Important Keywords: Instruction No. 02/2025 – GST, GST interest appeal, CGST penalty waiver, Section 128A CGST, GST department appeal, CBIC GST clarification, Finodha GST help,
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Table of Contents
CBIC-20016/39/2024-GST-SECTION
Government of India
Ministry of Finance
Department of Revenue
Central Board of Indirect Taxes and Customs
GST Policy Wing
*****
Room No.159-A , North Block,
New Delhi, 7th February, 2025
Instruction No. 02/2025 – GST: Procedure to be followed in department appeal filed against interest and/or penalty only, related to Section 128A of the CGST Act, 2017
To,
All the Principal Chief Commissioners /Chief Commissioners of the Central Tax
Madam/Sir,
Subject: Procedure to be followed in department appeal filed against interest and/or penalty only, related to Section 128A of the CGST Act, 2017 -regarding.
Kind attention is invited to the Section 128A of the Central Goods and Service Tax Act, 2017 (hereinafter referred as ‘the CGST Act’) read with Rule 164 of the Central Goods and Service Tax Rules, 2017 (hereinafter referred as ‘the CGST Rules’) which provides waiver of interest or penalty or both, relating to demands under section 73 of the CGST Act pertaining to Financial Years 2017-18, 2018-19 and 2019-20, subject to certain conditions. Further vide Circular No. 238/32/2024-GST dated 15th October, 2024, various doubts related to section 128A were clarified.
2. In this regard, references have been received from various field formations seeking clarification from the Board as to whether the benefit of section 128A (supra) be extended to taxpayers in cases where the tax amount has been paid but the department has gone in Appeal on the basis of wrong arithmetic calculation of interest, or where penalty is either not imposed or imposed less than the prescribed threshold etc.
3. The matter has been examined by the Board. It has been observed that at S. No. 4 of the Table under para 4 in the aforesaid circular, it is clarified that cases where the tax due has already been paid and the notice or demand orders under Section 73 only pertains to interest and/or penalty involved, the same shall be considered for availing the benefit
of section 128A.
Hence, it is evident that in cases where the taxpayer has paid the full amount of tax and only interest and/or penalty is in dispute by the taxpayer, then he is eligible to avail the benefit of Section 128A of the CGST Act. On the similar pattern, it is felt that just because the department has gone in appeal or is in the process of filing an appeal, a taxpayer who is otherwise eligible for availing the benefit of section 128A, should not be denied the benefits. Further the intention of the said provision is to reduce litigation and a taxpayer should not be denied the benefit of the provision on mere technicalities.
4. Based on the above, it is decided that in cases where the tax amount has been fully paid by the taxpayer on demands made under section 73 of the CGST Act and the department is in appeal or under the process of filing an appeal only on account of wrong interest calculation and/or wrong imposition or non-imposition of penalty amount under the provisions of CGST Act or IGST Act and the taxpayer fulfils other conditions of section 128A and the rules made thereunder, the proper officer may proceed towards withdrawing such appeal filed and in case where the order under section 73 is under review stage only,
accept the same.
5. Difficulties, if any, in the implementation of these instructions may be informed to the Board.
Yours faithfully,
(Gaurav Singh)
Commissioner (GST Policy Wing)
📘 Frequently Asked Questions (FAQs) on Instruction No. 02/2025-GST
Q1: What is the purpose of Instruction No. 02/2025-GST?
Answer:
It clarifies the procedure to be followed when the department files or intends to file an appeal under Section 73 of the CGST Act, but the dispute pertains only to interest and/or penalty (not the core tax amount). It ensures taxpayers aren’t denied the benefit of Section 128A due to technicalities.
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Q2: What does Section 128A of the CGST Act cover?
Answer:
Section 128A allows waiver of interest and/or penalty for tax demands under Section 73 for the Financial Years 2017–18, 2018–19, and 2019–20. The waiver applies if the principal tax is paid and other prescribed conditions are fulfilled.
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Q3: When can the benefit of Section 128A be availed?
Answer:
✅ When full tax has been paid
✅ The dispute is only over interest and/or penalty
✅ Other eligibility criteria under Section 128A are satisfied
✅ Even if the department is in appeal or planning an appeal, the taxpayer remains eligible
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Q4: What scenario does Instruction No. 02/2025-GST address?
Answer:
It addresses instances where:
📌 The department is appealing due to miscalculation of interest
📌 The penalty is not levied as per expectations
📌 The core tax is already paid
In such cases, officers may withdraw appeals or accept orders under review.
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Q5: Can an appeal be withdrawn by the department?
Answer:
Yes. If the appeal only involves interest or penalty and the taxpayer qualifies for benefits under Section 128A, the department is advised to:
🔁 Withdraw the appeal (if already filed)
✅ Accept the adjudication order (if under review stage)
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Q6: What’s the key message from this instruction?
Answer:
⚖️ Don’t deny eligible taxpayers the relief of Section 128A due to technicalities like ongoing or future departmental appeals.
🛑 Focus should be on reducing litigation and simplifying compliance.
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Q7: Does this apply to IGST cases too?
Answer:
Yes. The same principle applies to interest and/or penalty appeals under IGST Act as well, provided Section 128A conditions are met.
💡 Need help verifying your eligibility? Visit: https://finodha.in/gst-compliance/
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Q8: What should taxpayers do if the department is appealing their case?
Answer:
✅ Check if you’ve paid the full tax under Section 73
✅ Evaluate if the dispute is only on interest/penalty
✅ Request the officer to withdraw the appeal based on this instruction
✅ Keep proof of MoF/CBIC compliance circulars (like this one) for reference
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Q9: How does Finodha help in appeal or review situations?
Answer:
Finodha offers:
📋 Representation before GST authorities
📄 Section 128A waiver support
🧾 Legal drafting of withdrawal request letters
📈 GST Return Filing: https://finodha.in/gst-return-filing/
📊 ROC & Business compliance: https://finodha.in/roc-compliance-for-private-limited-company/
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Q10: Where can one read the original instruction or get updates?
Answer:
✔ Official CBIC site under GST Instructions
✔ Through GST advisors like Finodha → https://finodha.in/gst-compliance/
✔ Legal consultants or chartered accountants dealing in indirect tax
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✅ Conclusion:
Instruction No. 02/2025-GST streamlines GST litigation by ensuring taxpayers aren’t penalized due to departmental technical appeals. Eligible taxpayers must leverage this for penalty relief and quicker resolution.
📢 For Section 128A waiver application, appeal withdrawal drafting, or GST review case strategy — consult Finodha’s experts.
Download PDF: Instruction No. 02/2025 – GST
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