance with the notification issued by the Government.
  • Tax authorities cannot extend the benefit beyond the scope of the notification.
  • Conditions prescribed in the notification must be strictly complied with.

🎯 Objective of Section 128

The principal objectives are:

✔ Encourage voluntary compliance.

✔ Reduce the burden of procedural penalties.

✔ Promote ease of doing business.

✔ Provide relief during exceptional circumstances.

✔ Improve GST return filing compliance.

📌 Important Points to Remember

  • Only the Government can grant waiver.
  • Recommendation of the GST Council is mandatory.
  • Waiver is granted through Official Notification.
  • It may be full or partial.
  • It generally applies only to the specified class of taxpayers or specified tax periods.
  • Section 128 does not provide for waiver of tax liability.

🔄 Related Provisions

SectionParticulars
Section 47Levy of Late Fee
Section 122Penalty for Certain Offences
Section 125General Penalty
Section 126General Disciplines Related to Penalty
Section 128Power to Waive Penalty or Fee or Both

⚖️ Landmark Judicial References

1. Union of India v. Bharti Airtel Ltd. (2022) 4 SCC 328

While dealing with procedural compliance under GST, the Supreme Court observed that statutory benefits and relaxations are governed by the provisions of the Act and the notifications issued thereunder.

Relevance: Waivers under Section 128 are available only in accordance with the applicable notification.

2. Various High Court Decisions on Late Fee Amnesty Schemes

Several High Courts have held that:

  • Taxpayers fulfilling the conditions of a notification are entitled to its benefit.
  • Authorities cannot deny a statutory waiver where the notification clearly applies.
  • Relief under amnesty or waiver schemes must be interpreted in line with the language of the notification.

❓ Frequently Asked Questions (FAQs)

Q1. What is the purpose of Section 128?

It empowers the Government to waive, fully or partially, any penalty, late fee, or both under the CGST Act.

Q2. Who can grant the waiver?

Only the Government, on the recommendations of the GST Council.

Q3. Can the Proper Officer waive the late fee?

No. The Proper Officer has no independent power to grant a waiver under Section 128.

Q4. Can tax liability be waived under Section 128?

No. The provision applies only to penalty, late fee, or both.

Q5. Is every taxpayer automatically entitled to a waiver?

No. The waiver is available only if a notification has been issued and the taxpayer satisfies its conditions.

Q6. Can the Government grant a partial waiver?

Yes. The waiver may be either full or partial.

Q7. Are late fee amnesty schemes issued under Section 128?

Yes. Most GST late fee amnesty notifications are issued by exercising the powers under Section 128.

Q8. Can a waiver notification apply only to a specific period?

Yes. The Government may restrict the benefit to specified tax periods or classes of taxpayers.

Q9. Can a taxpayer claim a waiver without fulfilling the notification conditions?

No. Compliance with all prescribed conditions is mandatory.

Q10. Why is Section 128 important?

It provides statutory relief from penalties and late fees, encourages voluntary compliance, and supports taxpayers during exceptional situations.

📝 Conclusion

Section 128 of the CGST Act, 2017 provides the Government with a significant policy tool to grant relief from penalties and late fees in deserving circumstances. By enabling the issuance of targeted waiver notifications on the recommendations of the GST Council, the provision balances effective tax administration with taxpayer facilitation.

Taxpayers should closely monitor the latest notifications issued under Section 128, as the benefit of waiver depends entirely upon the scope, conditions, and timelines specified therein. Proper understanding of these notifications can help taxpayers reduce compliance costs while ensuring timely adherence to GST obligations.

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