Like in any other tax collection system, in GST regime also there may be situations where:
– no tax was paid
-taxes were short paid
-there was non-levy or short levy
– there fund granted was erroneous
– the availment / utilization of input tax credit was wrong
-there was fraudulent evasion of tax
In all such situations, a demand has to be raised and recovery proceedings initiated on the taxpayer for the various situations mentioned above. These proceedings relating to demand and recovery start with the issuance of a show cause notice by the taxman on the taxpayer and these conclude by issuance of an adjudication order, and subsequent recovery of tax, fine, penalty, etc., as applicable.
Demands have been categorised into two categories, i.e., normal period demands which can extend up to 3 years from the date of filing of annual return. Such demands which shall be without an element of allegation of fraud, wilful misstatement, or suppression of facts to evade tax shall require to be show caused at least 3 months prior to 3 years of time limit period with adjudication being time bound and shall be required to be completed within a period of 3 years by the Adjudicating Authority.
Second category of demand shall be for an extended period which can go up to 5 years from annual return and such demands can be invoked on grounds of fraud, wilful misstatement, or suppression of facts to evade tax. Such demands will attract a mandatory penalty of 100% of du ty amount. Unlike Central Excise the words “intent” is missing with ex pression “to evade”, but same may not have much effect, as the same is inbuilt in fraud, wilful misstatement, and suppression.
The incidence of short payment of tax or erroneous refund or wrong availment of input tax credit may be because of an inadvertent bona fide mistake (normal cases) or it may be a deliberate attempt (fraud cases) to evade the tax. Since the nature of offence is totally different in both, therefore, separate pro visions for recovery of the tax and the amount of penalty have been made to deal with such type of cases. Besides these, there are provisions to encourage voluntary compliance such as no penalty or lesser penalty.
Encouraging Voluntary Compliance
The incidence of short payment and non-payment of tax, wrong availment of Input Tax Credit, etc. may be because of an inadvertent bona fide mistake (Normal Cases) or it may be a deliberate attempt (Fraud Cases) to evade the tax. Since the nature of offence is totally different in both the incidences, separate provisions for recovery of the tax and the amount of penalty have been made to deal with such type of cases. Besides these, there are provisions to encourage voluntary compliance, such as no penalty or lesser penalty, if the tax dues along with interest are paid within the specified time limit. The table below gives a comprehensive chart of provisions for voluntary compliance:
| SI | Action by Taxpayer | Amount of Penalty Payable Normal Cases | Amount of Penalty Payable Fraud Cases | Remarks |
| 1 | Tax amount, along with the interest, paid before issuance of notice | No penalty and no notice will be issued | 15% of the tax amount and no Notice will be issued | The penalty will also not be chargeable in cases, where the self-assessed tax or any amount collected as tax is paid (with interest) within 30 days from the due date of payment |
| 2 | Tax amount, along with the interest, paid within 30 days of issuance of notice | No penalty. All proceedings deemed to be concluded | 25% of the tax amount. All proceedings deemed to be concluded | |
| 3 | Tax amount, along with the interest, paid within 30 days of communication of order | 10% of the Tax amount or Rs. 10,000, whichever is higher | 50% of the tax amount. All proceedings deemed to be concluded | |
| 4 | Tax amount, along with the interest, paid after 30 days of communication of order | 10% of the Tax amount or Rs. 10,000, whichever is higher | 100% of the tax amount |
Thus, there are incentives for the person who accepts tax liability and readily discharges the same. The law provides an opportunity for the payment of tax, interest and a nil or nominal penalty (depending on the nature of offence) before the issuance of notice and emphatically stipulates that in all such cases, no. notice shall be issued and consequently there shall be no other consequences for any default.
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