The Kerala State Goods & Services Tax Department has issued Circular No. 2/2026-Kerala SGST dated September 22, 2026, laying down detailed instructions for uniform implementation of the Small Arrear Waiver Scheme, 2026, introduced through Chapter III of the Kerala Finance (No. 3) Act, 2026 [Act 12 of 2026]. The Scheme has been introduced for settlement of arrears of tax, cess, surcharge, interest or penalty pertaining to specified orders issued under the relevant Acts, subject to the conditions prescribed under the Scheme.
The Circular states that, for implementation of the Scheme, the Commissioner of State Tax, vide Order No. SGST/3429/2026-PLC9 dated August 21, 2026, has constituted Committees as Designated Authorities in accordance with Section 7 of the Kerala Finance (No. 3) Act, 2026. These Committees are headed, as applicable, by the Deputy Commissioners of State Tax (Arrear Recovery) and Deputy Commissioners of State Tax (Taxpayer Services Division). The instructions have been issued in exercise of powers under Section 16 of the Act to ensure uniform implementation of the Scheme across the State.
Under the prescribed procedure, the Designated Authorities are required to identify and verify cases eligible for settlement under the Small Arrear Waiver Scheme, 2026. Details of cases verified and treated as settled are required to be communicated to the jurisdictional Assessing Authority in the format prescribed in Annexure-IV, with a copy marked to the jurisdictional Joint Commissioner.
Significantly, upon receipt of such communication, the jurisdictional Assessing Authority is required to verify whether any appeal filed by the Government in respect of the settled case is pending before any authority, tribunal or court. Wherever necessary, appropriate steps are to be initiated for withdrawal of such appeal in accordance with the proviso to Section 11(1) of the Act. Similarly, where a settled case is pending in revenue recovery proceedings, the Designated Authority is required to take necessary steps for withdrawal of such proceedings before the appropriate authority.
A beneficiary seeking a formal Certificate of Settlement under Section 11 is required to make an application before the Designated Authority in Form SAWS-1. Where settlement relates to more than one specified order, a separate application is required for each specified order. Form SAWS-1 requires, inter alia, particulars of the beneficiary, relevant Act, registration/TIN details, assessment or financial year, details of the specified order, pending appeal, revenue recovery proceedings and contact particulars.
After examining the application and satisfying itself that the arrears covered by the specified order are eligible for settlement under the Scheme, the Designated Authority will issue a Settlement Order in Form SAWS-2 and a Certificate of Settlement in Form SAWS-3. A separate Settlement Order and Certificate are required to be issued in respect of each specified order. The prescribed certificate specifically records the arrears settled under various heads including tax/surcharge, cess, penalty and interest.
The Circular further safeguards the rights of beneficiaries by providing that where any order adversely affecting the beneficiary is proposed to be issued, the Designated Authority must pass a speaking order after providing an opportunity of being heard. All authorities involved in implementation of the Scheme are also required to ensure strict compliance with the confidentiality provisions contained in Section 17 of the Act.
Further, Annexure-IV prescribes a structured statement of settled cases to be communicated to the jurisdictional Assessing Authority under Section 15 of the Kerala Finance (No. 3) Act, 2026, containing details such as the beneficiary’s name, relevant Act, assessment/financial year, specified order number and date, and certificate number and date, wherever applicable.
The Circular can be accessed at: https://a2ztaxcorp.net/wp-content/uploads/2026/10/STATE-SAWS-CIRCULAR.pdf
