A Guide to Dealing with GST Show Cause Notices (Section 73-74)

Introduction:

We’ve all received Show Cause Notices (SCNs) in form DRC-01 under section 73/74 of CGST rules from State Tax Officers. This comprehensive guide aims to simplify the process of responding to these notices and understanding the relevant provisions.

Types of Assessments:

Under the CGST Act, assessments can be self-assessment, provisional assessment, scrutiny of returns, assessment of non-filers, assessment of unregistered persons, and summary assessment.

Return Scrutiny (Section 61): Section 61 empowers officers to scrutinize returns filed by registered taxpayers. The officer issues a notice (GST AMST-10) if discrepancies are found, and the taxpayer must respond within 30 days.

Show Cause Notices (Section 73-74): If discrepancies persist, the officer may issue a show cause notice under section 73 or 74. Section 73 deals with tax determination without fraud, willful statements, or suppression of facts.

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Key Points Regarding Section 73:

Notice under section 73(1) should be issued at least three months before the order.
The order under section 73(9) must be issued within three years from the due date for the annual return or from the date of erroneous refund.
Time limits can be extended due to force majeure as per section 168A.

Challenges and Clarifications:

Challenges to time limit extensions have been noted.
CBIC has issued a clarification on differences in ITC availed in GSTR-3B and GSTR-2A for FY 2017-18 and 2018-19.

Handling Show Cause Notices – Dos and Don’ts:

SCN is issued for allegations or penal actions, not for inquiry.
Check the validity of proceedings under section 73, ensuring that a notice under section 61 (ASMT-10) was issued.
Carefully read the SCN, clarify ambiguities, and request details if it involves ITC mismatch.
Verify jurisdiction – SCN can only be issued by the Proper Officer with jurisdiction.
Check for ASMT-10 notices on the portal under section 61.
Pay undisputed demands promptly to avoid penalties under section 73.

Conclusion:

Effectively addressing GST Show Cause Notices demands a careful approach. Understanding the legal framework, responding strategically, and keeping abreast of clarifications are essential for a favorable resolution. Ensure compliance with procedural requirements and consider seeking professional advice for specific cases.

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Department of Trade & Taxes Delhi, issued indicative guidelines w.r.t. issuance of SCNs

It has been brought to the notice of the Competent Authority that in several instances non-speaking & vague Show Cause Notices (SCNs) are being issued in violation of provisions of the GST Act and Rules made thereunder. In view of the above, it is important that proper diligence is made before issuance of SCNs by the Proper Officers.

A SCN should comprise of the following, though there may be some variations from case to case:

a) It should be issued only after proper inquiry/investigation i.e. when the facts used are ascertained and allegations are prima fade made out;

b) It should be strictly in the format & manner prescribed under the GST Act and Rules made thereunder;

c) It should be clear on facts and legal provisions. Alleged violation of the provisions of law and other anomalies should be clearly brought out in the Show Cause Notice;

d) Copies of the documents to be submitted or compliance to be made by the noticee should be specifically mentioned in the SCN;

e) Possibility of additional evidence being needed or additional anomalies being detected should be kept open during the pendency of the proceeding and should also be mentioned in the notice itself;

f) Copies of the details giving reasons for SCN should be attached with the SCN and Proper Officer should not depend only on the drop down menus on the GSTIN portal;

g) The prima facie amount due, if any needs to be quantified and should be manifestly specified in the notice itself. Possibility of raising additional demand should be kept and mentioned in notice itself;

h) It should be clearly mentioned that whether the noticee(s) wishes to be heard in person, apart from filing a written representation, in the matter;

i) The authority to which the SCN is answerable should be specifically stated along with Ward, designation, e-mail Id etc.;

j) All SCNs should be disposed off within statutory timelines.

All the Proper Officers shall strictly, and without fail, adhere to the above guidelines while issuing SCNs. Zonal Incharges are also requested to ensure & monitor the compliance of the above guidelines.

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