If your business still carries old tax dues from the pre-GST era, the Uttar Pradesh government has opened a limited window to clear them at a much lower cost. The Interest Waiver Scheme 2026 lets eligible taxpayers pay only the principal tax and get relief on interest and penalties. Here is what you need to know.
What is the scheme?
The Uttar Pradesh Cabinet approved the scheme on October 9, 2026. It waives interest and penalties on outstanding dues arising under various tax laws up to December 31, 2025. The relief will remain available for three months. The government order was notified on October 16, and the scheme applies across all 75 districts.
The scheme is aimed at a large pool of traders. Media reports say about 5 lakh traders could get relief from ₹10,000 crore in interest and penalties.
How much can you save?
The interest waiver depends on your principal dues. You must deposit the entire principal amount to qualify.
| Principal dues | Interest waiver |
|---|---|
| Up to ₹10 lakh | 100% |
| ₹10 lakh to ₹1 crore | 90% |
| ₹1 crore to ₹5 crore | 75% |
| Above ₹5 crore | 50% |
Eligible penalties are waived fully in all four categories, subject to the scheme’s conditions.
Example: A trader with ₹8 lakh principal and a large accumulated interest and penalty pays only the ₹8 lakh. A trader with ₹2 crore principal pays the principal plus 25% of the interest.
Which laws are covered?
The scheme covers demands and arrears under the UP Sales Tax Act, 1948, the Central Sales Tax Act, 1956, the UP Trade Tax Act, 1995, the UP Entry Tax Act, 2007, and the UP Value Added Tax Act, 2008, among other listed enactments.
GST dues are not covered. A trade body leader in Uttar Pradesh clarified that the scheme does not apply to GST dues. It is for eligible cases under old VAT, CST and other specified tax laws.
Who is eligible?
- You must have outstanding dues up to December 31, 2025 under the covered laws.
- Both accepted and disputed demands are eligible.
- If your case is pending before a court, you must fulfil the prescribed conditions. These include submitting relevant documents and affidavits about withdrawing the proceedings, wherever applicable.
Important exclusion: The penalty waiver applies only to penalties imposed for non-payment of outstanding dues. Other penalties are not covered.
How to apply
Based on official statements reported in the media, the process works like this:
1. Check your dues. Before applying, review your outstanding demands and related documents. This tells you which slab you fall in and confirms that the dues fall within the covered laws and the December 31, 2025 cut-off.
2. Apply online on the department portal. Eligible traders must apply online on the department’s official portal, comtax.up.nic.in. The State Tax Commissioner has said the scheme runs entirely online.
3. Wait for verification. Reports on the order say that once the application is received, the assessing officer will verify the dues within 15 days.
4. Pay the full principal. The benefit is available only after you deposit the entire principal tax. Only then will the prescribed waiver on interest and penalty be given.
5. Fulfil court-related conditions, if applicable. If your case is in court, prepare the documents and affidavits on withdrawal of proceedings as the order requires.
If you face trouble: Reports say that if you have difficulty with the online application or payment, you can contact the concerned commercial tax office.
Documents to keep ready
The order’s exact checklist should be confirmed on the portal. In general, keep these handy:
- Your GSTIN, TIN or other registration details
- Demand notices, assessment orders and payment challans
- Records of earlier payments against the demand
- For court cases: copies of pleadings and a draft affidavit on withdrawal, as advised by your counsel
Deadline
The scheme runs for three months from the date of the order, which was October 16, 2026. That puts the window at roughly mid-January 2027. Confirm the exact last date on the portal or in the government order, and do not wait for the final days. Verification takes time, and the principal must be paid within the window.
Tips before you apply
- Reconcile first. If your records differ from the department’s demand figure, sort that out before paying.
- Choose disputed cases carefully. Taking the waiver on a disputed demand usually means withdrawing your appeal. Talk to your CA or advocate about whether that makes sense.
- Keep proof of everything. Save the application acknowledgement, challans and any communication from the assessing officer.
- Do not assume other penalties are covered. Only penalties for non-payment of dues are waived.
The bottom line
For businesses with old VAT, CST or trade tax arrears, this scheme can cut the cost of closing those liabilities substantially, especially for dues up to ₹10 lakh, where interest and eligible penalties are waived fully. The window is short, so check your dues, consult your tax advisor and apply on the official portal as early as you can.
Disclaimer: This post is for general information based on news reports of the government order. It is not legal or tax advice. Please read the official order and check the department portal for the latest procedure, forms and deadlines.
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