Background and Rationale:

In the 2025-2026 State Budget, the Kerala State Government has introduced several amnesty schemes aimed at helping traders settle pending tax arrears. These schemes include various discounts and waivers on penalties and interest. The government’s intention is to clear accumulated arrears and provide relief to businesses that have outstanding dues under multiple tax laws, which existed before the introduction of the Goods and Services Tax Act, 2017.

The amnesty scheme is designed to ease the financial burden on traders and encourage voluntary tax compliance, while also assisting the state in collecting pending revenues.

Detailed Comparison of Provisions:

The Amnesty Scheme 2025 includes multiple schemes targeting different categories of arrears:

1. General Amnesty Scheme 2025: Targets tax arrears from previous tax laws such as Kerala Value Added Tax (KVAT), Kerala General Sales Tax (KGST), Kerala Luxury Tax, and others applicable before the GST Act. Under this scheme, traders will benefit from discounts on tax amounts, and full waivers on penalties and interest.
2. Flood Surcharge Amnesty 2025: Specifically for businesses that owe flood surcharge taxes imposed on GST supplies from August 2019 to July 2021. This scheme offers a waiver on interest and penalties if the arrears are paid by June 30, 2025.
3. Bar Hotels Amnesty 2025: Aimed at bar hotels with outstanding turnover tax dues for the years 2005-2006 to 2020-2021. The scheme provides significant relief by waiving interest and penalties after paying the base turnover tax amount and surcharge.
4. Distillery Arrears Settlement Scheme 2025: For distillers who have turnover tax arrears for the period between June 2022 and November 2022. The scheme provides a full waiver on penalties and interest if the dues are cleared by June 30, 2025.

Amendments and Their Implementation:

The Amnesty Scheme 2025 operates under the premise that traders will be able to settle their arrears with the following provisions:

• First Slab: Arrears from ₹10,000 to ₹10 lakh can be settled by paying 30% of the total tax amount, with no penalties or interest.
• Second Slab: Arrears between ₹10 lakh and ₹1 crore will allow two methods of settlement:
  • For non-appealed (no legal disputes) arrears: 50% of the tax amount needs to be paid.
  • For appealed (under legal dispute) arrears: 50% of the tax amount needs to be paid.
• Third Slab: Arrears exceeding ₹1 crore will follow two settlement methods:
  • For non-appealed arrears: 60% of the tax amount must be paid.
  • For appealed arrears: 50% of the tax amount must be paid.

These payments must be made before applying for the amnesty through the e-Treasury portal.

Traders can submit applications through the e-Treasury portal (www.etreasury.kerala.gov.in), and the last date for submissions is June 30, 2025. This digital approach aims to streamline the process and ensure transparency.

Implications and Future Prospects:

• Positive Economic Impact: Settling arrears will result in enhanced liquidity for businesses, potentially supporting growth and further investments within the state.
• Compliance Culture: The introduction of this amnesty scheme aims to instill a culture of timely tax payment and compliance, which can result in fewer instances of tax evasion in the future.
• Risk of Non-Participation: If traders do not participate in the scheme and fail to clear their dues, they may face the consequences of penalties and interest once the scheme expires. This highlights the importance of the scheme in encouraging settlement before the deadline.

Conclusion:

Amnesty Scheme 2025 introduced by the Kerala State Government provides traders with an opportunity to clear their arrears with significant relief on penalties and interest. By offering three separate slabs and multiple categories for settlement, the scheme is designed to provide tailored relief to a wide range of traders, from small businesses to larger entities. The initiative aims to help businesses regain their financial footing while simultaneously ensuring that the state can collect much-needed revenue. Traders must act quickly, as the deadline for submission is June 30, 2025, after which the relief will no longer be available.